6 Risk management

Transcription

6 Risk management

Reference document
1et4doscarre20_GB.qxp:Mise en page 1 11/08/09 16:22 Page2
Reference
document 2008
Crédit Foncier de France SA (French public limited company) with share capital of €682,087,900
Paris Trade and Companies Register No. 542 029 848
Offices and postal address: 4, Quai de Bercy – Charenton Cedex 94224 - Tel: +33 1 57 44 80 00
Head office: 19, rue des Capucines - 75001 Paris
Reference Document 2008
Including the Annual Financial Report for 2008
The present document is a free English translation of the original French document filed with
the AMF - Autorité des Marchés Financiers (French Financial Markets Authority), on April 30,
2009, in accordance with Article 212-13 of the Authority's General Regulations.
It is available on the website www.creditfoncier.fr
Message from the Chairman and the Chief executive officer
The past year saw a number of significant events: changes in the overall operational environment, as well as developments specific to the Groupe Caisse d'Epargne.
The economic situation in 2008 was punctuated by a number of abrupt changes (increasing interest rates, a collapse of securitisation processes and severe constraints on liquidity) and marked by a sharp decline in transactions and financing requirements. In this unprecedented and extremely difficult context, Crédit Foncier was once again able to demonstrate the relevance
of its policies and its robustness in the face of volatility. The results speak for themselves: loan production of €19.6 billion and
issues of €8.5 billion in obligations foncières.
In contracting markets, Crédit Foncier strengthened its positioning as a full-service real estate company, covering all market segments, from the individual investor to the corporate and public sectors, making full use of its essential expertise to ensure the
provision of secure property financing. It gained market share in both individual and corporate sectors, whilst preserving control of client risk.
Maintaining unchanged its conditions for the provision of financing and pursuing its support for home ownership, Crédit Foncier
achieved €8.2 billion in loan originations to retail customers. Several initiatives were introduced during the year, including reinforcement of the national network of exclusive agents under the La Hénin brand and reactive customised solutions for clients
encountering difficulties, whether related to bridging loans, to the exceptional storm in the southwest of France or to situations
of temporary unemployment or reduced activity.
In the private and public sectors, Crédit Foncier out-performed the market with €11.4 billion in loan production. The strength
of its business model was recognised by public authorities which have entrusted Crédit Foncier with the management of the
Société de Financement de l’Economie Française (SFEF).
Despite the virtual closure of the market for obligations foncières at the end of 2008, Compagnie de Financement Foncier, Crédit
Foncier's AAA-rated refinancing vehicle, successfully attracted investors looking for selectivity, achieving an issuance volume of
nearly €8.5 billion with the cost of funding remaining within its targets.
As a result, Crédit Foncier's activities across the board in 2008 drove net banking income 10% higher and the group share of
net income to €220 million euros, up 4.3% compared to 2007. Cost control measures, in place since 2006, helped reduce the
cost/income ratio by 9 points to 60.2%.
2008 will also be remembered as the year when Groupe Caisse d'Epargne and Groupe Banque Populaire began moves towards
a merger, which will give rise to France's second largest banking group, with over 8,000 branches, 30 million customers and
€38 billion of Tier One capital, creating a stronger and more effective group whose real estate business will be of primary importance. Crédit Foncier will initially be placed in a separate holding company, regrouping, in particular, the real estate activities of
Groupe Caisse d’Epargne, which will be transferred to the new entity as soon as conditions are favourable.
The creation of this new group furthers the objectives defined in the Crédit Foncier Development Plan 2008 - 2012. Its ambition is to become the leading specialist for mortgage and public sector markets, by improving its market coverage, increasing
its efficiency as it takes advantage of economies of scale and modernising company operations to enhance development of staff
members and their careers.
In 2009, Crédit Foncier will celebrate 10 years as a member of Groupe Caisse d’Epargne, continuing to lead with its strengths
and specific skills and further confirming its role as a full-service real estate provider, supporting market recovery.
Alain Lemaire
François Blancard
Chairman of the Board of Directors
Chief Executive Officer
1 - Overview
of Crédit Foncier
2 - Crédit Foncier growth
3 - Crédit Foncier in 2008
4 - Corporate governance
Contents
1 OVERVIEW OF CREDIT FONCIER
Crédit Foncier Profile
Key figures
Highlights 2008-2009
Positioning
Share capital
Ratings
Subsidiaries
Organisational structure
2 CRÉDIT FONCIER GROWTH
Strategy
Development plan 2008-2012
International aspects
Capital transactions in 2008
Recent events
3 CRÉDIT FONCIER IN 2008
The economy in 2008
Putting the Customer first
Business lines
Activities of the main subsidiaries
Analysis of results
4 CORPORATE GOVERNANCE
Principles and organisation
Administrative and executive bodies
Remuneration
Report by the Chairman of the Board of Directors
on the operation of the Board and internal auditing
Statutory Auditors’report on the report
by the Chairman of the Board of Directors
5 HUMAN AND ENVIRONMENTAL ASPECTS
Human resources
Sustainable development
Facilities Planning
3
4
5
6
9
12
14
15
16
17
18
20
21
22
24
25
26
28
29
51
52
57
58
60
95
103
118
121
122
128
130
6 RISK MANAGEMENT
General organisation: Information concerning
risk management
Scope of application
Internal capital adequacy and equity requirements
Management of credit and counterparty risks
Risk mitigation techniques
Securitisations
G7 reporting
Market risk
Asset & liability management risk
Share risk
Operational risk
Intermediation risk
Settlement risk
Non-compliance risk
Other risks
7 FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Statutory auditors’ report
on the consolidated financial statements
PARENT COMPANY FINANCIAL STATEMENTS AND NOTES
on the financial statements
Statutory auditors’ report prepared in connection with
the payment of dividends in shares
on related party agreements and commitments
8 ADDITIONAL INFORMATION
General information
Ordinary General Meeting of April 10, 2009
Persons responsible for the reference document
and for auditing the financial statements
Cross-reference tables
131
134
151
151
157
193
198
207
218
221
230
233
235
236
237
239
245
246
319
322
379
381
382
389
390
392
395
397
Reference Document 2008 - CRÉDIT FONCIER - 1
2 - Reference Document 2008 - CRÉDIT FONCIER
1 - Overview
of Crédit Foncier
1 Overview of Crédit Foncier
1.1 CRÉDIT FONCIER PROFILE
4
1.2 KEY FIGURES
5
1.3 HIGHLIGHTS 2008-2009
6
1.4 POSITIONING
9
1.5 SHARE CAPITAL
12
1.6 RATINGS
14
1.7 SUBSIDIARIES
15
1.8 ORGANISATIONAL STRUCTURE
16
1.1 Crédit Foncier Profile
Crédit Foncier has specialised in real estate financing for
individuals and the private and public sectors since 1852,
continually developing innovative solutions adapted to the
increasing diversity of client requirements.
recognised know-how in all property market sectors, resulting from its extensive network of branches and exclusive
agents throughout the country, which enable it to be
extremely attentive to client needs.
From its earliest days, it has been deeply committed to a
pre-eminent role in support of public policy for the financing
of social housing and infrastructure. In the public interest, it
is driven by an ambition to make real estate ownership
accessible to as many as possible. This ambition is what
makes Crédit Foncier's 3,500 employees proud to be a part
of the company, dedicated to working alongside their clients
every step of the way.
At the heart of its real estate financing business is its AAArated subsidiary, Compagnie de Financement Foncier,
which provides a large part of the funding required for its
financing activities at optimal cost, by the issuing of obligations foncières on French and international markets. With
this expertise at its disposal, Crédit Foncier is able to operate extensively outside of France, particularly on behalf of
public sector clients.
The effectiveness of Crédit Foncier’s activities relies on a
combination of its specialised expertise in asset management and financial engineering, together with its widely-
Crédit Foncier is a subsidiary of Groupe Caisse d'Epargne.
1 - Overview
of Crédit Foncier
1.2 Key figures
(in millions of euros)
ACTIVITY
Total loan production
Individual
France
International (1)
Corporate, Institutional and Public
French private sector
French public sector (2)
International sector
Issues of obligations foncières
Liquidity reserves (3)
Gross securities and receivables (4)
Individual
Corporate, Institutional and Public
2006
2007
2008
24,629
10,898
8,524
2,374
13,731
3,564
2,523
7,644
17,263
n.a.
80,868
48,558
32,310
31,427
17,365
9,171
8,194
14,062
4,528
4,275
5,259
23,518
n.a.
107,047
57,496
49,551
19,567
8,150
7,642
508
11,417
3,888
4,144
3,385
8,455
367
114,302
59,369
54,933
2008/2007
-
37.7%
53.1%
16.7%
93.8%
18.8%
14.1%
- 3.1%
- 35.6%
- 64.0%
+ 6.8%
+ 3.3%
+ 10.9%
(1) Production from the Belgium branch, Banco Primus and residential mortgage loan acquisitions in Europe
(2) For French local authorities: excluding acquisitions of debt from Caisses d’Epargne and Natixis and excluding G2D
(3) Cf. liquidity risk monitoring (9.3) - Highlights
(4) Management data at year-end under IFRS7 from 2007 (see details in the risk management section).
CONSOLIDATED FINANCIAL
STATEMENTS (IFRS)
2006
2007
2008
2008/2007
94,028
2,423
3,226
2,565
2,285
9.5%
7.6%
6.7%
123,238
2,388
3,339
2,725
2,445
9.2%
7.5%
6.8%
133,029
2,322
3,316
2,856
2,576
8.9%
7.7%
6.9%
+ 7.9%
- 2.8%
- 0.7%
+ 4.8%
+ 5.4%
- 0.3 pt
+ 0.2 pt
+ 0.1 pt
999
341
484
350
939
289
300
211
1,037
413
295
220
+ 10.4%
+ 42.9%
- 1.7%
+ 4.3%
GROUP EMPLOYEES
2006
2007
2008
2008/2007
Average staff numbers
4,023
3,914
3,653
- 6.7%
CONSOLIDATED BALANCE SHEET
Balance sheet total
Group share of consolidated equity
Regulatory capital
- including basic regulatory capital
- including regulatory core capital
COREP capital adequacy ratio (Basel II)
- including Tier One capital
- including Core Tier One capital
CONSOLIDATED INCOME STATEMENT
Net banking income
Gross operating income
Income before tax
Group share of net income
1.3 Highlights 2008-2009
Crédit Foncier confirms the strength of its model
in a situation of international financial crisis
January 14, 2008
2009 for a final price of €539.6 million. The conditions
precedent were subsequently met on February 19, 2009,
thus allowing the transaction to be finalised.
The International Financing Review names Compagnie de
Financement Foncier winner of the "Covered Bond of the Year
2007" award for its benchmark issue in October 2007.
Crédit Foncier strengthens sales
by improving distribution
March 7, 2008
March 28, 2008
Crédit Foncier posts annual income of €211 million in 2007
as real estate markets begin to cool off.
Acquisition of an indirect holding in Maisons France Confort PI
to strengthen its brokering channels for lending to individuals.
March 27, 2008
July 22, 2008
Crédit Foncier releases its annual real estate market survey
and outlook. This survey, now updated quarterly, found that
the housing market was stabilising and prices were levelling
off in 2007. It also showed a record level of investment in
corporate real estate.
Opening of a Crédit Foncier office in Geneva, run by Swiss
Public Finance Solutions (SPFS), a company created on
September 18, 2007 by Crédit Foncier, Caisse d’Epargne
Rhône Alpes and Banque Cantonale de Genève.
October 2, 2008
Crédit Foncier reinforces its website for real estate markets:
www.marche-immo.com.
At the height of the financial turmoil, Crédit Foncier reassures the market by providing information about its exceptionally strong liquidity situation. In light of the difficulties
facing certain monoline insurers, details are also published
about its very limited dealings with such entities.
October 17, 2008
Thanks to its solid fundamentals, Crédit Foncier announces
good results at the end of September 2008 with €13.4 billion in new loan production.
October 22, 2008
Crédit Foncier is chosen as loan servicer for Société de
Financement de l’Economie Française (SFEF) after submitting a successful bid.
December 12, 2008
Caisse Nationale des Caisses d'Epargne (CNCE) and Nexity
announce that they have entered into discussions about a
CNCE cash acquisition of Nexity's 23.4% stake in Crédit
Foncier. Negotiations were completed and a contract signed,
subject to fulfilment of certain conditions, on January 29,
September 04, 2008
December 16, 2008
A representative office is opened in Tokyo.
December 17, 2008
Crédit Foncier launches a new version of its website
www.creditfoncier.fr. More modern and dynamic, the site
offers three different home pages to meet different visitor
expectations: individuals, businesses and local authorities,
and institutional customers. A variant of this site can be
accessed via a mobile phone: Creditfoncier.mobi
Crédit Foncier defends its commitments
to its clients
January 18, 2008
Crédit Foncier launches an initiative to offer 150,000 of its
clients two exceptional measures aimed at strengthening the
security of variable-rate loans and thus limiting the effects of
the sharp rise in interest rates.
1 - Overview
of Crédit Foncier
May 15, 2008
January 26, 2009
New types of loans adapted to the security and flexibility
needs of different individual clients are launched.
Customers whose primary residence was damaged by the
severe storm that hit the south-western part of France can
request that Crédit Foncier put a freeze on payment deadlines for a period of 6 months. This extension will help them
pay for necessities while waiting for compensation from their
insurance.
May 19, 2008
Signature of a financing contract for one billion euros
between the Ile-de-France, Caisse d'Epargne Ile-de-France
and Crédit Foncier: a first in France.
June 13, 2008
Launch of Scintilium, Crédit Foncier's new life insurance
product.
September 29, 2008
In the spirit of the twelve undertakings made by credit institutions, aimed at promoting the best real estate lending practices, in a regulated framework, Crédit Foncier begins work on
a guide and educational site, jefinancemonlogement.com.
February 2, 2009
Launch of the La Hénin brand for the network of exclusive
agents, replacing the Entenial brand.
February 6, 2009
Crédit Foncier announces the creation of a "Megastore",
which will be open to the public in April 2010. At this unique
location, customers can obtain information, interact with
experts and conduct simulations in order to better understand all the ramifications of their property project.
October 30, 2008
In the context of a sharp slowdown in the real estate market,
Crédit Foncier sets up personalised support for customers
who have taken out a bridging loan. In particular, the company offers to extend the term of loans that mature in the
next 3 months, at their initial rates.
December 16, 2008
The Caisses d'Epargne Foundation for Social Solidarity and
Crédit Foncier launch the 3rd edition of the "Lifestyle Comfort"
award, which honours projects that take into account urban,
socio-economic and intergenerational cohabitation, putting
accessibility to housing within the reach of everybody and
meeting certain social and environmental criteria.
Crédit Foncier pursues its investment strategy
in support of its business
January 4, 2008
Crédit Foncier acquires the Crédit Lyonnais stake in Crédit
Financier Lillois (15%), a financial company that centralises
reserve deposits from buyers of Nexity group's programmes.
January 31, 2008
Crédit Foncier acquires a 5% stake in GCE Covered Bonds,
GCE's refinancing arm for its real estate lending business,
by means of an issue of covered bonds. It subscribes to the
capital increase of April 10, 2008.
December 22, 2008
June 27, 2008
Committed to financing real estate for low-income borrowers,
Crédit Foncier finances the first beneficiaries of the
"Propriétaire de ma maison pour 15 euros par jour" ® (Owner
of my house for €15 per day) charter in the Ain department
of France.
Crédit Foncier subscribes to the 770 million capital increase
of its 99.99%-owned subsidiary, Compagnie de Financement
Foncier, under an obligation offsetting arrangement.
January 15, 2009
The ceiling on the Prêt à 0% (Interest-free Loan) is doubled
for purchases of new homes.
November 20, 2008
December 17, 2008
Crédit Foncier repurchases securities in order to increase its
stake in Banco Primus, its Portuguese subsidiary that specialises in retail lending from 37% to 85%.
Cicobail takes over Picardie-Bail in connection with the
restructuring of Groupe Caisse d’Epargne's real estate leasing business.
November 22, 2008
Crédit Foncier transfers its individual and professional banking business to Banque Palatine. This spin-off involved the
acquisition of an 8.33% stake in Banque Palatine by Crédit
Foncier.
1 - Overview
of Crédit Foncier
1.4 Positioning
Crédit Foncier's role within Groupe Caisse d'epargne
Organisation of the Group at December 31, 2008
350 local saving companies
3,7 million cooperative sharaholders
Fédération Nationale
des Caisses d'Epargne
80% (shares in LSCs)
Caisses d'Epargne
Foundation for Social Solidarity
17
Caisses
d'Epargne
20% (CICs)1
100%
Caisse Nationale des Caisses d'Epargne
COMMERCIAL BANKING
INSURANCE
REAL ESTATE SERVICES
WHOLESALE BANKING
AND FINANCIAL SERVICES
Main brands and investments
Caisses d'Epargne,
Crédit Foncier,
GCE Assurances, CNP*(3) ,
Séréna(4) , DomusVI(5)
Nexity*(6) , Meilleurtaux*(7) ,
Maissons France
Confort*(8)
Banque Palatine
Financière Océor (2)
GCE Habitat, GCE SEM
Natixis*(9) ,
Natixis Global Asset
Management,
Natixis Financement,
Coface, Natixis Garanties
Business lines
Individual customers
Professionnal customers
Corporate customers
Local authorities
and institutions
Social economy
Social housing
Life insurance
Non-life insurance
Healt and benefits
insurance
Payment protection
Guarantees and sureties
Personal care services
* Publicly trades compagny.
(1) Cooperative Investment Certificates (CICs) owned by Natixis representing 20%
of the capital of the Caisses d’Epargne : they give the right to a dividend but not
the right to vote.
(2) The Financière Océor holding compagny owns the Group’s investments in
banks in foreign countries and in overseas French territories.
(3) 17.74% held by Sopassure 49.98% owned by the CNCE.
(4) 25% owned in parity with Macif, MAIF and MGEN.
Development and
construction
Transactions / Sales
Property management
Advisory and
managment services
Corporate and
investment banking
Asset management
Private equity and
private banking
Investor services
Land development
Financing and
guarantiees
Public-private partnerships
Social housing
Receivables
management
(5) 17% interest held by DVHolding.
(6) 39.52% owned by the CNCE.
(7) 61.01% interest held by Oterom Holding, with MAIF, Macif and Nexity.
(8) 22.85 % interest owned by the Group.
(9) Jointly owned with Banque Fédérale des Banques Populaires, both Groups
owning a 35.62% interest. The percentage interest of CNCE in Natixis, after
restating to account for treasury shares is 35.78% at 12/31/08.
In 2008, Crédit Foncier, subsidiary of Caisse Nationale des Caisses d’Épargne (CNCE), was one of Groupe Caisse d'Épargne's
commercial banking entities.
Merger between the Caisse d’Epargne and Banque Populaire groups
(At March 31, 2009)
20% CCI
17
20
Banques
Populaires
50%
20% CCI
Caisses
d'Epargne
50%
New central institution
Former BFBP subsidiaries
Former CNCE subsidiaries
Financière Océor
GCE Assurances
DV Holding
BCP France & Luxembourg
CNP
SMC
SAS SIBP
72%
Natixis
BP holding
compagny
28%
CE holding
compagny
Free float
Foncia
VBI
DZ Bank
MA Banque
Other subsidiaries
Crédit Foncier
Nexity
Banque Palatine
Meilleurtaux
Maisons France Confort
Banca Carige
Other subsidiaries
1 - Overview
of Crédit Foncier
Several stages already completed
A common central structure
The Board of Directors of Banque Fédérale des Banques
Populaires (BFBP) and the Supervisory Board of Caisse
Nationale des Caisses d’Epargne (CNCE) met on February 24
and 26, 2009 and endorsed the principles for the merger of
the two groups' central structures.
The proposed merger is based on creating a new central
entity for the Banque Populaire and Caisse d’Epargne networks, each of which will retain their brands. This new unit
would be equally owned by both networks and bring together the technical and human resources that BFBP and CNCE
need to carry out their missions.
In order to speed up the project and optimise coordination of
activities, François Perol was appointed Chairman of the
Executive Board of Caisse Nationale des Caisses d’Epargne
(CNCE) and Chief Executive Officer of Banque Fédérale des
Banques Populaires (BFBP) with effect from March 2, 2009.
On March 16, 2009, the Board of Directors of BFBP and the
Supervisory Board of CNCE signed the protocol setting out
the negotiating principles agreed on at this point: structure
of the transaction, scope, valuations of the entities to be
transferred to the new central structure, conditions applicable to the Government's capital contribution, governance
and solidarity mechanisms for the future group.
The new central structure would hold stakes in the main retail
banking subsidiaries and their production structures: Natixis,
GCE Assurances, indirect holding of 17.7% in CNP, Société
Marseillaise de Credit, Financière Océor, BCP France, BCP
Luxembourg, DV Holding and SIBP (excluding Volksbank
International).
The subsidiaries of the two groups' real estate divisions, Crédit
Foncier, Nexity, Maisons France Confort, Foncia, Meilleurtaux,
and other holdings of the central entities, including Banque
Palatine, MaBanque, Banca Carige and DZ Bank would
remain under the separate control of each network. Following
a strategic review, a decision would be taken as to whether or
not they would be transferred to the new central structure.
1.5 Share capital
Characteristics
At December 31, 2008, the share capital amounted to
€682,087,900 divided into 104,936,600 fully paid-up
shares each with a nominal value of €6.50 each. Crédit
Foncier does not hold any of its own shares. The total number of voting rights is equal to the number of shares. The
Articles of Association do not contain any provisions that are
more restrictive than legislative provisions regarding
changes to the shareholding structure and the rights of different share classes that could be created.
Crédit Foncier has not issued any securities that could eventually be converted into shares: convertible bonds that can
be exchanged or redeemed for equity instruments, warrants, etc. nor options for management and staff to purchase shares.
On January 29, 2009, Nexity and CNCE signed an agreement according to which CNCE would undertake to acquire
Nexity's 23.4% stake in Crédit Foncier upon fulfilment of certain conditions. The conditions precedent were fulfilled on
February 19, 2009, allowing CNCE to acquire 100% of Crédit
Foncier's share capital and voting rights with the exception of
the shares held by members of the Board of Directors. There
is no shareholder pact.
Delegations of authority granted to management
to raise capital
The General Meeting of April 24, 2008 gave the Board of
Directors the authority, for a term of twenty-six months, to
proceed with capital increases.
These delegations are as follows:
Share capital changes
• Crédit Foncier’s share capital at December 31, 2007 stood
at €638,458,925 divided into 98,224,450 shares each
with a nominal value of €6.50 each.
• On July 29, 2008, as a result of the share subscriptions
exercised on June 10, 2008, the Board of Directors confirmed payment of dividends in the form of 6,712,150 new
shares in the company, each worth a nominal value of
€6.50. Their entitlement date is January 1, 2008, and they
represent a capital increase of €43,628,975. Article 4 of
the Articles of Association has been amended accordingly
and the share capital now stands at €682,087,900.
Distribution of share capital
Since June 7, 2007, following the inception of GCE and
Nexity's joint venture, 25% of Crédit Foncier's share capital
has been held by Nexity and 75% by CNCE who maintained
direct control. CNCE exercised its right to receive its dividends in the form of shares in 2007, thus raising its stake to
76.6% at the end of 2008.
- authorisation to carry out one or more capital increases,
while maintaining pre-emptive subscription rights, by issuing shares or any other type of security that could be
immediately or eventually converted to shares.
- authorisation to carry out one or more capital increases by
successively or simultaneously capitalising all or part of the
reserves, earnings, share premiums or contributions
whose capitalisation is legally permitted.
The maximum amount of capital that may be raised, immediately and/or eventually, under each of these delegations
has been set at €200,000,000.
In 2008, the Board of Directors did not exercise the delegations it had been granted.
Crédit Foncier shares
Crédit Foncier's shares have not been listed on a regulated
market since November 9, 2004. Its shares are therefore
registered shares as required by regulations.
1 - Overview
of Crédit Foncier
Changes in the share capital and capital structure over the past five years
Number of shares
(1)
GM May 2004
(2)
November 8, 2004
July 4, 2005
(2)
November 7, 2005
June 26, 2006
June 11, 2007
(7)
(2)
October 16, 2006
FCP1
(collective
investment
fund)
("Share"
company FCP)
Others
24,686,515(3)
657,498
242,466
1,882,513
60,733,008
57,950,531
657,498
242,466
1,882,513
60,733,008
58,892,236(4)
667,771
33,264,016
June 30, 2004
July 2004
EULIA
Crédit
Foncier
Pension
Fund
CNCEP
(Caisse Nationale
des Caisses
d’Epargne et de
Prévoyance)
(7)
(2)
NEXITY
2,147,979(5)
TOTAL
61,707,986
61,707,986(6)
61,707,986
67,734,589
67,734,589
67,922,027
67,922,027
81,003,427
81,003,427
81,129,851
81,129,851
98,224,450
98,224,450
July 23, 2007
(8)
73,668,337
24,556,113
98,224,450
July 29, 2008
(2)
80,380,487
24,556,113
104,936,600
(1) Before payment of the dividend in shares
(2) After payment of the dividend in shares
(3) Difference of 8 shares due to an accounting problem
(4) After payment of the dividend in shares and CNCE/Eulia merger
(5) Including approximately 0.39-0.40% for FCP1
(6) After public buyout offer and squeeze-out proceedings
(7) After subscription for Entenial's subscription options
(8) After CNCE's 25% contribution to Nexity
Changes in the distribution of share capital
February 19, 2009
100%
2008
23.4%
76.6%
2007
75.0%
25.0%
2006
100%
2005
100%
2004
100%
0%
20%
40%
CNCEP
Nexity
60%
80%
1.6 Ratings
At February 19, 2009
Standard & Poor’s/Moody’s/Fitch
Crédit Foncier A/Aa3/A+
affiliated with CNCE
A+/Aa3/A+
Compagnie de Financement Foncier AAA/Aaa/AAA
Vauban Mobilisations Garanties AAA/Aaa/AAA
• On 17 December, Crédit Foncier's rating was downgraded
to A/Stable to restore the difference with CNCE's new rating (A+/Stable). The rating agency said that Crédit Foncier
will have a strategic role in a future merged entity. Its rating is not equivalent to CNCE because of residual uncertainties at this stage about Crédit Foncier's long-term positioning in the newly merged group.
Downgrade of Crédit Foncier's rating by one notch
by Moody's and Fitch
Changes in Crédit Foncier ratings
Crédit Foncier's rating downgraded two notches
by Standard & Poor’s (S&P)
In terms of its methodology, S&P considers that all other things
being equal, Crédit Foncier's rating should be based on that of
its main shareholder, CNCE. Considering that in the present circumstances, Crédit Foncier is strategically important but not a
"core business" for CNCE, the agency rates Crédit Foncier one
notch below that of CNCE.
• On June 6, 2008, Crédit Foncier's rating (AA-) was placed
on CreditWatch negative. This is due to CNCE (AA) being
placed on CreditWatch negative because of uncertainties
related to improving returns from its retail banking activities, the negative impact related to the reform of the Livret
A (French savings account with special tax advantages)
and difficulties the investment bank is having meeting its
objectives during the economic downturn.
• On June 27, 2008, CNCE's rating was downgraded to AA/Stable because it is less able to generate profitable
results. The rating agency reserved the right to reassess
Crédit Foncier's rating (AA-/CreditWatch negative).
• On October 13, 2008, following the announcement of a
merger between CNCE and Banque Fédérale des
Banques Populaires (BFBP), the rating agency confirmed
Crédit Foncier's rating (AA-/CreditWatch negative) and
that any change will depend on its positioning within the
newly merged entity.
• On October 27, 2008, Crédit Foncier's rating was placed
on A+/CreditWatch Negative after CNCE's rating was downgraded to A+/Stable due to difficulties encountered by the
latter in its retail and investment banking businesses.
Moody's and Fitch lowered Crédit Foncier's rating on July 18
and 24, 2008 by one notch, to Aa3 and A respectively, due
to difficulties encountered by CNCE with its retail and investment banking businesses.
Moreover, on February 2, 2009, Moody’s lowered Crédit
Foncier's financial solidity rating to D+; the outlook remains
stable on all notes.
On 9 April 2009, the rating agency Fitch assigned a stable
long-term outlook to Crédit Foncier’s rating (A+), thereby
ending the negative surveillance instituted on February 3,
2009. At the same time, the short-term rating was increased
from F1 to F1+.
Ratings for obligations foncières issued by
Compagnie de Financement Foncier and covered
bonds issued by Vauban Mobilisations Garanties
As a consequence of the legal framework for sociétés de
crédit foncier, the quality of its assets and its specific management practices, the AAA rating of obligations foncières
issued by Compagnie de Financement Foncier is not affected by changes to Crédit Foncier's credit ratings. The same is
true for the ratings assigned to securities issued by Vauban
Mobilisations Garanties (VMG).
Ratings for Compagnie de Financement Foncier and VMG
are AAA/Aaa/AAA with a stable outlook.
1 - Overview
of Crédit Foncier
1.7 Subsidiaries
Crédit Foncier’s subsidiaries by business
At December 31, 2008
CRÉDIT FONCIER
and its subsidiaries
FINANCING
CORPORATE AND
INSTITUTIONAL FINANCING
MORTGAGE
FINANCING
CRÉDIT FONCIER
CRÉDIT FONCIER
• Real estate lending
• Commitments
CICOBAIL (66%)
LOCINDUS (68%)
CRÉDIT FONCIER
and related services
• Reverse mortgage
• Acquisition of mortgage
loans
Real estate leasing
CINERGIE (100%)
PUBLIC
FINANCING
• Social housing
• French local authorities
• International public financing
COMPAGNIE DE
FINANCEMENT FONCIER
COMPAGNIE DE
FINANCEMENT FONCIER
Debt restructuring
Real estate development
BANCO PRIMUS (85%)
CFCAL (67%)
SOCFIM (100%)
COMPAGNIE FONCIERE
DE CRÉDIT (100%)
Packaged products
QUATRINVEST (100%)
REFINANCING
International public financing
SWISS PUBLIC
FINANCE SOLUTIONS (40%)
REAL ESTATE SERVICES
CRÉDIT FONCIER
• Bond issues (qualified investors)
Appraisals & financial valuations
• Negotiable debt securities
COMPAGNIE DE FINANCEMENT
FONCIER (100%)
Obligations foncières
VAUBAN MOBILISATIONS GARANTIES
VMG (100%)
Bond issues
GCE COVERED BONDS (5%)
Covered bonds
FONCIER EXPERTISE (100%)
SEREXIM (100%)
FONCIER DIAGNOSTICS (55%)
FONTEC (55%)
GCE FONCIER CO-INVEST (49%)
1.8 Organisational structure
Senior management and the executive committee
Patrick CHASTANT ©
Alain LEMAIRE
Chairman
Patrice RENAULT ©
Risks
Philippe DRUART ©
Strategy, Communication
and Institutional Relations
General Inspection
François BLANCARD ©
Chief Executive
Djamel SEOUDI ©
Secretary General
Alexandre DIERS ©
Nicolas DARBO ©
Compliance, Permanent
Control and Ethics
Planning and Steering
Thierry DUFOUR ©
Christophe PINAULT ©
Managing Director for the
Resources Department
Deputy CEO in charge of
Corp., Inst. & Public and Finances
Managing Director for the
Individual Sector
Luc RONDOT ©
Pierre NUYTS ©
Anne-Marguerite GASCARD ©
Information Systems
Finance
Sales Network
Christian MIGLIETTI ©
Muriel COLLE ©
Human Resources
Daniel BINDER ©
Philippe DUPIN ©
Businesses & Investors
Surveys, Appraisals and
Real estate services
Bruno du RUSQUEC ©
Facilities
(provider)
Banking Plateform
© Members of the Coordination Comittee
Sandrine GUERIN ©
Jacques DABOUDET ©
Financial transactions
Partner networks
Isabelle SELLOS-MAHE ©
François GUINCHARD ©
French local authorities
and Social housing
Customer Management
1 - Overview
of Crédit Foncier
2
Crédit Foncier growth
2.1 CREDIT FONCIER’S STRATEGY
18
2.2 DEVELOPMENT PLAN 2008-2012
20
2.3 INTERNATIONAL ASPECTS
21
2.4 CAPITAL TRANSACTIONS IN 2008
22
2.5 RECENT EVENTS
24
2
2.1 Strategy
After eight years of exceptional growth, 2008 was
a difficult year for residential real estate financing.
Crédit Foncier faced external economic pressures that
restrained its activities at three different levels:
• An international financial crisis unique in its scope
and duration, characterised by a rapid transfer of invest1
ments into other types of financial assets , a systemic banking crisis and contagion to the real economy.
• An inverted yield curve: The lack of appeal for variable
rates continues due to high short-term interest rates compared to long-term rates, leading to a decline in loans
financed at variable rates (nearly 3 points in 2008).
2
• An exceptional phase in the real estate cycle : The
real estate crisis in France in 2007 and early 2008 is mainly explained by the beginning of a downward trend after 10
years of remarkable growth (60% difference compared to
average growth rates) as opposed to the crisis in the United
States that began in August 2007 (real estate surplus) or
the crises France experienced in the 1990's (speculation).
Indeed, ever since 2002, average housing prices have
exceeded 4 years of average household income, whereas
they had never diverged by more than 2% from a ratio of
2.5 years, even during the real estate crisis in 1990.
Notwithstanding the international financial crisis, French
real estate lending remains fragile due to falling household purchasing power. A sharp rise in house prices relative to stagnant wages has been creating more and more
insolvent households, especially in 2008 since all measures of assistance (longer loan terms for example) were
already in place and rates were steadily increasing.
Since then, demand has shifted to social housing. After a
wave of reforms initiated in the first half of 2008, the
government accelerated its programmes to boost the
housing supply with its Plan de Relance (Restart Plan) in
October 2008 by transforming private real estate develop-
(1) Financial products other than securitised assets whose underlying assets
include subprime mortgages
(2) Flash Etudes et prospectives of CNCE, 2008
(3) VEFA: vente en état futur d’achèvement (sale off plan)
3
ments into social housing (30,000 homes to VEFA ). Crédit
Foncier's production in this market grew significantly in
2008
In the 2nd half of 2008, with the acceleration of the
financial crisis after Lehman Brothers collapsed,
the financial crisis hit the French real estate lending market hard.
The fallout has two major consequences
create a downward trend in the market:
4
that could
• A decline in supply due to a lack of liquidity and tighter financing conditions as well as concerns over rising
risks of default and the automatic increase of loan-to5
value ratios.
• A fall in household demand as potential buyers hold off
on or abandon outright their real estate projects due to the
combined effect of a worsening outlook in the housing
market (expectations of falling prices resulting in a down6
ward spiral ) and a sharp deterioration in the confidence
of households due to rising unemployment and the prospects of lower growth.
The French market is less affected than the Spanish,
English and Irish markets since property prices over the
past years had increased by less: over the period 19962006, increases in Ireland, Spain and United Kingdom
were respectively 300%, 200% and 150%. Lower debt
levels and tighter lending conditions have protected the
French market.
The situation in 2009 promises to be similar but could worsen depending on the impact throughout the real economy,
the ECB's rate policy and whether interbank markets pick
up again. The downward trend for housing prices that started in the second half of 2008 is likely to continue during
the first half of 2009.
(4) Quarterly survey of the Banque de France, 2008
(5) Outstanding loan principal divided by the value of property securing it
(6) Note that prices in Paris have not fallen, though real estate price inflation has
declined as have the number of transactions (source: Notaires de Paris
- Press conference on real estate questions of January 22,2009)
1 - Overview
of Crédit Foncier
Despite this difficult context, Crédit Foncier, GCE's
second largest subsidiary after Natixis, has managed to maintain its course.
• Rationalisation efforts initiated in 2006 with the
CAP2010 programme continue
- Recast major banking roles: restructure the Risk division to comply with Basel II reforms, overhaul the
accounting information system, reinforce the Steering
Department and centralise project management with
the IT Department.
- New group-wide platform set up in the summer of 2008.
• Preparation and deployment of the Development Plan
2008-2012
- Position Crédit Foncier as a global player in every link of
the real estate value chain: construction, promotion,
transaction, housing policy, access to housing, public
investment or private investment.
- Specialised model: real estate valuation integrated into
the mortgage lending process, niche products (aimed at
high-wealth individuals, non-residents, Islamic finance)
and high value-added products (life annuity mortgages).
- Strengthen its commercial presence and network both in
France by creating a denser, exclusive network with the
La Hénin brand and abroad by creating new inroads into
corporate, institutional and public markets.
• Public role in the context of the current crisis reaffirmed
- Lending policy remains unchanged despite the lack of
liquidity in the market.
- Policies in support of distressed customers have been
reinforced: measures proposed to customers who had
contracted a variable-rate loan to finance the purcha7
se of a home , specific measures for bridging loans,
and a freeze on loan repayments for storm victims in
the southwest of France.
- Commitments made with local authorities: housing
policy support provided for more than 400 elected
officials, strong synergies between the geographical
proximity of the Caisses d’Epargne and Crédit
Foncier's expertise.
The year 2008 proved the resilience of Crédit Foncier's
model as well as its strong ability to reorganise and adapt
quickly to the crisis. While remaining faithful to its historic and public missions, Crédit Foncier has shown a renewed ambition to prepare for its future commitments.
Crédit Foncier de France is asserting itself more
than ever as the leading bank specialising in
mortgage and public markets.
- An innovative policy for low-income homebuyers: strengthening Crédit Foncier's positioning with 3 key home
ownership products (NPTZ [new interest-free loan], PassFoncier, “Propriétaire de ma maison pour 15 euros par
jour®” [Owner of my house for €15 per day]).
(7) These measures announced on January 18, 2008 concern 150,000 customers. The first measure concerns customers with regulated loans — variable-rate, state-subsidised loans
(Prêt d’Accession Sociale [PAS] or Prêt Conventionné [PC]). Crédit Foncier capped their interest rates. The second measure concerns customers with unregulated variable-rate loans.
Crédit Foncier offered them guarantees very similar to those for state-subsidised loans, including a measure to limit the increase in their monthly instalments to the inflation rate if interest
rates continue to rise.
2
2.2 Development plan 2008-2012
In 2008, despite the difficult context, Crédit Foncier
continued to reorganise its operations: further rationalising the allocation of its resources, providing more transparency for major areas of improvement and increasing
participation in its governance.
The "CAP 2010" programme, which 500 company
employees have been working on since mid-2006 and
which is nearing completion, gave birth this year to a
Development Plan for 2008-2012.
2. Modernise company operations
to enhance development of
employees and individual careers
The customer is the central focus of business and
career development at Crédit Foncier. This customeroriented culture is prevalent at every level: front, middle
and back office.
Founded on four strategic pillars, its ambition is to ensure sustainable growth for Crédit Foncier.
In addition, this focus on the customer will strengthen
dialogue and communication within the company and
improve the company's operations across the board.
1. Improve market coverage through
stronger, broader and more clearly
organised businesses
3. Standardise quality oversight
and initiatives
As far as core businesses are concerned, the plan of
action is to adapt Crédit Foncier's range of products to
better meet the needs of its customers. Its geographical
coverage of the individual market is growing thanks to the
emergence of complementary distribution channels
(exclusive agents) and the sales force's intensifying sales
and marketing efforts.
The plan also aims to expand Crédit Foncier's businesses
and develop new sources of growth. Crédit Foncier plans
to launch new renovation loan and mortgage restructuring
businesses for its individual customers and develop its
home inspections business in order to offer the customer
a full-service, residential housing package from start to
finish.
Deployment of its corporate, institutional and public activities abroad is also seen as a strong engine of growth for
the company by 2012.
Ensuring that the client is always the focus of the company's
attention is a leitmotif that concerns all employees.
Accordingly, quality assessments are carried out in almost
every line of business and followed up by action plans.
Furthermore, oversight of fundamental data for accounting, risk management, asset-liability management (ALM)
and management control is subject to ongoing efforts to
optimally coordinate and increase productivity by using
consistent tools and processes.
Finally, compliance with Basel II standards is providing
Crédit Foncier with new opportunities as resources are
allocated to support its development and its knowledge of
its customers enables pricing policies to be adjusted
depending on the level of risk involved.
1 - Overview
of Crédit Foncier
4. Increase efficiency everywhere
Internally, Crédit Foncier is moving forward with its policy
to reduce loan servicing costs by €140 million over the
next four years.
Externally, Crédit Foncier is directly insolved in Groupe
Caisse d’Epargne's IT strategy and its goal to implement a
streamlined, group-wide information system in order to
bring down IT costs.
The Development Plan 2008 – 2012 will be rolled
out for each business grouping, with five major
orientations, supported by a series of annual commitments through to the 2010 horizon.
In order to promote support for these commitments and
the concepts of the development plan among employees,
a series of briefings were run in Paris and throughout the
rest of France by members of the Executive Committee. To
encourage follow-up by all concerned, specific informational meetings and activities will be organised throughout
the duration of the plan.
2.3 International aspects
The reasoning behind Crédit Foncier's ambitions to develop internationally is twofold: to diversify geographically
its sources of net banking income (NBI) and its sources of
funding.
Crédit Foncier has been historically present in international markets for sources of funding via Compagnie de
8
9
Financement Foncier , its refinancing vehicle . In 2008,
foreign investors outside of Europe held 49% (€4.2 billion)
of its obligations foncières.
In 2005, Crédit Foncier launched a strategy to break into
foreign markets in order to diversify its sources of NBI and
capitalise on its expertise as a full-service real estate lender.
This policy was translated into concrete terms with the
strengthening of existing activities and the development
of new initiatives consequent on the merger with Entenial
(Belgium mortgages, individual lending to non-residents
with real estate projects in France) and by the opening up
of new markets in the wake of acquisitions (Banco
Primus), whilst at the same time developing organically on
the basis of its expertise and competitive advantages —
including those related to refinancing — in corporate, institutional and public markets.
• The individual market
- In Belgium, individual lending has been growing significantly ever since the branch was created in late 2006.
In 2008, production doubled, thus confirming the
Belgian market's interest for Crédit Foncier's range of
products. The Belgian market is well-suited to Crédit
Foncier's model: mortgage origination is based on specialised intermediaries and there are solid files of promising prospects which provide secure potential for production in this market.
- In the non-residents market, Crédit Foncier launched a
new sales strategy in November 2008 to strengthen its
expertise and local networks for this segment.
- In recent years, Crédit Foncier has developed production
of residential mortgage loans in continental Europe — in
the framework of its non-group, debt acquisition strategy
— by investing in debt securitisation funds or by directly
acquiring loan portfolios. In 2008, this production slowed
due to market conditions (the primary market for securitisation shut down) or the adoption of a conservative strategy (secondary market for mortgage loan portfolios).
• Corporate, institutional and public sector markets
- Crédit Foncier has new international ambitions for its
corporate and institutional customers in the private sector. It seeks to meet the needs of its investors' arbitration strategies and capitalise on its expertise of size and
growth dynamics in strategic markets. A special department was created in September 2008 to organise and
develop this activity.
(8) Société de Crédit Foncier - SCF, 100% subsidiary of Crédit Foncier
(9) Obligation foncière issues refinanced more than 40% of Crédit Foncier's production in 2008
2
- In the public sector, Crédit Foncier continues to develop,
despite tighter market conditions, with the setting-up of
two new offices abroad: one in Switzerland via the newly
operational joint-venture with Banque Cantonale de
Genève and Caisse d'Epargne Rhône-Alpes, the other in
Japan through a new office in partnership with Nomura.
This strategy should continue in 2009 with the opening
of an office for North American markets.
In 2009, Crédit Foncier will pursue its strategy
for foreign markets by consolidating its existing
positions and focusing on organic growth.
2.4.2 Transactions within Groupe
Caisse d’Epargne (GCE)
Equity interest in Crédit Financier Lillois
On January 4, 2008, Crédit Foncier acquired Crédit
Lyonnais' 15% stake in the finance company Crédit Financier Lillois (CFL), controlled by Nexity (85%), whose main
activities involve pooling reserve deposits from buyers of
Nexity group programmes and unwinding buyer funds.
Equity interest in GCE Covered Bonds
2.4 Capital transactions in 2008
2.4.1 Development
Equity interest in Maisons France Confort SA
GCE Foncier Coinvest, 49%-owned by Crédit Foncier and
51% by CNCE, finalised the acquisition of a 49% stake
in Maisons France Confort Prou Investment (MFC PI) in
March 2008. The latter company holds a 50% stake in
Maisons France Confort SA, a listed company that specialises in single-family housing.
Takeover of Banco Primus
Since October 2005 in connection with its international
growth strategy, Crédit Foncier has held an equity stake in
Banco Primus (37.4%), a Portuguese bank that specialises
in mortgage loans and the individual loan restructuring. On
November 20, 2008, Crédit Foncier took control of the
company and now holds an 85% stake in it.
On January 31, 2008, Crédit Foncier acquired 5% of GCE
Covered Bonds, a société de crédit foncier founded by GCE
in 2007, which refinances the group's real estate lending
business by issuing covered bonds when a public guarantee is unavailable. In addition, Crédit Foncier participated
in the company's capital increase of €65 million on April
10, 2008, in proportion to its holding (i.e. €3.25 million).
Disposal of shares of SEM by Crédit Foncier
and its subsidiaries
In 2007, GCE created GCE SEM, a wholly-owned subsidiary of CNCE, to round out the group’s strategy for semipublic companies (SEM) and become this market's leading private financial institution. Crédit Foncier and its
subsidiaries sold their minority stakes in 31 SEMs to CGE
SEM to support the group's strategy for this market on
October 21, 2008
Sale of Crédit Foncier and Foncier Participations' hodings
in La Compagnie 1818 – Banquiers Privés (13.5%)
On October 6, 2008, Crédit Foncier sold the rest of its stake
(13.5%) in La Cie 1818 – Banquiers Privés to Natixis.
1 - Overview
of Crédit Foncier
Partial contribution of Crédit Foncier's banking business
to Banque Palatine
In order to refocus its activities on financing the real
estate needs of individuals, the public sector, businesses
and investors, Crédit Foncier decided to transfer its banking business to Banque Palatine, wholly-owned subsidiary of CNCE.
As a result, Crédit Foncier and Banque Palatine signed an
agreement on June 10, 2008 that entailed the partial
contribution of Crédit Foncier's commercial and individual
banking activities. This was carried out on November 22,
2008. Crédit Foncier acquired an 8.33% staked in
Banque Palatine in return for its contribution.
In order to ensure the liquidity of Crédit Foncier's holding
and allow it to be transferred elsewhere within Groupe
Caisse d'Epargne, CNCE and Crédit Foncier have respectively signed promises to purchase and sell Crédit
Foncier's entire stake in Banque Palatine.
These promises can be exercised in 2011 or 2012, under
valuation terms that will depend on the business plan at
the time the promises are exercised, within 90 to 110%
of the valuation of Banque Palatine when the asset contribution was made.
2.4.3 Restructuring and internal
transactions
Capital increase for Compagnie de Financement Foncier
On June 24, 2008, Crédit Foncier, which holds a 99.99%
stake in Compagnie de Financement Foncier, subscribed to
its subsidiary's entire capital increase of €770 million.
Settlement for 48,125,000 new, fully paid-up shares was
achieved by a partial debt transfer involving a €800 million
claim that Crédit Foncier had on its subsidiary after transferring subordinate callable notes to it on June 20, 2008.
Compagnie de Financement Foncier's capital was thus raised from €154 million to €924 million on June 30, 2008.
Full asset transfer from Socrelog to Crédit Foncier
Crédit Foncier, Socrelog's sole shareholder, liquidated the
compagny in December 2008 and recovered all of its
assets. Socrelog was a credit institution that had not been
very active for several years.
Cicobail's acquisition of Picardie Bail
The merger between Picardie Bail and Cicobail is part of
the restructuring efforts for the real-estate leasing business that Crédit Foncier initiated in 2006 to consolidate
the leasing activities of GCE's subsidiaries into a single
entity, Cicobail.
Crédit Foncier contributed 100% of Picardie Bail to the
merger and saw its stake in Cicobail increase from 60.70%
to 65.85% as a result.
2
2.5 Recent events
CNCE's acquisition of Nexity's 23.4% stake in
Crédit Foncier
Pursuant to the announcement made in December 2008,
Nexity and Caisse Nationale des Caisses d’Epargne (CNCE)
signed an agreement on January 29, 2009 outlining
CNCE's acquisition of Nexity's 23.4% stake in Crédit
Foncier de France.
The final sale price of €539.6 million was appraised and
examined by Nexity's board of directors. The shares were
settled and transferred on February 19, upon fulfilment of
conditions precedent. This transaction will not modify the
agreements and conditions of the two groups' cooperation.
CFCAL and Locindus share purchases
In early January 2009, Crédit Foncier mandated Natixis
Securities to purchase a set amount of shares in Locindus
and CFAL-Banque over a specific period of time. These
acquisitions were reported to the AMF and are not intended to push it past regulatory thresholds as it already
owns two-thirds of these two companies' share capital.
From January 12, 2009 to March 31, 2009, Crédit
Foncier acquired 82,618 Locindus shares and 47,473
CFCAL shares, raising its stakes in both companies to
68.81% and 68.38%, respectively.
Then, on April 3, 2009, the company acquired a block of
Locindus shares representing 1.62% of the capital, increasing the investment of Crédit Foncier to 70.43%.
Outlook
Crédit Foncier is unaware of any deterioration affecting
the group's outlook since the date of its last financial
statements.
1 - Overview
of Crédit Foncier
3 Crédit Foncier in 2008
3.1 THE ECONOMY IN 2008
3.1.1 Macro-economic environment
3.1.2 Yield curve
26
26
27
3.2 PUTTING THE CUSTOMER FIRST
3.2.1 Individual customer relationships
3.2.2 Quality assurance for all customers
28
28
28
3.3 BUSINESS LINES
3.3.1 Individual
3.3.1.1 Loan origination in France and Europe
3.3.1.2 Acquisitions of residential mortgage loans in Europe
3.3.2 Corporate, Institutional & Public
3.3.2.1 Public Sector
3.3.2.2 Private Sector
3.3.3 Studies, Appraisals and Real Estate Services
3.3.4 Financial Operations
29
30
30
34
36
36
42
45
49
3.4 ACTIVITIES OF THE MAIN SUBSIDIARIES
51
3.5 ANALYSIS OF RESULTS
52
3
Crédit Foncier in 2008
3.1 The Economy in 2008
3.1.1 Macro-economic environment
The world economy was shaken by turbulent events in
2008. Triggered by the subprime crisis in 2007, financial
markets remained volatile and beset by a series of nationalisations, rescue plans, recapitalisations, mergers and
other unprecedented measures throughout the year. At the
same time, global economic growth slowed significantly.
The banking sector in particular was hard hit by the crisis.
By late 2007, investors had all but abandoned structured
instruments linked to U.S. real estate assets, resulting in
massive asset impairments. In order to preserve their
capital ratios, banks sold off their holdings and even large
parts of their businesses to private investors or sovereign
states at knockdown prices. Confidence in the financial
system sank to its lowest levels. Interbank markets started
to clog up in the second half of 2008 and shutdown completely in the wake of the Lehman Brothers' bankruptcy.
Ever since, credit institutions have had difficulties refinancing. Beyond the role played by central banks as liquidity managers, government intervention is seen as a
potential saviour for financial institutions: in the UK, the
government acquired significant stakes in its banks, while
in France state aid came in the form of "hybrid" capital.
The fallout from the financial crisis meant tighter lending
conditions for the rest of economy, thus putting the brakes
on economic growth. Though worldwide gross domestic
product (GDP) fell by a higher than expected 2.5% in
2008, the fall should not exceed 0.5% in 2009, according
to the IMF. According to the same forecasts, GDP growth
in developed countries will be negative (-2%), while GDP
growth of 3.3% in emerging and developing countries
should help the world economy get back on its feet.
Equity markets around the world were affected as well: the
CAC 40 lost 43%, the Dow Jones 34% and the Shanghai
Stock Exchange fell by a staggering 54% in 2008.
Uncertainties due to volatility in commodity markets,
exemplified by the steep drop in oil prices at the end of
the year, continued to stifle the efforts of central banks,
among others, to promote growth and price stability at the
same time. The European Central Bank (ECB), for
example, adopted a tight monetary policy until October
2008. With the threat of deflation now looming on the
horizon, central bank discount rates are struggling to stimulate growth: the ECB overnight rate at the end of 2008
was 2.5%, after reaching a peak of 4.25% in July, while
that of the Federal Reserve (Fed) was 0.5%. Central
banks, the safest haven for increasingly risk averse investors, are fully living up to their role as lender of last resort.
In each country, issues of government-backed bonds are
making their appearance.
Recovery plans for the banking system and the economy,
falling raw material and energy prices and a back-to-normal production cycle should further strengthen banks,
restore investor confidence and get credit flowing again.
All of these efforts are contributing to a brighter economic
outlook for 2009.
1 - Overview
of Crédit Foncier
3.1.2. Yield curve
Interest rate movements in 2008 reflected two contradictory outlooks from market stakeholders.
Fears of recession that had prevailed in late 2007 largely
dissipated in the first part of the year. Rising raw material
prices (oil rose from $96 to $145.50 on July 3, 2008 and
the RJ/CRB10 raw materials index rose by 11.5% over the
same period) were seen as a direct consequence of growth in emerging countries, growth that would also benefit
Western economies. However, inflationary pressures
around the world (end of June: 4% in the Euro zone, 5%
in the USA, 7.1% in China) put an end to the expansionary policies of central banks and even justified the ECB's
decision to raise its discount rate in July (+0.25% to
4.25%). All rates naturally shifted upwards; however,
yields on overnight to 3 year notes exceeded long-term
yields, creating an inverted yield curve.
From summer onwards, however, and in light of serious
concerns about the soundness of financial institutions, the
yield curve was influenced by two main factors. First, mar-
ket expectations of a lasting economic slowdown began to
set in, leading to significant nominal rate cuts. Second,
recovery plans largely financed by public debt and that
could potentially lead to inflation were rolled out, restoring
a significant gap between short and long rates at more than
1.7% compared to less than 0.6% earlier this year.
Moreover, higher credit spreads reflected the refinancing
difficulties encountered by financial institutions.
With regard to senior debt, the bankruptcy of Bear Stearns
in March, followed by Lehman Brothers in September
pushed credit default swaps (CDS) to exceptionally high
levels (greater than 100 bp11).
Penalised by the absence of liquidity in the secondary market, spreads on covered bonds also increased despite being
considered one of the safest investments after governmentbacked debt. However, these increases have been greater
on bonds whose legal structure in the underlying market
offers less protection: limited to approximately 60 bp for
Compagnie de Financement Foncier, spreads reached 120
to 160 bp for other UK or European issuers.
Rates over the last five years
6
5
4
3
Swap EUR 10 yrs
2
ECB discount rate
1
OAT 10 yrs
EUR 3 months
0
2004
2005
2006
2007
2008
(10) Reuters-Jefferies/Commodity Research Bureau: Composite index of 19 listed commodity prices.
(11) bp: basis points
3
3.2 Putting the customer first
3.2.1 Individual customer
relationships
In light of sharply rising interest rates, Crédit Foncier took
bold measures in 2008 to secure variable-rate loans
(VRL), announcing said measures as early as January 18,
2008. It should be noted that all of these measures have
been strengthened by handling, on a case-by-case basis,
each customer that contracted a variable-rate loan and
who is having difficulties making payments.
Crédit Foncier took another initiative to help its customers
complete their projects under more difficult market conditions: by year's end, individual support was proposed to
customers that had taken out bridging loans.
The latest example among all the measures rolled out by
Crédit Foncier for its Individual customers is an on-line
user account integrating E-Management, which went live
at the end of the year. This user account can be accessed
from www.creditfoncier.fr and allows customers to perform
remote operations and consultations as well as send messages. Responding to customers needs for autonomy, this
e-account facilitates communication and, by reducing the
number of requests via other means of contact, ultimately improves customers' overall satisfaction.
3.2.2. Quality assurance
for all customers
Whether with individual, corporate, institutional or public
customers, Crédit Foncier’s ambition is to be renowned for
the quality of its service.
2. overall performance geared towards customer satisfaction: a factor for commercial and financial efficiency,
3. employee motivation: a factor for growth and performance.
Listen to customers needs and improve satisfaction
In 2008, Crédit Foncier continued to develop tools to
measure customer and partner satisfaction in order to better understand their needs.
A customer satisfaction barometer was launched in collaboration with the CSA Institute: 1,500 customers and
partners were interviewed to measure their level of satisfaction vis-à-vis the services they were provided with and
to identify their main expectations.
With over six million calls per year, Crédit Foncier also
wanted to assess the quality of its telephone conversations. The quality system put in place plays an important
role in assuring customer satisfaction.
A specific quality assurance system was developed to
meet this key need in terms of customer satisfaction.
Striving for operational excellence
In the first half of 2008, Crédit Foncier completed its data
quality oversight system in order to meet its regulatory
obligations and business needs.
It now has a consolidated dashboard with "efficiency" and
"customer satisfaction" indicators allowing it to measure
business performance and promote a customer-oriented
culture among its employees.
Managing quality by getting all employees on board
In 2008, it focused on three areas for improvement:
1. customer satisfaction on an ongoing basis: a factor for
trust, loyalty and referrals,
Crédit Foncier took steps to intensify communication, training and staff involvement in order to get all employees on
board and focused on "quality".
1 - Overview
of Crédit Foncier
At the end of 2008, a Crédit Foncier Quality Charter was
distributed to 3,500 employees, inviting them to become
more involved in this process.
In 2009, measures used to obtain feedback from clients,
such as the customer satisfaction barometer and the tele-
phone conversation quality assurance, will be continued
and expanded. Processes for quality assessment and oversight will be rolled out company-wide and quality data
processing will be standardised.
3.3 Business lines
Crédit Foncier products & services
CORPORATE,
INSTITUTIONAL & PUBLIC
INDIVIDUAL
– Loan products
- Homeownership
- Rental investments
– Support services
– Packaged products for investors
PUBLIC SECTOR
• French Local Authorities
PRIVATE SECTOR
• Loan products
(FLA)
• Social housing
– Classic: long term,
short term
• International public
– Leasing
financing (IPF)
– Public-Private
Partnerships (PPP)
– Mortgages
- Debt restructuring
- Reverse mortgage
• Acquisition of residential mortgage loans
• Appraisals and financial valuations
STUDIES, APPRAISALS
AND REAL ESTATE SERVICES
• Real estate investments and holdings
• Housing policy
• Real estate studies and research
FINANCIAL OPERATIONS
• Issues of obligations foncières
• Other financial operations
3
3.3.1. Individual
In 2008, Crédit Foncier created new structures to support
the development of its network of exclusive agents and
centralised partnerships as well as optimise the quality of
its loan origination services.
Customer relationship management was also revised to
handle the flow of exceptional services offered to customers and process routine transactions faster.
The market slump impacted Crédit Foncier by a drop in
new construction rentals. It has, however, defended its
positions in the low to mid-income first-time homebuyers
market. Market conditions have allowed exclusive agent
networks to increase margins and thus compensate for
lower volumes.
With its array of expertise in real estate, regulated and
social housing loans, Crédit Foncier has become a market
leader with new and innovative solutions such as the
PASS-FONCIER® or reverse mortgages.
Almost every type of loan available was renewed to provide
more security and alternatives in terms of repayment.
Finally, in November 2008, the retail banking business
was transferred to Banque Palatine. This transfer includes
accounts, savings deposits and the retail banking staff.
3.3.1.1 LOAN ORIGINATION IN FRANCE
AND EUROPE
Organisation
Sales in the individual market are based on two networks:
Crédit Foncier agencies and exclusive agents (independent agents under the Entenial brand, replaced by the La
Hénin brand in early 2009). Both networks reach out to
broad customer bases and connect with local specifiers.
In 2008, the network of exclusive agents grew considerably and totalled 78 sales outlets in the beginning of 2009.
A specific management structure has now been put in
place for them.
In addition, a centralised structure is available for partners that provide more comprehensive financing packages
(insurers, banks, sales outlets, brokers) and want to
consolidate agreements and loan origination. It also
includes the remote sales platform that is capable of fully
processing prospects and customers from all channels,
especially those referred by the internet.
Sales offer and communication
In February 2008, Crédit Foncier decided to completely
overhaul its range of variable-rate loans. New solutions are
based on customer segmentation:
• Young, first-time homebuyers can purchase real estate
via a POSSIBLIMO loan that adjusts to changing income
levels. This loan has a fixed rate with instalments that
slightly increase by 1% per year. Instalments are thus
low in the beginning and gradually increase as homeowners' careers evolve and household income increases.
• JUSTEO offers a solution to buyers looking to safely take
advantage of future rate cuts.
• PERIODIMO is an improvement on the old Génération I
line of loans and offers a choice of terms at a fixed rate
for an initial period (between 3 and 10 years), then a
choice of rate caps.
• TENDANCE J is one of Crédit Foncier's classic loans,
but it now systematically includes a rate cap.
Thus, as of June 2008, all of Crédit Foncier's loans comply
with the characteristics stipulated in the first of the banking
profession's "12 Commitments".
Seeking to accompany customers and their projects from
start to finish, Crédit Foncier is also developing a full range
of products and services that include property inspections
and renovation support packages (ZEN solutions).
Savings solutions also evolved in 2008 with Scintillium
replacing Planetys.
1 - Overview
of Crédit Foncier
Crédit Foncier did this so that it can offer a product with
even more flexibility, management options and security.
In November 2008, the new Crédit Foncier internet portal
for individuals went live. More modern and interactive, the
goal of this new version is to boost the traffic of qualified
prospects and route this traffic to the Foncier Direct
Platform and the networks.
Two major actions were prepared in 2008 and rolled out in
January 2009 to boost growth among the network of exclusive agents:
ments and are mostly looking to move up into more comfortable or bigger homes. These projects can be delayed or
abandoned if the resale value of their current home is compromised or is carried out under unfavourable terms.
In addition, the decline in rental investment, which began
in 2007, has accelerated, especially Robien law investments affected by tax brackets being lowered. Uncertainties
about the quality of investments and their location, in addition to rising interest rates, have turned most investors away
from this type of product.
• All exclusive agents were rebranded La Hénin to capitalise on its brand recognition as a "real estate bank".
As a result, new home sales fell sharply: the Fédération des
Promoteurs Constructeurs (FPC) announced net sales of
79,400 units in this sector compared to 127,300 in 2007.
• The website dedicated to the La Hénin brand was launched.
New, single-family homes were relatively spared early in
These launches were accompanied by regional advertising.
French markets in 2008
The fallout from the financial crisis hit the real estate sector hard. Investment has been hampered by uncertainty
about real estate price movements and especially by rising
interest rates, which has further restricted lending, especially over long periods or when property is financed with
little or no down payment.
Buyers have increased down payments to compensate for
higher rates; however, loan terms have little, if not at all,
increased. Most sellers are maintaining prices which has
caused real estate markets to seize up.
the year. However, after energy prices and rates rose sharply
during the summer this market also went south. Gross sales
in 2008 fell to 150,000 — an annual decline of 23%.
The market for existing properties also recorded a fall in
transactions, averaging 20% to 25% in the first half of the
year and accelerating by year's end. Regional disparities are
significant. The Paris region was relatively spared with a
drop of 15% in 2008 and prices holding steady, according
to data from public notaries.
Prices didn't start falling until the end of the year: -9.9%
for the 4th quarter according to the Fédération Nationale
des Agents Immobiliers (FNAIM) or a -3.1% annual
decline for 2008.
Real estate lending market in France
Residential real estate market
New property developments have been most affected so
far as prices have not adjusted to new financing conditions.
As a result, withdrawal rates have reached 40% with certain
developments.
First-time homebuyers have encountered difficulties obtaining financing or have decided to put their acquisition on
hold for the time being. Second-time homebuyers make up
more than half of the buyers of new real estate develop-
Loan origination declined marginally slower than the real
estate market since the level of acquisitions made by firsttime homebuyers held steady in the first half of 2008.
Origination of interest-free loans (Nouveaux Prêts à Taux
0% or NPTZ) is a prime example: thanks to an excellent
second quarter, the number of NPTZ decreased by only
2% at the beginning of the year. However, in the second
half of 2008, this clientele was also affected by the crisis, posting an average yearly decline of 13.4%12.
(12) SGFGAS data
3
With real estate markets seized up, buyers with homes to
sell have to be more cautious and oftentimes sell before
buying. Moreover, the marked drop in these types of transactions has been accompanied by a decrease in bridging
loans, both in number and size.
To help finance projects, regardless of their purpose, down
payment percentages have slightly increased: +0.8 point
according to CSA/Crédit Logement.
After factoring in the decline in new rental investments and
the erosion of transaction costs, real estate loan origination
fell by approximately 20% in 2008 (-17% according to the
Observatoire du Financement et du Logement and -26%
according to the Banque de France).
Average loan terms have stopped increasing, whereas last
year they had increased by more than one year. The
CSA/Crédit Logement institute predicts that the trend will
inverse due to strong reductions in November and
December 2008.
Faced with rising short-term rates, the appeal of variable
rates continues to decline: only 17% of loans had variablerates in 2008 compared to 20.8% in 200713.
Crédit Foncier activity in 2008
Individuals: loan origination
Change
2008/2007
Origination - direct loans
2006
2007
2008
Physical networks(1)
Partner networks(2)
6,293
2,249
7,305
2,053
6,206
1,877
-15.0%
-8.5%
Total individuals
8,542
9,357
8,084
-13.6%
(1) Loans originated by Crédit Foncier agents/distribution platform and the Belgian branch.
Belgian origination was reclassified and is now included in the physical networks for all three years.
(2) Including loan origination from CFCAL and Banco Primus subsidiaries.
Loan origination breakdown in 2008
By distribution channel
By market
Banco Primus 2%
Non residents 2%
CFCAL 2%
Exclusive agents 5%
Belgium 3%
New property
ownership
27%
Partnerships 7%
Sales units 5%
€8.1bn
Branches* 16%
€8.1bn
Specifiers
58%
Miscellaneous
11%
Rental investment,
Existing 3%
* Loans to walk-in clients
(13) DAFSA GLOBAL INSIGHT
Existing property
ownership
46%
Rental investment,
New construction 13%
1 - Overview
of Crédit Foncier
In line with the real estate and lending market downturn,
Crédit Foncier loan origination fell in 2008 (-14%) but by
less than the market average (-20%). It was unable to
fully make up for lost revenue in the new homes market,
a market in which it has had strong positions in the past.
Crédit Foncier is notably a leader for new construction rental investments. Even though falling origination in this sector is well below the market average (estimated at a 40%
drop, identical to the percentage decline in sales), its
impact is significant and has reduced the percentage of
this type of origination to 13% compared to 18% in 2007.
The decline in Crédit Foncier's total loan production is less
than that for the market as a whole, as a result of continued growth in the share of the total market represented by
first-time homebuyers who acquire existing property - a
segment where Crédit Foncier performs strongly.
Crédit Foncier continues to demonstrate its expertise in
terms of financing low to mid-income families purchasing
their first home. It has significantly increased its market
share for interest-free loan origination (NPTZ): 17.2% in
2008 compared to 14.1% in 200714.
Crédit Foncier remains the leading distributor of state-subsidised loans (PAS) with 32%14 of the market share, compared to 31% the previous year. The -11.2% decline in this
segment is lower than the market average thanks to income
ceilings being raised at year end.
In 2008, despite tighter market conditions, Crédit Foncier
did not change its origination criteria and rate conditions,
especially for financing with long terms. Average loan
terms therefore increased by more than one year in 2008.
Meanwhile, the down payment rate (excluding bridging
loan capital) on new loans for Crédit Foncier customers
grew by 2% on average and increased from 9% to 11.2%
for acquisitions of existing properties.
This situation has enabled networks to improve margins
slightly to compensate for falling transaction volumes. The
decrease in the number and amount of bridging loans also
improves the average net banking income (NBI) per transaction.
The breakdown of fixed and variable-rate loans changed
significantly after loan financing options were overhauled,
especially due to the success of Possiblimo loans. Fixedrate loans now make up the majority of annual loan origination at 57% compared to 27% in 2007.
In Europe, the promising development of real estate and
consumer loan businesses reinforces the decision to move
into new geographic locations despite the limitations this
may pose.
Individuals: outstanding loans
Outstanding loans at year end - direct loans
2006
2007
2008
Change 2008/2007
Subsidised loans*
Competitive loans
1,826
35,743
1,361
38,784
1,010
42,697
- 25.8%
+ 10.1%
Total individuals
37,569
40,145
43,707
+ 8.9%
* This only includes subsidised loans such as the PAP (Prêt à l’Accession à la Propriété).
Despite the rapidly decreasing stock of subsidised loans
(such as PAP loans to support homeownership) and lower
origination levels than in 2007, the loan portfolio conti-
nues to grow steadily and outstanding loans now total
€43.7 billion.
(14) SSGFGAS: periodic statistics at March 3, 2009
3
Outlook for 2009
French markets
As interest rates and house prices continue to fall and the
government's recovery plan gets underway, real estate
sales should pick up in 2009. It should be noted that
though the ECB's successive rate hikes had an immediate impact on mortgage loan rates, recent rate cuts have
not been immediately factored in, despite declining long
rates (OAT or Swap), given the general refinancing difficulties encountered by banks.
The market for new construction should take off first, supported by the twofold increase in the ceiling on interestfree loans (NPTZ) and rental investments thanks to new
Robien law tax deductions. The FPC believes that sales
should stabilise or even increase by a few thousand units.
Before the recovery plan was announced, they expected
sales in 2009 to continue to fall by at least 20,000.
The increasing potential of exclusive agents that have
recently joined the sales force, new openings and new
agent recruitment will all help Crédit Foncier boost production and market share nationwide.
Marketing and sales have been given additional human
and technical resources to improve network performance.
Crédit Foncier's newly overhauled website as well as the
new website for the La Hénin brand will help increase traffic to these two networks and to the FONCIER DIRECT
platform.
Access to the E-Management site should reduce the number of calls to the loan servicing department while at the
same time providing customers with immediate answers
and even faster processing times.
In 2009, Crédit Foncier is putting ever more resources
behind its ambitions to improve sales and the quality of
its services for individual customers.
In the existing properties market, repricing is expected to
intensify, including in the Paris region.
Without knowing for certain when the economy will
rebound during the year and given the lower transaction
prices, the real estate lending market is expected to
contract slightly in 2009.
3.3.1.2 ACQUISITIONS OF RESIDENTIAL MORTGAGE
LOANS IN EUROPE
In addition to its individual lending business, Crédit Foncier
acquires residential mortgages by purchasing mortgagebacked securities or by purchasing residential loans outright.
Crédit Foncier
As of January 19, 2009, Crédit Foncier could offer customers twice the amount of interest-free loans (NPTZ) for
new homes. It continues to offer the best possible service
to its young and/or modest-income customers and strengthen its long-running partnerships with single-family
home builders and developers.
Similarly, Crédit Foncier is pursuing its efforts to fully
comply with all twelve of the banking profession commitments. For example, all loan contracts were recently
rewritten to make them clearer and more structured.
In 2009, Crédit Foncier will work on consolidating its
newly created or modified offers. All its financing solutions will be improved with added flexibility and specific
variations for certain loans such as PAS loans.
Activity in 2008
The mortgage acquisition business was seriously affected
by the credit crisis in 2008. The primary market for securitised residential mortgages remained closed off throughout the year for foreign investors.
Crédit Foncier's business in 2008 was therefore limited to
a few additional acquisitions in the secondary market of
lines already held in the portfolio in Italy, Portugal and the
Netherlands for a nominal value totalling €72.2 million.
Furthermore, direct acquisitions of mortgage loan portfolios were deliberately put on hold, pending more stable
market conditions.
1 - Overview
of Crédit Foncier
The intensity of this crisis has most investors overlooking
the fundamentals.
It should be pointed out that the credit quality of the
Crédit Foncier's residential mortgage loan portfolio (€15.7
billion at the end of 2008, excluding government-backed
loans) has held up extremely well. Basel II ratings (based
on external ratings) for the 82 lines remained at the AAA
level at December 31, 2008, with the exception of one
line rated AA+.
It should also be noted that Crédit Foncier group has a
long-term outlook and intends to hold these positions until
maturity. These loans have strategic importance as they
are originated in neighbouring countries throughout continental Europe, are related to Crédit Foncier's core business of residential lending, have no legal, fiscal or credit
risks tied to them and do not rely on the development or
acquisition of distribution networks.
In 2008, Crédit Foncier also unwound a credit default
swap (CDS) that was concluded in 2007 with a banking
counterparty on most of the group's residential mortgage
portfolio to manage regulatory capital requirements in
anticipation of the transition to Basel II. This transaction
resulted in a one-off gain of €175 million before tax.
Acquisitions of European residential mortgage loans
New acquisitions
Outstanding loans at year end
2006
2007
2008
Change 2008/2007
2,356
10,989
8,008
17,351
66
15,662
- 9.7%
Change 2008/2007
Strategy and outlook for 2009
The market for mortgage loan acquisitions will remain closed off as long as spreads remain as high as they were at
the end of 2008. In 2009, activity for this business
should remain negligible.
SUMMARY OF RESIDENTIAL LOAN ACTIVITY
Production
individual loan origination – direct loans
Acquisitions of residential
mortgage loans
2006
2007
2008
10,898
17,365
8,150
- 53.1%
8,542
9,357
8,084
- 13.6%
2,356
8,008
66
- 99.2%
48,558
57,496
59,369
+ 3.3%
individual loan origination – direct loans
Acquisitions of residential
mortgage loans
37,569
40,145
43,707
+ 8.9%
10,989
17,351
15,662
- 9.7%
3
3.3.2. Corporate, Institutional
& Public
3.3.2.1 Public sector
IN FRANCE
Social housing
Social housing: a key part of the government's economic recovery plan
The financial crisis has resulted in a shortage of liquidity
to finance public and public/private investment and a
sharp rise in spreads, making it more expensive to finance social housing. The real estate housing slowdown in the
private sector has placed social institutions at the centre
of the government's recovery policy. More generally, the
impact of the crisis on household purchasing power has
highlighted the need for more social housing. Faced with
this situation, the government has launched various measures to revive this sector.
For Crédit Foncier, 2008 was characterised by two contrasting periods. Demand for financing during the first half of
2008 remained strong for social housing. Meanwhile,
Crédit Foncier pursued its efforts to restructure this business and its resources. The impact of the crisis in the
second half of the year was mainly characterised by private
financial institutions dropping out of the market. The business slowed down as customers waited to see what would
happen with volatile financing costs and interest rate movements. Government intervention, via the exceptional tender
for tax-efficient loans for investment in social rental housing
(Prêt Locatif Social [PLS] and Prêt Social Locatif et Aidé
[PSLA]), was a highlight at the end of the year.
Organisation
Crédit Foncier is represented in the social housing segment at the regional level by its sales network of regional
managers and locally via the Caisse d’Epargne network.
Development of Crédit Foncier's range of products
In 2008, the product range was extended by increasing
long-term financing options, such as the fixed rate 25-50
years distributed by Crédit Foncier and the Caisse
d’Epargne.
The PSLA range was also expanded to finance a new trend
of lease-to-buy transactions involving variable-rate solutions that are indexed to the Livret A (French savings
account with special tax advantages).
Crédit Foncier can also set up comprehensive partnership
agreements with the Caisse d’Epargne regional entities to
finance various social institutions investment policies.
Finally, the first results of the customer satisfaction barometer, launched with the CSA institute, will help set the
course of action in early 2009.
In 2009, Crédit Foncier will intensify its efforts in favour of
the social housing market in three ways:
- strengthening its local presence to better meet the needs
of its customers,
- improving communication about its organisation and
collaboration with the Caisse d’Epargne regional entities,
- simplifying its internal procedures to make projects and
investment policies more transparent for its customers.
Activity in 2008
Social housing market
The first half of the year saw some important reforms
pushed through by the government: liberalisation of the
Livret A, change in the governance of certain organisations, etc.
Financial pressures stemming from interest rate movements and inflation caused the Livret A interest rate to
increase despite government intervention.
By the end of the year, market liquidity had dried up
mainly because spreads rose across the board for all
counterparties.
1 - Overview
of Crédit Foncier
The economic recovery measures announced by the
French President on October 1, 2008 included an additional tender in November 2008 to transform private
developments into social housing units. This tender
concerns future state of completion sales (VEFA) of
30,000 homes.
Social housing: Crédit Foncier production increases
significantly
- Lending activity is firmly progressing in both the regulated and competitive sectors. New loans in 2008 amounted to 554 contracts for a total of €1,026 million (up
13.6%), in addition to 653 commitment contracts totalling €1,169 million.
- Dynamic debt management (G2D) continues with the
aim of reducing client debt that is highly exposed to
changes in Livret A rates during times of crisis. In 2008,
these transactions amounted to €133 million in loans
tied to 31 contracts.
- Crédit Foncier offers financial solutions that safely optimise debt management while taking into account its
customers' overall investment and asset arbitrage policy.
Production breakdown in 2008
Key projects in 2008
• Public-private partnership financing, for the PLS
portion, of the student dormitories extension at
the Ecole Polytechnique (€35 million).
• Financing for the Hospital Association of Franche
Comté: €40 million.
• Debt management transactions for the OPAC of
Haute Savoie and Batigère.
Crédit Foncier represented Groupe Caisse d’Epargne
(GCE) for tenders involving tax-efficient loans for investment in social rental housing (PLS, PLI and PSLA loans).
GCE followed up on the success of its bids in 2007 and
submitted bids for these tenders in March 2008. The lots
awarded were as follows:
Tender 2008
PLS
PLI
Local authorities
12%
Volume
790
20
PSLA
15
The additional tender in November 2008, related to the
VEFA programme involving 30,000 housing units announced by the French President, secured the group's position:
Additional tender
Social economy
21%
PLS
Volume
150
PSLA
5
Outlook for 2009
€1bn
Social housing
67%
In light of the current economic crisis, social housing in
2009 will be an important focus of the government's recovery plan. This business should pick up to compensate for
the slowdown in private investment, both in terms of rental properties and home ownership.
3
French Local Authorities
Activity in 2008
A turbulent year due to elections and the financial crisis
Municipal elections during the first half of the year caused local authorities to postpone several financing or existing debt management decisions. Nevertheless, the market share of financing transactions referred by the Caisse
d’Epargne regional entities progressed during the first six
months thanks to more efficient operations, and debt
management activity increased by 35% compared to
figures for the first half of 2007.
The year 2008 was marked by two major events. Elections
involving several local authorities and the repercussions of
the financial crisis affected the entire sector (regions,
departments, intercommunal institutions and hospitals).
The elections caused demand for overall funding in this sector to decline as well as financing requests and debt management transactions to be put off until later in the year.
The financial crisis created its fair share of concern
among local authorities after a key player in this sector
encountered difficulties. In the end, a massive government injection of €5 billion, including €2.5 billion via the
traditional banking sector, ensured that this sector's liquidity needs were met.
Organisation
Crédit Foncier does business with French local authorities
via the Caisse d’Epargne sales network, its main broker.
Crédit Foncier deals directly with national clients.
For new financing, the second half of the year suffered
from the financial crisis, especially among clients as worries mounted about their ability to obtain the funding they
needed. The most important impact for customers was the
sharp rise of margin conditions applied by lenders for
indexed debt. As for debt management activities, this period was quite favourable due to falling long-term rates and
customers' increasing aversion to risk. Crédit Foncier
responded by offering customers the possibility to swap
into fixed rates.
Breakdown of long-term production in 2008
Range of products
Crédit Foncier's product range includes a comprehensive
package of financing and debt management services.
It mainly consists of fixed-rate and market-rate financing
and rate derivatives to meet customer needs.
This latest range is marketed under improved verification
procedures to ensure the product is the right solution for
the customer. With its partners, Crédit Foncier also periodically monitors rate/client exposures.
In order to meet client needs throughout the entire term
of its loans, Crédit Foncier offers to manage customers
existing debt including the possibility to secure it by
swapping from variable to fixed rates. This activity continues to develop and allows customers to successfully
capitalise on market opportunities.
Communes 13%
Departements
28%
Other 4%
Bond issues
3%
€3.1bn
Hospitals
23%
Inter-communal
syndicates 5%
Regions 11%
Inter-communal
authorities 13%
1 - Overview
of Crédit Foncier
Key transactions in 2008
• Crédit Foncier, Senior Co-lead for the Territoires
de France bond issue with a contribution of
€100 million.
• Originator of a €150 million financing package for
the Departmental Council of Seine-Maritime, €100
million carried on Crédit Foncier's balance sheet.
• Existing debt management transactions on €900
million to lock in fixed rates for clients through
out the year.
It should be noted that 2007 was marked by two extraordinary transactions: Natixis' sale of this business for €4.8 billion, and €1 billion in financing for the Ile-de-France region.
Crédit Foncier's direct loan production in 2008 amounted
to €3.1 billion, falling from €3.4 billion in 2007 due to the
same reasons affecting the rest of the business: local elections and financial crisis. The massive injection of public
funds to offset the absence of one of the main market
players also reduced Crédit Foncier's distribution potential.
During this difficult period, Crédit Foncier teams were in
constant contact with clients via the Caisse d’Epargne
network. This contact, combined with customers increasing desire for security and renewed sales efforts, led to a
sharp increase of activity for the debt management business. It reached €1.3 billion during the year (up 84%
compared to 2007).
Outlook for 2009
Now that local authorities and their new teams are settled
into their positions and new hospital programmes are
underway, local authority investments should boost local
financing requirements. In addition, local authorities have
a capacity for counter-cyclical investment, which can be a
significant asset for the government's recovery plans.
The debt management business will continue to be developed, particularly with customers' renewed appetite for
secure interest rates.
INTERNATIONAL
International Public Financing
Crédit Foncier provides financing solutions tailored to the
needs of international public sector clients by drawing on
the refinancing capacity of its subsidiary, Compagnie de
Financement Foncier.
This business continues to grow via acquisitions of bonds
issued by public or related entities and financing granted
to foreign local authorities in the form of loans or the subscription of bond issues.
This business not only requires innovative financial engineering but also an in-depth analysis of financial, regulatory and fiscal aspects.
Activity in 2008
With production nearing €3.4 billion, Crédit Foncier
remains focused on managing risks and optimising profitability from its international public financing business.
Outstanding direct loans at the end of 2008 amounted to
€13.5 billion, including €5 billion lent to sovereign states.
The international public financing business was affected
by the crisis in banking and financial markets that followed the subprime crisis in the summer of 2007.
Proactive management of scarce liquidity as well as careful
monitoring of the environment and target markets
— foreign local authorities and their affiliates — helped
Crédit Foncier meet the financing requirements of international local authorities and public entities while maintaining
high profitability margins and successfully managing risks.
3
Moreover, the acquisition and implementation of an internal ratings model as well as the expansion of eligible
assets for sociétés de crédit foncier (modernization of the
economy law of August 5, 2008) helped maintain ambitious growth targets. Finally, due to downward trends in
the market, forecasted production volumes for 2008 were
cut back while profitability objectives were held steady
given the favourable circumstances.
Compagnie de Financement Foncier's outstanding exposures to the American public sector are especially safe as
most of them are rated at least AA without monoline credit enhancements. The main counterparties are major
states or cities such as New York.
As for organic growth, a Crédit Foncier sales office was
opened in Geneva in September 2007 followed by an office in Tokyo in December 2008.
Finally, in connection with its Basel II approval, Crédit
Foncier created an internal ratings based approach for
international local authorities that complements rating
agency assessments.
Production breakdown in 2008
Canada 10%
Poland 4%
Switzerland 6%
Greece 8%
€3.4bn
Benelux 11%
Italy 7%
Germany 2%
Japan 6%
United
States
46%
A first for Crédit Foncier: tax lease financing for tramway
cars in Switzerland.
Crédit Foncier was awarded the tender by Transports
Publics Genevois (TPG) to finance the acquisition of
18 tramway cars under a tax lease guaranteed by
the Canton of Geneva (internal rating A+). Crédit
Foncier provided funding in Swiss Francs (CHF) for
the lessor in the form of two loans with 20 and 30
year terms, equivalent to €50.5 million.
As this asset is secured by the assignment of lease
payments from TPG and a guarantee from the
Canton of Geneva, Compagnie de Financement
Foncier can carry it as an eligible asset, giving
Crédit Foncier a competitive advantage that enabled
it to win the tender.
This is a remarkable transaction for Crédit Foncier
for several reasons: this is the first time it has arranged a tax lease in Switzerland and will gain valuable
expertise in assembling financing for public projects. Furthermore, collaboration with an urban
transport company will give Crédit Foncier the
opportunity to increase its visibility in a public sector segment that is expected to grow in Switzerland
and elsewhere in coming years. For instance, a similar lease transaction is currently being studied in
Belgium where public infrastructure needs and budgetary constraints make it more than ever necessary to seek out private financing partnerships for
public investments.
1 - Overview
of Crédit Foncier
Summary of public sector activity
Production - direct loans
(1)
Social housing
International public financing
(2)
French local authorities – direct loans
Social housing – direct loans
International public financing – direct loans
Acquisitions of receivables backed
by public sector entities
2006
2007
2008
Change
2008/2009
10,167
9,534
7,519
- 21.1%
1,676
847
7,644
3,372
903
5,259
3,118
1,026
3,375
- 7.5%
+ 13.6%
- 35.8%
24,164
39,034
43,719
+ 12.0%
6,480
4,818
12,866
16,100
5,317
9,973
17,098(3)
5 543
13,494(4)
+ 6.2%
+ 4.3%
+ 35.3%
7,644
7,584
- 0.8%
(1) Excluding G2D and loan portfolio acquisitions
(2) Segmented according to Basel standards as of 2008
(3) Including €1.1 billion in loans to sovereign states
(4) Including €5.0 billion in loans to sovereign states
Outlook for 2009
Crédit Foncier's international public financing business is
set to evolve in 2009 since its main competitors should
pose less of a threat; however, the current lack of liquidity will continue to restrict production volumes.
In light of these circumstances, Crédit Foncier plans to
work on getting its Swiss and Japanese offices fully ope-
rational and pursue its development in North America by
opening a sales office in Canada.
Moreover, newly eligible asset locations for Compagnie de
Financement Foncier have opened up new opportunities
that will be examined by Crédit Foncier for this business'
future developments.
3
3.3.2.2 Private sector
Despite the crisis in the financial and real estate sectors,
Crédit Foncier managed to preserve the profitability of its
private sector financing business while reigning in on production.
Group synergies have been strengthened, thereby further
consolidating Crédit Foncier's reputation for its real estate financing expertise among commercial and other corporate clients.
Furthermore, in November 2008, banking services for real
estate professionals, property managers, real estate
agents and investment companies were transferred to
Banque Palatine along with customers and the staff that
managed this business.
The range of products is adapted to customer segments:
- Investors: long-term mortgage loans, investment leases,
commercial loans, fixed-rate loans, locked in fixed rates or
variable rates, syndicated loans, etc.
- Developers: land acquisition loans, credit facilities,
construction loans, financial guarantees of completion,
sub-contractor payment guarantees, discharge guarantees, collateral guarantees, etc.
- Companies: real estate leasing, Sofergie (energy-environment).
- Public-private partnerships: project financing, real estate
leasing, etc.
Additional products will be added to the range during the
first quarter of 2009, including rate hedging instruments
that have been the subject of current considerations.
Organisation
French markets in 2008
Crédit Foncier has four main types of corporate and institutional clients: investors, developers, businesses and
public project partners.
As with Crédit Foncier's other businesses, private sector
clients in their respective markets also encountered difficulties in 2008: financial, property and real economy crisis.
To better meet the needs of its customers, Crédit Foncier
reorganised its front office into departments and businesses dedicated to specific customer segments.
Developers
Moreover, in order to better understand the market at the
European level, a new department was created in 2008 in
connection with Crédit Foncier's international development strategy.
The offer and its development: range of products
and services
The private sector offer includes a comprehensive range of
real estate products and services that are tailored to individual customer needs.
(15) Ministry of Ecology, Energy, Sustainable Development and Planning - Housing construction
(16) Ministry of Ecology, Energy, Sustainable Development and Planning – Home sales
In 2008, the number of new building permits declined by
16.7% (455,673 in 2008 compared to 547,746 in
2007) as did the number of housing starts by 15.7%
(368,609 in 2008 compared to 435,365 in 2007).15
Cancellations of approved developments increased considerably, representing nearly 55,000 housing units in
2008. Only 37,400 housing units were cancelled in 2007
and 32,400 in 2006.15
In 2008, the number of sales fell to nearly 79,400 units,
down 37.6% from 2007. This decline was especially
steep in the fourth quarter of 2008. Only 15,000 homes
were sold, representing a drop of 47.6% compared to the
fourth quarter in 2007.16
1 - Overview
of Crédit Foncier
There are 110,900 unsold new homes, or 8.3% more than
Q4 2008, but this figure includes two distinct categories
of homes: finished homes and pre-sales of unfinished
homes.16
In one year, the average turnover time rose from eleven
months to over twenty-one months for collective housing
units and to twenty months for single-family homes.16
Sales forecasts for the coming years are 60,000 units in
2009 and 58,000 in 2010.17
Investment in commercial real estate
Investments in commercial real estate fell by nearly 55%
to €12.5 billion for 2008 — levels not seen since 2004.18
The market continued to worsen as the months went by:
€4.1 billion in transactions for the first quarter, €3 billion
for the second quarter and €2.5 billion for the third quarter. Transactions picked up slightly during the fourth quarter, but business was limited to small transactions.18
Cross-border investors have largely withdrawn from the
market which has largely favoured national players
(69%), especially French institutional investors such as
real estate investment trusts (REIT), insurers and real
estate mutual funds (Organismes de Placement Collectif
Immobilier – OPCI).
Finally, the rate of return "premium" increased significantly (e.g. the "premium" in the central business district
(CBD) rose from 4% in 2007 to 5.75% at end of 2008).18
Market forecasts for investment in 2009 range from €10
to €12 billion. In the first quarter of 2009, few transactions are expected to go through since the economy has
officially entered into recession and prospects in the rental market are not looking bright.18
Companies
Three major factors encourage real estate leasing (REL):
industrial investment, commercial real estate investment
and construction starts for non-residential buildings
(-18.3% in 2008). Given the projected decline in these
three sectors in 2009, especially for commercial real estate until the market levels out, REL production is also
expected to fall in 2009.
Real estate leasing production resisted the downturn and
was up 2.9% in 2008. But this is due to a "price effect"
associated with an increase in the average transaction
price. The number of transactions, on the other hand, fell
sharply (-7.2%).
Growth prospects look less favourable in 2009 since the
economy is not expected to rebound until 2010. As in
2008, increasing average contract amounts will offset the
decline in the number of transactions and ultimately realestate leasing production will grow in value by 1%.19
Public-Private Partnerships (PPP)
The PPP market is expected to accelerate in 2009 as
spending that was put on hold during the 2008 elections
picks up again, and due to new legislation that simplifies
PPP procedures. The government is also launching a recovery plan that involves massive public spending. New
legislation aims to make PPP procedures equivalent to
those of public procurement contracts.
In addition, an important feature of this type of project is
that it is drawn out over a very long period. Given this fact
and the rapidly changing conditions in the financing market, it becomes difficult to forecast profitability for this
business.
Cabinet Bourdais Richard Ellis forecasts that volumes will
pick up in the second half of 2009, but only after significant price corrections.
(16) Ministry of Ecology, Energy, Sustainable Development and Planning – Home sales
(17) Emmanuel Parot – Analyst at Gilbert Dupont
(18) CBRE – investment market in France
(19) XERFI – real estate leasing – December 2008
3
Crédit Foncier activity in 2008
Private sector production
Production - direct loans
Change
2008 / 2007
2006
2007
2008
Developers
Investors
Companies
International
Public-Private Partnerships
1,690
1,557
317
-
1,581
2,362
483
102
1,348
1,519
391
10
630
- 14.7%
- 35.7%
- 19.0%
Total Private Sector
3,564
4,528
3,898
- 13.9%
X 6.2
Due to market forces, Crédit Foncier saw volumes fall but
continued to manage risks successfully and maintain
satisfactory profitability levels.
Expected margins in the commercial real estate financing
sector have long exceeded market conditions. Production
volumes were particularly low in early 2008.
Almost all development financing targets were met as
transactions focused on secure, recurring customers.
However, these transactions were initiated in previous
years. The fall in activity is thus due to lower production
levels at year end 2008.
Business in the public-private partnerships sector was
solid as were financing conditions, resulting in excellent
figures for Crédit Foncier in terms of volume, margins and
net banking income on new production.
Finally, the international business got off the ground by the
end of 2008. Its results are therefore negligible.
Commitment volumes in the investors' market has fallen
back significantly, by as much as 60%, which has impacted the level of production. However, Crédit Foncier offset
this reduction by increasing margins, allowing it to attain
virtually all of its profitability targets.
Private sector outstanding loans
Change
2008 / 2007
2006
2007
2008
Private sector – direct loans
8,146
10,367
11,034
+ 6.4%
Acquisitions of mortgage loans
from private sector entities
Total Private Sector
-
150
180
+ 20.0%
8,146
10,517
11,214
+ 6.6%
1 - Overview
of Crédit Foncier
Outlook for 2009
Markets will remain tied up in 2009: liquidity will be rare
and expensive, there will be little investment in commercial
real estate, housing starts will fall and the crisis will work its
way into the real economy, directly impacting businesses.
Under these circumstances, Crédit Foncier will consolidate
its positioning among its private sector customers as a genuine partner and a leader in real estate financing. This positioning should go hand in hand with its aim to conserve net
banking income under secure conditions. International development is one area of growth that should help offset falling
domestic demand.
Two strategic actions will be deployed to achieve these
objectives:
An obligation to focus on customer relations
and their quality
Forecasted levels of activity should allow Crédit Foncier to
differentiate itself from competitors and add more value by
improving existing customer relationships. To this end, it
plans to clarify each sectors' organisation and operations
and improve the quality of information given to customers.
Developing the international business
– a growth engine
After putting in place a dedicated international department
in 2008, Crédit Foncier plans to substantially increase its
positions in several European countries in 2009. By late
2009, Crédit Foncier should be capable of meeting its customers' needs with a range of customised financing solutions throughout Europe.
3.3.3 Studies, Appraisals and Real
Estate services
The real estate services business, which originally started
out with appraisals (Foncier Expertise and Serexim), asset
management and holdings to leverage debt, continues to
develop with new services for professionals (Fontec: audits
and inspections) and for individual customers (Foncier
Diagnostics). The Real Estate Studies and Research business was in high demand both internally and externally,
which boosted employee morale and this activity's reputation. Finally, housing consulting services geared towards
local authorities took off in 2008 under the new Housing
Department. This business reinforces Crédit Foncier's active role in shaping real estate recovery policy.
Appraisals and financial valuations
Activity in 2008
The appraisal business in 2008 consisted of more than
31,000 appraisals conducted by 127 experts and appraisers. Total revenue amounted to €20.8 million, including
€16.1 million from the 21,500 external appraisals.
Foncier Expertise, which specialises in property appraisals
and real estate market assessments, generated new business with several Organismes de Placement Collectif
Immobilier (OPCI, French real estate mutual funds) and by
calculating estimates required for reverse mortgage loans.
Serexim, which specialises in residential real estate appraisals, was recently certified ISO 9001 and launched a new
"State of habitability" service which is indispensable for
beneficiaries of government subsidised, interest-free loans.
3
Fontec, a joint venture of Foncier Expertise and Socotec,
offers a comprehensive real estate appraisal and technical
audit. It took off in 2008 and carried out an important "comprehensive assessment" mission involving 12 health facilities with 2,324 beds. This new concept of a "comprehensive real estate assessment" (combining financial, legal, technical, regulatory and environmental assessments) has recei-
ved praise from every real estate market participant, whether
they be investors, managers, users or bankers.
Foncier Diagnostics, a joint venture of Serexim and
Socotec, is now operational in major regional cities throughout France and is developing its business which
consists of regulatory building inspections.
Missions conducted in 2008
Dates
Missions
Customers
February 2008
Appraisal of 125 residential apartment buildings – throughout France.
SNI (Société Nationale
Immobilière)
March 2008
Full appraisal of the business and premises of the Hilton Suffren
(75015) hotel prior to its sale
IMHOLD
April 2008
Appraisal of 16 different assets (excluding offices)
located in the Rhône Alpes region; coupled with a consulting mission
to implement an asset management plan developed by GCEI CI
CERA
(Caisse d’Épargne
Rhône Alpes)
June 2008
Appraisal of 11 investment properties (including some bank branches)
as part of due diligence before contributing them to an OPCI vehicle
Archon (Whitehall)
September 2008
Appraisal of 25 real estate portfolios containing standard or single-use
properties in connection with efforts to review risks on these assets,
financed by leasing agreements
HSBC Leasing
Outlook for 2009
This business will continue to seek out new customers in
2009 while rolling out services for GCE and its subsidiaries and creating synergies among the various real estate
service subsidiaries, especially with the consulting entity.
During the first quarter of 2009, new software (Imothep)
will be implemented to manage the Appraisal Department's
sales and finance.
It performs the following tasks:
- risk studies/listings associated with financing requests
(development operations, investments, etc.),
- provisioning policy assistance,
- strategic analysis of national and local real estate markets and real estate financing (website www.marcheimmo.com, indicators, etc.),
- real estate database management (millions of statistical data),
Real estate studies and research
The real estate studies and research business is fully operational and plays an essential role in Crédit Foncier's real
estate risk management policy.
- external studies for professionals (developers, land
developers, investors, local authorities, etc.).
1 - Overview
of Crédit Foncier
Activity in 2008
Crédit Foncier has over 150 analysts throughout France
that work with both public and private sector customers
as well as with individual customers. This advantage, in
addition to its leadership in the mortgage financing
industry, allows it to formulate a precise yet global picture of French real estate markets, thanks to its numerous
locations across all of France and the diversity of properties and transactions it studies.
In 2008, 293 credit risk assessments were conducted on
more than €1 billion in loan applications.
At the end of March 2008, Crédit Foncier launched a new
version of its website www.marche-immo.com. This new
version has additional features and is now available by
subscription. With 40,000 real estate data updated every
quarter, it already recorded 26,000 visits in 2008 with
150,000 viewed pages.
Outlook for 2009
In 2009, new indicators will be added to www.marcheimmo.com, including a purchasing power and household
location indicator by metropolitan area. 45,000 real estate data will be updated every quarter with a target of
35,000 external visits and 200,000 pages viewed. In
terms of credit risk analysis, the goal is to complete over
250 internal missions.
Real estate investment
A dedicated team with proven real estate skills has a specific operational function to meet any request from the
Credit Foncier or its subsidiaries. It operates in the following areas:
Foreclosure protection: In order to optimise debt recovery
related to real estate lending activities, Crédit Foncier's subsidiaries bid on foreclosed property during auction sales to
support prices and, as a result, sometimes acquire, manage, promote and resell the properties.
Real estate investment: The aim is to implement a real
estate investment strategy that is customer oriented and
that will create synergies among Crédit Foncier's different
businesses, especially between real estate appraisals and
financing.
Real estate for public-private partnerships: Crédit
Foncier performs the operational real estate aspects of
property projects on behalf of the project companies it has
equity stakes in. It also provides its subsidiaries with marketing assistance and occasional consulting services.
Activity in 2008
The downturn in the real estate market that began in
2008 first affected property located in rural parts of
France and then, as the financial crisis worsened, all real
estate assets throughout France. Nevertheless, debt recovery targets on foreclosed property were reached, even
though part of the 2009 disposal plan was not carried
through. A gain of €6.0 million and rental income of
€6.4 million were posted in 2008.
Sales of assets held by the SOREGE and FVA investment
funds were finalised and the deeds should be signed sometime in January 2009.
In terms of investment, SIPARI (Crédit Foncier whollyowned subsidiary) assigned €11.7 million to diversified
real estate vehicles (SIIC, OPCI or closed funds). These
transactions generate secure cash flows in which SIPARI
has a minority participation. In light of the economic
downturn during the last six months of the year, some
investments that were being looked into were deferred or
simply abandoned.
As for business related to public-private partnerships, five
new projects were completed this year: four police stations and a dormitory and training centre at the Ecole
Nationale Supérieure de Police at Saint-Cyr in Mont d'Or.
3
Lastly, Crédit Foncier continued to provide certain of its
subsidiaries with sales support for their real estate assets.
Outlook for 2009
Due to forecasted economic and real estate trends, the
foreclosure protection business will need to be managed
carefully to continue to optimise Crédit Foncier's debt
recovery. Improving yields will be the focus for those real
estate assets that are held by subsidiaries.
In terms of real estate investment, the strategy will remain
on course and focus on joint-minority shareholding structured projects developed with group clients, targeting
assets with secure cash flows and unit sizes that are sufficiently liquid.
Lastly, Crédit Foncier will pursue its public-private partnership business and continue to offer services for certain
subsidiaries.
A Housing Department for local authorities
Crédit Foncier created a separate Housing Department in
June 2007 whose purpose is to advise local authorities
on their housing policy. In close contact with local actors
and keenly aware of their problems, this department provides local authorities with information about best practices and helps Crédit Foncier constantly improve the services it can provide them with: financing for private individuals and social institutions as well as real estate advice and expertise.
Activity in 2008
In 2008, Crédit Foncier's Housing Department mainly
informed local authorities about the financial leverage they
can use to further policies that promote home ownership.
It was particularly involved at the regional level, promoting
the PASS-Foncier, a financial mechanism designed by the
1% Logement institution that offers several tax advantages, including VAT at the reduced rate of 5.5%.
Over 300 meetings were held with regional local authorities in charge of housing policy, i.e. the "housing authorities" (urban areas, agglomerations, departments) and with
the professionals that are party to the projects initiated by
these authorities: private or public developers, single-family home builders, subdivision developers, Collectivités et
Institutionnels Locaux (CIL, Local Authorities and
Institutionals) etc.
The Housing Department helped promote the PASSFoncier® in several regions, either by convincing local
authorities to use it, or by federating local professionals to
get approval for the first projects — 700 homes in 2008.
This product is based on a separation of the land (initially acquired by a CIL) and the construction (acquired by
the homebuyer). Thanks to the efforts carried out in synergy with the sales network, Crédit Foncier is now a leader
in this new market.
Outlook for 2009
Simplified and now open to the condominium market
(subject to the passing of a housing promotion law planned for February 2009), the PASS-Foncier® will soon be
used on a large scale in regional cities throughout France
and in the most highly priced markets (PACA, RhôneAlpes and Ile-de-France). The Housing Department, in
close collaboration with the sales network, will continue to
explain to local authorities how the system works and what
its advantages are as well as help the network put together
financing packages for new prospects.
1 - Overview
of Crédit Foncier
3.3.4 Financial operations
Issues
Activity in 2008
Crédit Foncier's financial market transactions mainly
consist of obligations foncières issued by Compagnie de
Financement Foncier that are backed by the latter's high
quality assets.
Compagnie de Financement Foncier has a transparent and
regulated business model with strict regulatory safeguards,
a portfolio of high quality, diversified assets, rigorous risk
management procedures and significant liquidity reserves.
All of these safeguards helped Compagnie de Financement
Foncier weather the financial fallout that affected banking
systems around the world in 2008 and that led to significant
write-downs, bailouts, nationalisations or debt buybacks.
As risk aversion increased, liquidity dried up and bond
issues became harder to place.
At the same time, competition picked up markedly in 2008.
The number of covered bond issuers rose by 30%, and a new
asset class of government-backed bonds appeared on the
market in connection with government recovery plans.
In terms of public issues in 2008, which totalled €4.2 billion, Compagnie de Financement Foncier seized on
issuance windows to complete its programme, including a
benchmark issue of €1.5 billion that matures in February
2011 and three other new benchmarks: €500 million,
maturing in January 2010, CHF 350 million, maturing in
August 2016 and CHF 200 million, maturing in
September 2012.
51% of Compagnie de Financement Foncier's annual
issuance programme was carried out via private placements under satisfactory conditions and at volumes equivalent to 2007 levels while the market as a whole fell by
35%. Almost €4.3 billion in bonds were issued, most of
which were plain-vanilla bonds.
In addition, callable bonds were also issued to take advantage of market opportunities.
With structured products falling out of favour, Compagnie
de Financement Foncier's responsiveness and flexibility
have answered the needs of private investors, both with
currency structures such as the ratchet reverse floater and
other formats.
Finally, in an attempt to innovate and diversify its product
range, Compagnie de Financement Foncier continued to
develop the registered covered bonds format regulated by
German law.
Despite this difficult environment, Compagnie de
Financement Foncier continued to attract astute investors
with its stable AAA rating and reaffirmed its role as one of
the world's leading private issuers. Compagnie de
Financement Foncier issued nearly €8.5 billion while
maintaining its cost of funding targets. The volume issued
in 2008 represented 37% of the obligation foncière market. Furthermore, volatility in secondary markets was limited by successfully managing its benchmarks.
3
Breakdown of issues by currency
CHF 5%
BRL 1%
JPY 2%
GBP 2%
Insurers 7%
Other 1%
Pension funds
12%
USD
24%
€8.5bn
Breakdown of issues by type of investor
EUR
66%
Asset
management 15%
€8.5bn
Central banks
44%
Banks 21%
Outlook for 2009
Thanks to the strong safeguards provided by obligations
foncières and a solid investor base, activity should pick up
in 2009 and contribute to the success of this year's
issuance programme. Increasing appeal among customers
and newly standardised banking conditions will further
support these expectations. Finally, the expected approval
from the SEC to allow Compagnie to directly solicit U.S.
domestic investors will further broaden its investor base in
this potentially vast market.
In the public sector, €3.8 billion of French public sector
debt and €30 million of social housing debt was refinanced via direct assignments, European Investment Bank
(EIB) and pursuant to Article L. 431-7.
Crédit Foncier also refinanced Caisse d’Epargne loans to
French local authorities (FLA) via its AAA-rated subsidiary,
Compagnie de Financement Foncier. Three Caisse
d’Epargne regional entities completed five FLA assignments for a total of nearly €192 million in 2008.
Overall assignment and internal loan securitisation activities amounted to €11 billion.
Intra-group assignments
The long-term component of loans originated by the Crédit
Foncier group is mainly refinanced by its two AAA issuers,
Compagnie de Financement, a société de crédit foncier,
and Vauban Mobilisations Garanties. In order to carry out
their issues, Crédit Foncier must first assign or securitise
its loans to these issuers.
In 2008, Crédit Foncier used different means to refinance its production.
In the individual segment, Compagnie de Financement
Foncier acquired or refinanced by securitising €2.8 billion
in loans originated by Crédit Foncier.
During the second half of 2008, Crédit Foncier refinanced
€3.2 billion in individual mortgage loans via the Fonds
Commun de Titrisation Zèbre 2008-1 (debt securitisation
fund).
Cash and derivatives
Financial transactions conducted for the group, other than
those related to international public sector financing and
issuance in markets, include short-term investments, surplus cash management, certificate of deposit (COD) or
medium-term note (MTN) issuance and asset hedges, liability hedges and ALM hedges (swaps, caps, etc.).
Crédit Foncier also participated in European Central Bank
auctions and entered into repurchase agreements with
banking counterparties in 2008.
In light of events in 2008, effectively managing short-term
and long-term group liquidity has been a top priority.
1 - Overview
of Crédit Foncier
3.4 Activities of the main subsidiaries
PUBLIC DEBT OFFERING BY SUBSIDIARIES
La Compagnie de Financement Foncier
Le Crédit Foncier et Communal d’Alsace et de Lorraine
Compagnie de Financement Foncier is a credit institution
authorised to operate as a financial company and a société de crédit foncier. It is a wholly-owned subsidiary of
Crédit Foncier de France (A/Aa3/A+). Its mission is to
finance real estate loans and loans to public sector authorities originated by its parent company, Groupe Caisse
d'Épargne (A+/Aa3/A+), and its affiliates as well as other
European credit institutions. Strongly rooted within its
parent company Crédit Foncier, Compagnie de Financement Foncier has been issuing obligations foncières
since 1852 and remains a market leader to this day.
Crédit Foncier et Communal d’Alsace et de Lorraine
consists of CFCAL-Banque, the parent company, and
CFCAL-SCF, a 99.99% owned société de crédit foncier
authorised to operate as a credit institution. Crédit Foncier
owns a 68% stake in its subsidiary, CFCAL.
KEY FIGURES 2008
KEY FIGURES 2008
Volume of issues in 2008: €8.5 billion
French public financing: €4 billion
International public financing: €3.4 billion
Acquisition of individual mortgage loans: €6 billion
Acquisitions of AAA-rated, European residential mortgage loans: €72.2 million
• Total assets: €95.9 billion
• Overcollateralisation ratio20: 110.8%
• Net income: €62.2 million
• New production: €178 million (- 33.6%)
• Outstanding customer loans: €954 million (+ 3.7%)
• Group share of net income: €13.3 million (€12.6 million in 2007)
•
•
•
•
•
CFCAL is one of France's leading loan restructuring companies. CFCAL-SCF issues are rated A+ by Standard &
Poor’s and long-term bonds issued by CFCAL-Banque are
rated A with a stable outlook, reflecting the strength of
this institution.
Locindus
Locindus is a recent subsidiary of Crédit Foncier (67.8%)
and specialises in financing commercial real estate,
conventional mortgages, real estate leasing (REL) and
long-term leasing (LTL). In 2008, it was backed up by
Crédit Foncier, which has allowed it to optimise refinancing and operations.
KEY FIGURES 2008
(20) Coverage rule according to which the total assets of a société de crédit foncier
must be greater than the total liabilities that benefit from a priority right of
repayment (privileged debt).
• New production: €69 million, including 97% mortgage loans and 3% REL
• Outstanding loans: €773 million (+ 16.8%)
• Consolidated net income: €10.9 million
OTHER SUBSIDIARIES
Cicobail
Socfim
Founded in 1972, Cicobail is a subsidiary of Crédit
Foncier (65.85%) and specialises in real estate leasing.
Crédit Foncier's wholly-owned subsidiary that specialises in
short-term financing for real estate professionals (developers, subdivision developers, property vendors, etc.).
Its expertise and solid reputation have turned it into Groupe
Caisse d'Epargne's dedicated real estate leasing arm.
KEY FIGURES 2008
• New production: €305 million authentic
deed signatures
• Total assets: €2,731.4 million
KEY FIGURES 2008
• New production: €567 million
• Outstanding loans: €445 million
3
3.5 Analysis of results
• Outstanding loans (end of year): €114 billion
(management data)
• Net banking income: €1,037 million
Consolidated results
• Net income (group share): €220 million
The group share of net income in 2008 was €220 million,
up 4.6% compared to 2007.
• Total assets: €133 billion
Crédit Foncier's main consolidated financial indicators at
December 31, 2008 are as follows:
• Consolidated equity (group share): €2.3 billion
• Consolidated European capital adequacy ratio: 8.9%,
including Tier One: 7.7%
• Production: €19.6 billion
(In millions of euros)
Net banking income (NBI)
Operating expenses
Gross operating income (GOI)
Cost of risk
Income from holdings consolidated by the equity method
Income from other fixed assets
Goodwill impairment
Income before tax (IBT)
Corporate tax
Minority interests
Group share of net income (NI)
Cost/income ratio (22)
Net banking income rose to €1,037 million, up by more
than 10% compared to 2007. The 2008 statements
include a €101 million post related to IFRS accounting
standards (prudent valuation of the variation in credit
spreads on €156 million in structured issues) and the
one-off gain of €175 million after credit default swaps
were unwound in April 2008.
On January 18, 2008, Crédit Foncier decided to propose
exceptional measures to customers that had contracted
certain categories of variable-rate loans (by setting an
upper limit on the interest rate and/or extending protections for regulated — state-subsidised PAS/PC loans —
and unregulated loans) and to recognise the cost of these
(22) Cost-to-income ratio = Operating expenses/NBI
2007
2008
Change
939
1 037
+ 10.4%
- 650
289
- 624
413
- 4.0%
+ 42.7%
9
0
2
0
300
- 166
1
93
- 46
295
- 1.7%
- 75
- 14
211
69.2%
- 76
1
220
60.2%
+ 4.6%
- 9 bp
measures as of 2007, at the estimated cost at that time.
Interest rates movements during the period and the prolongation of these measures led to the recognition of a
charge of €95 million in 2008, in addition to the €13 million recognised in 2007.
Overheads, depreciation and amortisation were down 4%
compared to 2007, thanks to cost control measures in
place since 2006. These expenses include a €29 million
provision for real estate office restructuring (central departments) and IT tools. Overall, the cost/income ratio improved compared to 2007, falling 9 points to 60.2%.
1 - Overview
of Crédit Foncier
Due to the current economic situation, Crédit Foncier
increased its provisions for performing loans. The cost of
risk thus appears significant at €166 million, and reflects
three important elements:
• Prudent provisioning of €20 million for maturing bridging loans.
• A significant collective provision of €119 million for
outstanding performing loans to public and private
clients, in light of the downturn in real estate markets.
Crédit Foncier included the securitised debt portfolio
when calculating provisions on performing loans for the
first time in 2008. A provision of €79 million was recognised on the basis of stress scenarios applied to the
entire stock of securitised mortgage loans.
Gains on other assets include the sale of Crédit Foncier's
retail and professional banking business to Banque
Palatine for €90 million. Crédit Foncier acquired an
8.33% staked in Banque Palatine in exchange for its
contribution of client accounts worth €2.3 billion.
In accordance with regulations, all goodwill is subject to
impairment tests based on valuations of cash-generating
units (CGU) related to the goodwill. Crédit Foncier recognised a €46 million impairment of goodwill on real estate leasing CGU23 (impairment of goodwill item).
The group share of net income rose to €220 million and
the return on equity (ROE) was nearly 10%.
• The increase in the cost of risk for individual customers
(excluding bridging loans) was limited to only €27 million.
Consolidated balance sheet
ASSETS
2007
2008
- Cash and amounts due from central banks
and post office banks
2
22
- Financial assets at fair value
through profit or loss
2,262
2,987
- Derivatives used for hedging purposes
1,930
5,246
- Available-for-sale financial assets
15,197
2,450
- Loans and receivables due
from credit institutions
8,235
7,405
- Loans and receivables due
from customers
92,600 108,693
- Revaluation adjustment
on interest rate risk hedged portfolios
83
1,767
- Held-to-maturity financial assets
566
- Current tax assets
115
185
- Deferred tax assets
196
217
- Accrued income and other assets
2,201
3,107
- Investments in associates
35
70
- Investment property
160
117
- Property, plant and equipment
139
141
- Intangible assets
35
26
- Goodwill
48
30
Total
123,238
EQUITY AND LIABILITIES
- Financial liabilities at fair value
- Due to credit institutions
- Due to customers
- Debt securities
- Remeasurement adjustment
on interest rate risk hedged portfolios
- Current tax liabilities
- Deferred tax liabilities
- Accrued expenses and other liabilities
- Provisions
- Subordinated debt
- Consolidated equity - group share
- Net income for the year
- Minority interests
Total
2007
2008
6,923
3,128
14,535
2,713
87,981
6,751
5,972
18,817
487
93,062
459
31
231
3,568
195
834
2,388
211
252
284
3
149
3,879
211
855
2,322
220
237
123,238
133,029
133,029
(23) Cash-generating units
3
The IFRS consolidated balance sheet total at December
31, 2008 amounted to €133 billion, an increase of 8%
compared to December 31, 2007.
Outstanding available-for-sale financial assets decreased by €12.7 billion mainly due to the reclassification of
€11.3 billion in securities pursuant to IAS 39 amendments on October 13, 2009. In addition, €0.5 billion
worth of securities were reclassified as held-to-maturity
financial assets.
Loans and receivables due from customers, amounting
to €108.7 billion at December 31, 2008, was up 17%
compared to December 31, 2007. Customer loans increased by €6.8 billion (+10.3%). After taking out the impact
from reclassifying available-for-sale financial assets (see
above), securitised debt increased by €0.9 billion.
Due to credit institutions reached €18.8 billion compared
to €14.5 billion at December 31, 2007 due to the combined effect of financing transactions with the ECB for €6.8
billion and the reduction of repurchase agreements for €2
billion.
Due to customers fell by €2.3 billion after the banking
business was transferred to Banque Palatine on November
22, 2008.
Debt securities amounted to €93.1 billion compared to
€88 billion at December 31, 2007. This increase is
mainly due to the €3.3 billion increase in bonds and the
€1.8 billion increase in the interbank money market
(IMM), negotiable debt securities (NDS) and certificates
of deposit (COD) item.
The group share of consolidated equity stood at €2.3 billion and remained stable compared to December 31, 2007.
Individual income statement for Crédit Foncier
31/12/2007
31/12/2008
Net interest margin
Lease financing and related transactions
Income from variable-income securities
Commissions
Gains/losses on trading portfolio
Gains/losses on available-for-sale portfolio
Other banking operating income/expense
233
1
190
175
-2
5
85
267
0
44
187
169
- 86
79
Net banking income
686
660
-625
-24
- 587
- 30
37
43
Cost of risk
-9
- 94
Operating income
28
- 51
Operating expenses
Amortisation and depreciation of fixed assets
Gains and losses on non-current assets
131
34
Ordinary Income before tax
159
- 17
2
40
31
0
62
34
231
79
Non-recurring items
Income tax
Movements in the reserve for general banking risks (FRBG) and regulated provisions
Net income
1 - Overview
of Crédit Foncier
The individual financial statements are prepared and
presented under French accounting standards and comply with regulations set forth by the French Accounting
Regulations Committee (CRC) and the French Banking
Regulations Committee (CRBF).
Net banking income for the parent company amounted
to €660 million euros, down €26 million euros compared
to 2007.
The net interest margin increased by 15% (+€34 million
euros) compared to last year.
Dividends amounted to €44 million, down €146 million
compared to the previous year.
Gains and losses on trading securities included a one-off
gain of €175 million in 2008 after unwinding a credit
default swap entered into for the purpose of optimising
Basel I regulatory ratios.
An impairment provision of €89 million was recognised in
gains and losses on investment securities in connection
with the downturn in financial markets.
Operating expenses, which recorded a provision of €29
million in order to meet the costs of optimising Parisian real
estate holdings, are down €38 million compared to 2007.
Gains on non-current assets of €34 million in 2008
consisted of capital gains of €97 million on the contribution of the banking business to Banque Palatine, of €8
million on the sale of Picardie Bail holdings to Cicobail
and provisions on securities of -€75 million that are
connected to leasing subsidiaries for the most part.
Appropriation of net income and dividends
Income available for distribution at December 31, 2008,
which consists of net income of €79 million plus retained
earnings, is equal to €117 million after allocating €4 million
to the legal reserve.
After appropriating an additional €103 million from share
premiums, the General Meeting shall vote on the distribution of €220 million.
Shareholders may opt to receive their dividends in the form
of shares, up to the amount of the total dividend payout.
The dividend paid on each of the 104,936,600 shares
comprising the company's share capital is set at €2.10.
The Board of Directors will decide when dividends will be
settled, which may not be later than September 30, 2009.
For the first time in 2008, securitised debt was included
when calculating provisions for outstanding loans, resulting in a charge of €79 million recorded as cost of risk.
Meanwhile, an additional €33 million has been provisioned for performing loans due to deteriorating real estate
market conditions.
1 - Overview
of Crédit Foncier
4 Corporate governance
4.1 PRINCIPLES AND ORGANISATION
4.1.1 Executive Officers and the Board of Directors
4.1.2 Internal Control
4.1.3 Compliance
58
58
58
60
4.2 ADMINISTRATIVE AND EXECUTIVE BODIES
4.2.1 Executive Officers
4.2.2 Board of Directors
60
60
64
4.3 REMUNERATION
4.3.1 Remuneration of Executive Officers
4.3.2 Subscription rights and stock options
4.3.3 Remuneration of Board members
4.3.4 Remuneration of statutory auditors
95
95
97
97
102
4.4 REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
ON THE OPERATION OF THE BOARD AND INTERNAL AUDITING
4.4.1 Conditions surrounding the preparation
and organisation of the board’s work
4.4.2 Internal control procedures
4.5 STATUTORY AUDITORS’REPORT ON THE REPORT
BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
103
103
107
118
4.1 Principles and organisation
4.1.1 Executive Officers
and the Board of Directors
Crédit Foncier de France is incorporated as a French
société anonyme (public limited company) with a Board of
Directors and is governed by Articles L. 225-17 to L. 22556 of the French Commercial Code.
Mr. Alain Lemaire has been Chairman of the Board since
December 19, 2008, following Mr. Nicolas Mérindol's
resignation. The board's Vice-Chairman is Mr. Alain Dinin.
Under the unitary board structure, the responsibility for
Crédit Foncier's management is divided between:
- the Board of Directors, which defines strategic orientations,
- executive officers, who ensure day-to-day management
of operations.
The Board of Directors operates under the conditions
defined by law, Crédit Foncier's Articles of Association and
the by-laws adopted at its meeting on February 27, 2008.
In 2008, the Board of Directors met five times (February 27,
April 24, July 29, October 16 and December 19).
The normal agenda at board meetings included:
• reports on company activities;
• budget approval and resource allocation;
• reports on auditing and control of Crédit Foncier activities (internal control, permanent control, Banking
Commission);
• developments concerning company counterparty risk...
In 2008, the Board of Directors authorised the following
major transactions:
• the acquisition via a CNCE-Crédit Foncier holding of a
49% stake in Maisons France Confort Investissement, a
holding with a controlling interest in Maisons France
Confort SA. The latter company is listed and specialises
in single-family housing;
• the transfer of banking services to Banque Palatine and
approval of various agreements in connection with this
transfer (refinancing agreement, partnership protocol,
share sale undertaking);
• the sale to GCE SEM of minority stakes held by Crédit
Foncier and its subsidiaries in semi-public companies;
• approval of the merger between Picardie Bail and Cicobail.
4.1.2 Internal control
Organisation of Crédit Foncier’s
internal control in 2008
The organisation of Crédit Foncier's internal control, adapted to the provisions of amended Regulation No. 97-02 of
the Comité de la Réglementation Bancaire (French Banking
Regulations Committee), is structured as follows:
Permanent control falls within the competence of:
• Operating units, which are responsible for implementing
adequate mechanisms and measures to ensure:
- management and control of risks inherent in their operations, using appropriate management and monitoring
tools,
- asset-value conservation by effectively using the
resources they have been allocated,
- compliance with legal and regulatory provisions as well
as executive guidelines.
• Permanent control units that are independent of operational departments and ensure that procedures are executed correctly. These units are either dedicated units
within operational departments or dedicated, standalone structures (Risk Department, Compliance and
Permanent Control Department, Head of Information
Systems Security [RSSI], RPCA).
1 - Overview
of Crédit Foncier
Periodic control is carried out by the Crédit Foncier group’s
General Inspection Department, which reports directly to
the Chief Executive Officer.
This department is authorised, without restriction, to
conduct any internal audit it considers necessary within
Crédit Foncier and its subsidiaries. Its missions are part of
a global approach managed by the controlling shareholders’ auditing unit. They are based on Crédit Foncier's
auditing charter, which itself stems from Groupe Caisse
d’Epargne's auditing charter.
The annual audit plan, drawn up in the context of a multiyear plan, is validated by the Audit Committee and submitted to the Board of Directors. It covers all the business
activities conducted by Crédit Foncier and its subsidiaries
over an audit cycle of two and a half years. This is supplemented by special missions carried out at the request of
executive management.
Department heads implement executive decisions taken
by senior management and the Executive Committee, as
well as decisions from relevant internal decision-making
committees. The latter committees include the commitment committees (National Loan Committee and business
activity based committees) for authorising large loans,
the sensitive operations committees (National Committee
and litigation committees) for managing high risk commitments, the ALM Committee for managing financial risks,
the Loan Conditions Committee for determining loan
conditions offered to customers and the Risk Committee
for defining and monitoring limits for each counterpart
and the rules for taking on risks.
The Crédit Foncier's Audit Committee meets at least once
every quarter before the Board of Directors' meeting; it
may also hold exceptional meetings as needed.
It regularly monitors conclusions from auditing assignments (regardless of the auditing entity: Banking
Commission, CNCE General Inspection Department or
internal audit) and ensures follow-up on the implementation of recommendations arising from these audits.
There are also two other committees that report to the
Board of Directors and that meet as needed:
• a Remuneration Committee, whose role is to propose
remuneration levels for the CEO and Deputy CEO as well
as performance criteria for the variable part of their
remuneration,
• a Strategy Committee, whose role is to provide the Board
of Directors with informed opinions on Crédit Foncier's
external growth plans.
Activity in 2008
The year 2008 featured:
• progress with the reorganisation of permanent control, via:
- the reinforcement of follow-up and actions related to
internal control by the dedicated committee,
- the launch of a project to strengthen and update risk
management measures for banking activities,
• the completion of the project to update the business
continuity plan ensuring that the company remains operational even in the event of a significant loss. It has been
tested for effectiveness and its documentation has been
revised,
• progress with studies undertaken in the context of Basel
II with the aim of meeting the timetable for approval of
internal ratings procedures for each portfolio,
• updating of service provider contracts to comply with
regulatory provisions regarding key outsourced services,
• the reinforcement of audit recommendations follow-up,
using appropriate statistical tools and involving management teams in the process.
Pursuant to Article L. 225-37 of the French Code of
Commerce, the Chairman of the Board's report to the
Shareholder's General Meeting for the year 2007 included
a section dedicated to internal control.
Outlook for 2009
During 2009, internal control developments will specifically focus on:
• continuation of work on the business continuity plan,
improving the procedures involved, carrying out additional tests and raising awareness levels among key staff
members,
• completion of an essential phase of the Basel II project,
the aim being to have lending standards for loans to
individuals approved by the Banking Commission by the
end of the year,
• establishing active follow-up procedures for the implemention of recommendations from auditing entities,
• improving the principal mechanisms of risk management.
4.1.3 Compliance
place to ensure compliance with laws and regulations,
ethical standards and rules of good conduct as well as
compliance with group rules.
The Compliance and Permanent Control Department
reports to the Chief Executive Officer and relies on procedures based on the guidelines set out by Groupe Caisse
d’Epargne's Compliance/Security Department. It is responsible for organising and monitoring 1st and 2nd level
controls relative to non-compliance and general businessrelated risks. It is also in charge of specific controls for
investment service compliance, ethics, anti-money laundering efforts and prevention of the financing of terrorism.
The Compliance and Permanent Control Department oversees controllers in the various operational departments. As
such, it continued to organise and strengthen operational
monitoring across all business activities in 2008.
Executive officers, the Internal Control Committee, the
Audit Committee and the parent company are routinely
kept informed about its activities.
Compliance controls, an essential part of the permanent
control procedures created by the Financial Regulation
and Legislation Advisory Committee, have been put in
4.2 Administrative and executive bodies
4.2.1 Executive officers
The executive management team is assisted in its tasks by
two Managing Directors:
Composition of the executive management team
• CHRISTOPHE PINAULT, Managing Director
- Individual Sector
(At December 31, 2008)
FRANÇOIS BLANCARD, CHIEF EXECUTIVE OFFICER
THIERRY DUFOUR, DEPUTY CHIEF EXECUTIVE OFFICER
• CHRISTIAN MIGLIETTI, Managing Director
- Resources Department
The composition of the executive management team has
not changed since the new governance structure was
adopted on July 23, 2007.
1 - Overview
of Crédit Foncier
Offices held by senior executives
M. FRANÇOIS BLANCARD
Crédit Foncier de France - 4, quai de Bercy - 94224 - Charenton le Pont
COMPANY
POSITION
EXECUTIVE OFFICES
- CREDIT FONCIER DE FRANCE - SA
OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER
- CICOBAIL – SA
- CINERGIE – SA
Permanent Representative of Crédit Foncier, Director
- COMPAGNIE DE FINANCEMENT FONCIER – SA
- COMPAGNIE FONCIERE DE CREDIT – SA
- REAL ESTATE CONSULTANT – SAS
(SA until 12/12/2008)
Permanent Representative of Crédit Foncier, Director (until 12/12/2008)
- FONCIER EXPERTISE – SA
Chairman of the Board of Directors (until 12/12/2008)
- LAMY – SA
Director
- LES EDITIONS DE L’EPARGNE – SA
Director
- LOCINDUS – SA (SACS until 26/11/2008)
Chairman of the Supervisory Board, then Chairman of the Board of Directors
- BANQUE PALATINE – SACS
Supervisory Board member (since 01/07/2008)
- FINANCIERE OCEOR – SACS
Member of the Supervisory Board
- LA COMPAGNIE 1818 – BANQUIERS PRIVES – SACS
Permanent Representative of Crédit Foncier,
Member of the Supervisory Board (until 15/04/2008)
- SERENA – SACS
- SOCFIM – SACS
Vice-Chairman and Member of the Supervisory Board (since 30/05/2008)
- SAS CEMM
- GCE FONCIER COINVEST – SAS
- GIRCE STRATEGIE – GIE
- ECUREUIL CREDIT – GIECS
- GCE BUSINESS SERVICES – GIE
Permanent Representative of Crédit Foncier,
Member of the Supervisory Board (since 17/12/2008)
M. FRANÇOIS BLANCARD
OTHER OFFICES AND POSITIONS
- CFD – SAS
Legal Representative of Cofimab, Chairman
- FONCIER EXPRESS 2008 – SAS
Legal Representative of Crédit Foncier, Chairman
- FONCIER FOREIGN 2008 – SAS
- FONCIER LARGE 2008 - SAS
- FONCIER STRUCTURE 2008 – SAS
- FONCIER VISION 2008 – SAS
- ECUFONCIER – SCA
Legal representative of Crédit Foncier,
Active Managing Partner, Limited Partner
- FONCIER PLAN 2008 – SARL
Manager
- COFIMAB SAS (SNC jusqu’au 18/12/2008)
Legal Representative of Crédit Foncier, Director-Shareholder until 18/12/2008
- FONCIER PROJET 2008 – SNC
Legal Representative of Crédit Foncier, Managing Partner
- SOCLIM – SNC
Legal Representative of CFD, Manager
- SOFIPAR LOGEMENT – SNC
- SOFONEG – SNC
- COLOMIA 31 - SCI
Legal Representative of Crédit Foncier, Manager
- COMELIA - SCI
- FRANCILIA - SCI
- IMMOBILIERE MADELEINE DUPHOT – SCI
Legal Representative of CFD, Manager
- MANTELIA - SCI
Member of the Audit Committee
1 - Overview
of Crédit Foncier
M. Thierry DUFOUR
Deputy Chief Executive Officer
Crédit Foncier de France - 4, quai de Bercy - 94224 Charenton le Pont
COMPANY
POSITION
EXECUTIVE OFFICES
- COMPAGNIE DE FINANCEMENT FONCIER – SA
Chairman & Chief Executive Officer
- CREDIT FONCIER DE FRANCE – SA
- COMPTOIR FINANCIER DE GARANTIE – SA
- CICOBAIL - SA
- COMPAGNIE FONCIERE DE CREDIT – SA
- FINANCIERE DESVIEUX – SA
Director
- FONCIER EXPERTISE – SAS (SA jusqu’au 12/12/2008)
Director until 12/12/2008
- PICARDIE-BAIL – SA (Fusion-absorption)
Representative of Crédit Foncier, Director until 17/12/2008
- SOCRELOG – SA (TUP)
Director until 17/12/2008
- VAUBAN MOBILISATION GARANTIE – SACS
Permanent Representative of Crédit Foncier, Member of the Supervisory Board
OTHER OFFICES
- SCI VALENCE
Legal Representative of Crédit Foncier, Manager until 31/12/2008
4.2.2 Board of directors
STATUTORY NON-VOTING DIRECTORS (CENSEURS)
• M. Jean-Hervé LORENZI – Member of the Audit Committee
Composition of the Board of Directors
• M. Robert ROMILLY
(At December 31, 2008)
• M. Jacques-Henry WAHL
BOARD OF DIRECTORS
CENTRAL WORKS COUNCIL DELEGATES
• M. Alain Lemaire, Chairman of the Board of Directors
– Chairman of the Remuneration Committee and the
Strategy Committee
• M. Michel LAMY (management representative)
• M. Alain DININ, Vice-Chairman of the Board of
Directors – Member of the Remuneration Committee
and the Strategy Committee
• Mme Nicole VOCORET
(client executives, banking representative)
GOVERNMENT AUDITOR
• M. Antoine MERIEUX
• M. Gérard BARBOT – Member of the Strategy Committee
• M. Jean Marc CARCELES
• M. Guy COTRET – Member of the Audit Committee
and the Remuneration Committee
• M. Hervé DENIZE
• M. Laurent DIOT – Member of the Audit Committee
• M. Jean DREVON
• M. Bernard FOUGÈRE
• M. Michel GONNET
• M. Francis HENRY – Member of the Strategy Committee
• M. Jean MÉRELLE
• M. Philippe MONETA – Chairman of the Audit Committee
• M. Pierre QUERCY – Member of the Remuneration
Committee
• M. Michel SORBIER
• Mme. Catherine STÉPHANOFF
• CAISSE NATIONALE DES CAISSES D'EPARGNE
ET DE PREVOYANCE, represented by Mr. Julien CARMONA
– Member of the Audit Committee
Changes to the composition of the Board
of Directors in 2008
In 2008, the following changes affected the composition
of the Board of Directors:
• The General Meeting of April 24, 2008 ratified the Board
of Directors' provisional co-optation of Mr. Laurent Diot on
February 27, 2008 as a replacement for Mr. Jean-Eric
Vimont, following the latter's resignation.
• Mr. Jean Mérelle was co-opted by the Board on July 29,
2008 to replace Mr. Christophe Estivin as Director, following the latter's resignation.
• Mr. Pierre Quercy was co-opted by the Board on July 29,
2008 to replace Mr. Paul-Louis Marty as Director, following the latter’s resignation.
• Mr. Alain Lemaire was co-opted by the Board on
December 19, 2008 to replace Mr. Nicolas Mérindol
as Director, following the latter’s resignation. Mr. Alain
Lemaire was named Chairman of the Board at the
same meeting.
1 - Overview
of Crédit Foncier
Office and positions of members of the Board of Directors
M. ALAIN LEMAIRE
Chairman of the Board of Directors since December 19, 2008
Chairman of the Remuneration Committee and the Strategy Committee
Chief Executive Officer of Caisse Nationale des Caisses d’Epargne et de Prévoyance
50, avenue Pierre Mendès France - 75201 Paris Cedex 13
COMPANY
POSITION
EXECUTIVE OFFICES
- CAISSE NATIONALE DES CAISSES D'EPARGNE
ET DE PREVOYANCE – SACS
Member of the Executive Board – Chief Executive Officer (since 19/10/2008)
- CAISSE D’EPARGNE PROVENCE ALPES CORSE
(CEPAC) – SACS
Chairman of the Executive Board
- BANCA CARIGE – SA
Director
- BANQUE DE LA REUNION – SA
Permanent Representative of CEPAC, Director
- BANQUE DES ANTILLES FRANÇAISES – SA
- CNP ASSURANCES – SA
Director
Chairman of the Board of Directors (since 19/12/2008)
- GCE DOAMINES – SA
Director
- LA CHAINE MARSEILLE – SA
- NATIXIS ASSET MANAGEMENT – SA
- NATIXIS EPARGNE FINANCIERE – SA
Director
- NATIXIS EPARGNE FINANCIERE GESTION – SA
Director
- NEXITY – SA
Director
- PROXIPACA FINANCE – SA
Member of the Management Board
- SOPASSURE – SA
Director
- ANF – SACS
Chairman of the Supervisory Board (since 02/12/2008)
Permanent Representative of CEPAC, Member of the Supervisory Board
- GCE CAPITAL – SACS
Chairman of the Supervisory Board
- ISELECTION – SACS
Permanent Representative of GCEI, Member of the Supervisory Board
- NATIXIS – SACS
Permanent Representative of CNCE, Member of the Supervisory Board
(since 12/11/2008)
M. ALAIN LEMAIRE
- SOCFIM – SACS
- ERILIA – SAS
Permanent Representative of Erixel, Director
- EXIREL – SAS
Chairman
- FLCP – SAS
Chairman of the Supervisory Committee
- VIVERIS – SAS
Chairman of the Management Committee
- VIVERIS MANAGEMENT – SAS
- MARSEILLE AMENAGEMENT – SEM
Director
- BUSINESS SERVICES – GIE
- CAISSE D’’EPARGNE GARANTIES ENTREPRISES – GIE
- NATIXIS – SACS
Co-Chairman of the Audit Committee
- SCF FY & ROTJA
Manager
- CRÉDIT FONCIER DE FRANCE - SA
Chairman of the Remuneration Committee
and of the Strategy Committee (since 19/12/2008)
1 - Overview
of Crédit Foncier
M. NICOLAS MERINDOL
UNTIL DECEMBER 19, 2008
Chief Executive Officer of Caisse Nationale des Caisses d’Epargne et de Prévoyance (until October 19, 2008)
50, avenue Pierre Mendès France – 75201 Paris Cedex 13
COMPANY
POSITION
EXECUTIVE OFFICES
- CAISSE NATIONALE DES CAISSES D'EPARGNE
ET DE PREVOYANCE – SACS
Executive Board member – Chief Executive Officer
(until 19/10/2008)
- BANCA CARIGE (ITALIE)
Director
- CEMM (CE MACIF MAIF) – SAS
Director
- COFACE – SA
Director
- ERIXEL - SAS
Director
Vice-Chairman of the Supervisory Board
- GCE CAPITAL – SAS
- GCE DOMAINES - SA
Director
- GEMO RSI – GIE
- NATIXIS – SACS
- NATIXIS ASSET MANAGEMENT - SA
- NATIXIS CONSUMER FINANCE - SAS
Chairman
- NATIXIS GLOBAL ASSET MANAGEMENT – SA
Vice-Chairman of the Board of Directors
- NEXITY -SA
Director
- SAS FLCP - SAS
Chairman of the Supervisory Committee
- SOPASSURE – SA
Director
Member of the Audit Committee – Member of the Strategy Committee
Chairman of the Remuneration Committee – Chairman of the Strategy Committee
(until 19/12/2008)
- EUROTEVEA -SA
Member of the Council of Eminent Persons
- LA COMPAGNIE 1818 BANQUIERS PRIVES - SACS
- NATIXIS – SACS
Chairman of the Audit Committee
- SAS FLCP - SAS
Member of the Remuneration Committee
- THE YUMUS MOVIE PROJECT PARTNERS - SAS
Non-Voting Director
1 - Overview
of Crédit Foncier
M. ALAIN DININ
Vice-Chairman of the Board of Directors
Member of the Remuneration Committee and the Strategy Committee
Chairman and CEO of Nexity, 1, Terrasse Bellini - 92919 Paris La Défense Cedex
COMPANY
POSITION
EXECUTIVE OFFICES
- NEXITY - SA
- LES CHANTIER NAVALS DE L’ESTEREL – SA
Permanent Representative of George V gestion, Director
- CREDIT FINANCIER LILLOIS - SA
Vice-Chairman of the Board, Director
- FEREAL - SA
Permanent Representative of Nexity Logement, Director
- LAMY – SA
Vice-Chairman and Director (since 29/07/2008)
- NEXITY ENTREPRISES – SA
Permanent Representative of Nexity Logement SAS, Director
- NEXITY SERVICES – SA
Permanent representative of Nexity, Director
- RESSOURCES ET VALORISATION – SA
Permanent representative of Nexim 1, Director
- SAGGEL TRANSACTIONS- SA
Permanent representative of Nexity, Director
- SOCIETE LAMY – SA
Chairman of the Supervisory Board (until 29/07/2008)
- UFIAM – SA
Permanent representative of Nexim 1, Director
- SAGGEL HOLDING – SACS
Vice-Chairman and Member of the Supervisory Board
- GCE HOLDING PIERRE –SAS
Chairman
- GEORGE V REGION NORD – SAS
- GEPRIM- CONSTRUCTION – SAS
Permanent Representative of SIG 30 Participations,
- GEPRIM- SAS
Permanent Representative of SIG 30 Participations,
- NEXITY FRANCHISES- SAS
Legal Representative of Nexity, Chairman
- NEXITY LOGEMENT- SAS
Director
- SERRI –SAS
Permanent Representative of Nexity Logement, Director (until 23/04/2008)
- FEDERATION NATIONALE DES PROMOTEURS
CONSTRUCTEURS ET DE L’ECOLE SUPERIEURE
DE COMMERCE DE LILLE
Director
- OBSERVATOIRE REGIONAL DU FONCIER
EN ILE-DE-FRANCE (ORF)
Director
- CLICHY EUROPE 4 – SARL
Joint Manager
OFFICES ABROAD
- NEXITY ESPANA
Administrador and Consejere delegato
- NEXITY IG
Permanent Representative of Nexity, Director
- CITY GARDEN REAL ESTATE
Permanent Representative of SIG 30 Participations, Director
- NEXITY BELGIUM
Director
- NEXIBEL 1
- NEXIBEL 2
- NEXIBEL 3
- NEXIBEL 5
- NEXIBEL INVESTISSEMENT
Director (until 30/05/2008)
- NEXITY BIANDRATE
Consigliere and Presidente
- NEXITY ITALIA
Consigliere
- SESTO EDISON 1
Consigliere and Presidente di Consiglio di amministrazione
- SESTO EDISON
Consigliere and Presidente di Consiglio di amministrazione
- CREDIT FONCIER DE FRANCE
Member of the Remuneration Committee and Member of the Strategy Committee
- FNPC
Member of the Executive Board
- NEXITY – SA
Chairman of the Investment Committee
M. GERARD BARBOT
Member of the Board of Directors
Member of the Strategy Committee
COMPANY
POSITION
- CREDIT FONCIER DE FRANCE- SA
Director
- VMG – SACS
- ODDO ET CIE – SACA
- LA BANQUE POSTALE – SACS
- LA BANQUE POSTALE ASSSET MANAGEMENT – SACS
- GEOPOST – SA
Director
- GCI - SACA
Manager
1 - Overview
of Crédit Foncier
M. JEAN-MARC CARCELES
Chairman of the Executive Board of Caisse d’Epargne Languedoc Roussillon
254, rue Michel Teule – Zac d’Alco – BP 7330 – 34184 Montpellier Cedex 4
COMPANY
POSITION
EXECUTIVE OFFICES
- CAISSE D’EPARGNE ET DE PREVOYANCE
LANGUEDOC ROUSSILLON – SACS
- CICOBAIL – SA
Director (since 17/12/2008)
Director
- FEDERATION NATIONALE DES CAISSES D’EPARGNE – SA
Director
- MURACEF – SA
Permanent Representative of Caisse d’Epargne Languedoc Roussillon,
Director (until June 2008)
- TELSUD – SA
Director
- CAISSE NATIONALE DES CAISSES D’EPARGNE
ET DE PREVOYANCE (CNCE) – SACS
- SAS GCE COURTAGE
Director
- SOCIETE DU JOURNAL MIDI LIBRE – SACS
Permanent Representative of Caisse d'Epargne Languedoc Roussillon,
- GIE GCE BUSINESS SERVICES
- GIE GCE TECHNOLOGIES
ET DE PREVOYANCE (CNCE)
M. JULIEN CARMONA
Permanent Representative of Caisse Nationale des Caisses d'Epargne et de Prévoyance
Group Executive Director in charge of finance and risks
COMPANY
POSITION
EXECUTIVE OFFICES
- CNCE – SACS
Member of the Executive Board (until 19/10/2008)
Permanent Representative of CNCE, Director
- ECRINVEST 11 – SA
- GCE COVERED BONDS – SA
- NATIXIS CONSUMER FINANCE – SA
- NATIXIS FINANCEMENT – SA
- NATIXIS SECURITIES – SA
Director
- GCE CAPITAL – SAS
- TWINS PARTICIPATIONS – SAS
- GCE ACHATS – GIE
- CNCE – SACS
Executive Director reporting to the Chief Executive Officer
Chairman of the Audit Committee (since 26/05/2008)
1 - Overview
of Crédit Foncier
M. GUY COTRET
Member of the Audit Committee and Member of the Remuneration Committee
Member of the Executive Board of Caisse Nationale des Caisses d’Epargne et de Prévoyance, in charge of the Resources Division,
COMPANY
POSITION
EXECUTIVE OFFICES
ET DE PREVOYANCE – SA
- NEXITY - SA
- BANQUE DE NOUVELLE CALEDONIE – SA
- BANQUE DES MASCAREIGNES LTEE
Director
- BANQUE TUNISO-KOWEITIENNE – SA
Director
Director
- FONDATION CAISSES D’EPARGNE POUR
LA SOLIDARITE – SA
Director
- GCE DOMAINES - SA
Director
- GESTITRES – SA
- MEILLEURTAUX –SA
Director
- NEXITY – SA
- FINANCIERE OCEOR - SACS
- GCE BUSINESS SERVICES – SACS
Permanent Representative of CNCE, Chairman of the Supervisory Board
- GCE TECHNOLOGIES – SACS
Permanent Representative of CNCE, Chairman of the Supervisory Board
- IXIS CORPORATE& INVESTMENT BANK- SACS
- NATIXIS ASSET MANAGEMENT- SACS
- SOCFIM – SACS
- SOCIETE LAMY - SACS
- FINANCIERE OCEOR ALGERIE – SAS
Director
- GCE FONCIER COINVEST –SAS
- GCE MAROC – SAS
- GCE MAROC IMMOBILIER - SAS
Chairman
- GCE NEWTEC –SAS
- GCE OTEROM HOLDING – SAS
Chairman
- GCE PAIEMENTS – SAS
Chairman
- GCE SEM – SAS
- GCE SERVICES ET CONSEIL A L’IMMOBILIER – SAS
Director
- ARPEGE – GIE
- ECUREUIL CREDIT - GIE
- GIRCE INGENIERIE – GIE
Permanent Representative of CNCE, Director (until 31/10/2008)
- UNIVERSITE DU GROUPE CAISSE D’EPARGNE - EPIC
Chairman
- NEXITY - SA
Member of the Executive Committee
- IXIS CORPORATE & INVESTEMENT BANK
Member of the Appointments and Remuneration Committee
1 - Overview
of Crédit Foncier
M.HERVE DENIZE
Deputy CEO of Nexity – 1 Terrasse Bellini – 92919 Paris La Défense Cedex
COMPANY
POSITION
EXECUTIVE OFFICES
- CREDIT FINANCIER LILLOIS – SA
- NEXITY – SA
Deputy CEO, Director
- CHANTIERS NAVALS DE L’ESTEREL-SA
- COMPAGNIE FONCIERE
FINANCIERE ET IMMOBILIERE –SA
Legal Representative of George V gestion, Director
- CREDIT FINANCIER LILLOIS – SA
Permanent Representative of SAS Nexity Logement, Director
Director
- FEREAL-SA
- LAMY – SA
Permanent Representative of Nexity SA, Director (since 29/07/2008)
- NEXITY CONSULTING – SA
Permanent Representative of SAS Nexity Logement, Director
- NEXITY ENTREPRISES - SA
Director
- NEXITY SAGGEL PROPERTY MANAGEMENT – SA
Legal Representative of SARI Investissements, Director
- RESSOURCES ET VALORISATION- SA
Permanent Representative of GCE Immobilier, Member of the Supervisory Board
(until 29/07/2008)
- VECTRANE – SA
Permanent Representative of Eurosic, Director (until 13/11/2008)
- EUROSIC –SACS
- ISELECTION – SACS
Chairman of the Supervisory Board (since 03/01/2008)
- SAGGEL HOLDING-SACS
- NEXITY IG
Permanent Representative of SIG 30 Participations
- APOLLONIA – SAS
Director
- CANTON 1 - SAS
Legal Representative of Nexim 4, Chairman
- CANTON 2 - SAS
Legal Representative of SAS Nexim 4, Chairman
- CANTON 9 - SAS
Legal Representative of SAS Nexim 4, Chairman
- CENTURY 21 FRANCE – SAS
Chairman and Member of the Supervisory Board
- FINANCIERE GUY HOQUET IMMOBILIER – SAS
Permanent Representative of Nexity Franchises, Director
- GEORGE V REGION NORD – SAS
Permanent Representative of George V gestion, Director
- GEPRIM – SAS
Legal Representative of SARI Investissements, Member of the Supervisory Board
- GEPRIM CONSTRUCTION – SAS
Legal Representative of SARI Investissements, Member of the Supervisory Board
- GOERGE V GESTION – SAS
Permanent Representative of COFIPA, Director
- MASSENA PARIS 13EME – SAS
Legal Representative of SARI Investissements, Chairman
- NEXICOM 1 –SAS
- NEXICOM 2 -SAS
- NEXICOM 3 -SAS
- NEXIM 4 –SAS
Chairman
- NEXIMMO 1 - SAS
- NEXIMMO 10- SAS
- NEXIMMO 11 – SAS
Chairman
- NEXIMMO 12 –SAS
Chairman
- NEXIMMO 16- SAS
Chairman
- NEXIMMO 17- SAS
Chairman
- NEXIMMO 19 -SAS
Chairman
- NEXIMMO 3- SAS
Chairman
- NEXIMMO 31 - SAS
- NEXIMMO 32 - SAS
- NEXIMMO 4 -SAS
Chairman
- NEXIMMO 5 – SAS
- NEXIMMO 6 - SAS
- NEXIMMO 8 -SAS
Président
- NEXIMMO 9 - SAS
- NEXITY LOGEMENT – SAS
Permanent Representative Nexity Regions I, Director
- OPERATEUR ALSACE EIFFEL LEVALLOIS
– OPALE LEVALLOIS – SAS
Legal Representative of SARI Investissements, Liquidator
- SARI INVESTISSEMENTS – SAS
Chairman
- SEERI – SAS
Permanent Representative of George V gestion, Director (until 24/04/2008)
- SOCIETE IMMOBILIERE ESCE – SAS
Permanent Representative of SAS Nexim 5, Director (until 09/12/2008)
- VANEAU –SAS
- ACTILOGIS 1 DE L’ISLE D’ABEAU – SNC
Legal Representative of SARI Investissements, Manager
- ACTILOGIS FOS DISTRIPORT – SNC
- AUBERT EGALITE - SNC
Manager
1 - Overview
of Crédit Foncier
- BERCY VAN GOGH -SNC
Manager (until 20/06/2008)
- COUDRAY ACTILOGIS – SNC
- DANTON PROMOTION – SNC
- DEATORIS LYON SAINT PRIEST – SNC
- DU PARC D’ATTON – SNC
- DU PARC DES CHESNES – SNC
- DU PARC DES LUMIERES 3 – SNC
- DU PARC DES LUMIERES 4 – SNC
- IRIS LYON SAINT PRIEST – SNC
- LE BOURGET PARC DE L’ESPACE – SNC
- LIEUSAINT PARC DU LEVANT A2 - SNC
- MARC SCHWOOB REBUPLIQUE- SNC
Joint Manager (until 10/10/2008)
- MARSEILLE JOLIETTE – SNC
- MESNIL EN THELLE LOGISTIQUE – SNC
Legal Representative of SARI Investissements, Manager (since 18/12/2008)
- MONTELIMAR ACTILOGIS – SNC
- NEXIMMO 27- SNC
- NEXIMMO 28- SNC
Non-Partner Manager
- NEXIMMO 29 -SNC
Manager
- NEXIMUR (Belgium)
Joint Manager (since 25/06/2008)
- NEXITIM –SNC
- NEXITY REIM (ex NEXITY INVESTISSEMENT) –SNC
Joint Manager
- NIMES ACTILOGIS – SNC
- PARC ACTILOGIS DE L’ISLE D’ABEAU
– SNC (EX NEXIMMO 27)
- PARC DE CORBAS – SNC
- PARC DE LA CAMBUSE – SNC
- PARC DE LA PLAINE DE L’AN III – SNC
- PARC DE NIMES – SNC
- PARC DES EOLIENNES – SNC
- PARC MORMANT – SNC
- PARC PAUL BERLIET – SNC
- PARC SAINT QUENTIN 3 – SNC
- PB31PROMOTION – SNC
Legal Representative of SARI Investissements, Joint Manager
- PERSAN ACTILOGIS – SNC
- PIC DE BELLEDONNE – SNC
- PROMOTION M7 – SNC
Legal Representative of SARI Investissements,
Chairman of SAS MASSENA PARIS 13ÈME, Joint Manager
- QUAI D’ARENC -SNC
Manager
- RIS ACTILOGIS – SNC
- RUE DU PETIT CLAMART -SNC
Manager
- SENNECEY LOGISTIQUE – SNC
- SNC D’INVESTISSEMENT EN IMMOBILIER
- SNC PUTEAUX AMENAGEMENT
- TISON RIVOLI –SNC
- VERSAILLES CHANTIERS AMENAGEMENT - SNC
- VOLNEY SAINT MARTIN -SNC
- VOROIZE EXPRESS – SNC
- AVENIR - SCI
Joint Manager
- BEZIERS LOGISTIQUE – SCI
- BORDEAUX BASTIDE 1 -SCI
- CLICHY EUROPE - SCI
- CLICHY EUROPE 3- SCI
- CRISTALESPACE -SCI
- FOS ACTILOGIS – SCI
- FUTUR ANTERIEUR - SCI
Joint Manager
- MONTELIMAR ACTILOGIS 2 – SNC
- MORMANT LOGISTIQUE – SNC
- L’ECRIN – SCI
- MARSEILLE AVENUE VITON - SCI
- MONTELIMAR ACTILOGIS – SCI
- PARC DE GERLAND ILOT N° 3 – SCI
- PARC DE GERLAND ILOT N° 4 – SCI
- PARC DE GONESSE – SCI
- PARC DE LISSES – SCI
- PARC DE SENART – SCI
- PARC DES LUMIERES – SCI
- PARC DES LUMIERES 2 – SCI
- PARC SAINT QUENTIN – SCI
1 - Overview
of Crédit Foncier
- PARIS-BERTHELOT -SCI
- SCI MARSEILLE 165 AV DU PRADO
- SCI MONTREUIL RUE CUVIER
Manager
- SCI REILLE MONTSOURIS 98
- HAUT LAUVERT ANTIBES -SCP
- GIE DES LONGS QUARTIERS
Director
OFFICES ABROAD
- COMPANHIA IMMOBILIARO DO SENA – Portugal)
Director
- NEXIBEL 1 (Belgique)
Director
- NEXIBEL INVESTISSEMENT (Belgique)
Director
- NEXITY ESPANA (Espagne)
Director
- EUROSIC – SA
Member of the Appointments and Remuneration Committee
- NEXITY – SA
Member of the Investment Committee
Member of the Audit Committee (until 29/07/2008)
- VECTRANE – SA
Member and Chairman of the Remuneration Committee (until 13/11/2008)
M. LAURENT DIOT
Nexity Chief Financial Officer - 1, Terrasse Bellini - 92919 Paris La Défense Cedex
COMPANY
POSITION
EXECUTIVE OFFICES
- DELCIS – SA
Member of the Executive Board (until 30/06/2008)
- ESPACE CONSULTANT – SA
Director (from 20/06/2008 to 01/12/2008)
- SARI HARTFORD – SA
Permanent Representative of Nexim 5, Director (since 30/04/2008)
- EUROSIC – SACS
Chairman
- DBS – SAS
- SIG 30 PARTICIPATIONS – SAS
Chairman (since 24/01/2008)
Legal Representative of SIG 30 Participations, Chairman (since 24/01/2008)
1 - Overview
of Crédit Foncier
Legal Representative of SIG 30 Participations,
Chairman (from 24/01/2008 to 12/06/2008)
- NEXIS 1 – SAS
Representative of Nexibel Investissement, Director (since 18/03/2008)
- AG3 GENNEVILLIERS – SCI
Legal Representative of SIG 30 Participations, Joint Manager (since 24/01/2008)
- BOULOGNE VILLE A3B – SCI
Legal Representative of SIG 30 Participations, Joint Manager (since 24/01/2008)
- NEXIMMO 37 – SNC
Legal Representative of SIG 30 Participations, Manager (since 24/01/2008)
- CAPNEXI OPCI – SPPICAV RFA
OFFICES ABROAD
- GESTRIM DEUTSCHLAND AG (ALLEMAGNE)
- NEXITY BELGIUM ( BELGIQUE)
Director and Chairman
- CITY GARDEN REAL ESTATE (BELGIQUE)
Director and Chairman of the Board – Managing Director
- NEXIBEL 3 (BELGIQUE)
Director
- NEXIBEL 5 (BELGIQUE)
Director
- NEXIBEL INVESTISSEMNT (BELGIQUE)
- NEXIMUR (BELGIQUE)
- NEXITY ESPANA (ESPAGNE)
Consejero Delegado and Administrador – Chairman
- EUROBARAJAS (ESPAGNE)
Administrador unico
- EUROGOYA (ESPAGNE)
Administrador unico
- EUROSOFIA (ESPAGNE)
Administrador unico
- POBLADOS 15 (ESPAGNE)
Administrador unico
- DOMUS SOROLLA (ESPAGNE)
Administrador unico
- DOMUS DALI (ESPAGNE)
Administrador unico
- NEXITHYSSEN (ESPAGNE)
Administrador unico
- NEXIPRADO (ESPAGNE)
Administrador unico
- CAPTIVA NEXIS – SARL (LUXEMBOURG)
Category B Member of the Management Board (since 26/02/2008)
- COMPANHIA IMMOBILIARA DO SENA (Portugal)
Director and Chairman
- NEXITY PORTUGAL
Manager
- NOVY SMICHOV DEVELOPMENT (Czech Republic)
- NEXITY CZ (Czech Republic)
Director
- JIZNI SVAHY (Czech Republic)
- NEXITY POLSKA (Poland)
Manager
- NEXITY BIANDRATE (Italy)
Consigliere
- NEXITY GRUGLIASCO STAMPALIA (Italy)
Consigliere
- NEXITY ITALIA (Italy)
Consigliere and Chairman
- NEXITY RESIDENZIALE ITALIA (Italy)
Consigliere
- SESTO EDISON 1 (Italy)
Consigliere and Amministratore delegato
- SESTO EDISON 2 (Italy)
Consigliere and Amministratore delegato
- EUROSIC- SA
Member and Chairman of the Audit Committee (since 01/02/2008)
end of term of office as Chairman on 01/12/2008
- EUROSIC – SA
Member of the Investment Committee (since 01/02/2008)
Member of the Audit Committee (since 27/02/2008)
1 - Overview
of Crédit Foncier
M. JEAN DREVON
Chairman of the COS (Orientation and Supervisory Board) of Caisse d’Epargne Bourgogne Franche Comté
1, rond point de la Nation – BP 23088 – 21088 Dijon Cedex 9
COMPANY
POSITION
DE BOURGOGNE FRANCHE-COMTE – SACS
Director
- NATIXIS GARANTIES – SACS
- SACCEF – SA
Director
- NATIXIS GARANTIES – SACS
M. BERNARD FOUGERE
COMPANY
POSITION
EXECUTIVE OFFICES
- SOCIETE LOCALE D’EPARGNE D’ANGOULEME
Chairman
Director
- FONDATION BELEM
Director
- CAISSE D’EPARGNE AQUITAINE
POITOU CHARENTES – SACS
Non-Voting Director
M. MICHEL GONNET
Chairman of the Executive Board of Financière Océor
88, avenue de France – 75641 Paris Cedex 13
COMPANY
POSITION
EXECUTIVE OFFICES
- FINANCIERE OCEOR
- BANQUE DE NOUVELLE CALEDONIE - SA
Director
- BANQUE DE TAHITI - SA
Director
Director
- BANQUE TUNISO-KOWEITIENNE – SA
Director
DE LA NOUVELLE CALEDONIE - SA
Director
Director
- ERILIA - SA
Director
- FONDATION DES CAISSES D’EPARGNE
POUR LA SOLIDARITE
Director
- INGEPAR – SA
- MASSIRA CAPITAL MANAGEMENT – SA
Director
- OCEOR PARTICIPATIONS – SA
- SACOGA – SA
Director
- CREDIT IMMOBILIER ET HOTELIER (CIH) – SACS
- SOGIMA – SACS
- GCE SERVICES ET CONSEIL A L’IMMOBILIER-SAS
Chairman (since 15/09/2008)
- BANQUE BCP – SA
Member of the Supervisory Board, then Chairman (since 05/06/2008)
- SAS GCE MAROC
- SAS GCE MAROC IMMOBILIER
Director
- SAS GCE SEM
- SAS SINJAB IMMOBILIER – SAS
- FEDERATION DES EPL
Director
1 - Overview
of Crédit Foncier
M. FRANCIS HENRY
Chairman of the COS (Orientation and Supervisory Board) of Caisse d’Epargne Lorraine Champagne-Ardenne
2, rue Royale – BP 70784 – 57012 Metz Cedex 01
COMPANY
POSITION
DE LORRAINE CHAMPAGNE-ARDENNE - SACS
Director
- FEDERATION NATIONALE DES CAISSES D’EPARGNE - SA
Director
- NATIXIS – SACS
- SOCIETE LOCALE D’EPARGNE MARNE-NORD – SA
- NATIXIS – SACS
M. JEAN MERELLE
Chairman of the Executive Board of Caisse d’Epargne Nord France Europe
135, Pont de Flandres – 59777 Lille
COMPANY
POSITION
EXECUTIVE OFFICES
- CAISSE D’EPARGNE NORD FRANCE EUROPE – SACS
- BATIXIA – SA
- FINORPA FINANCEMENT – SAS
Permanent Representative of Caisse d’Epargne Nord France Europe,
- FINORPA SCR – SAS
- HAINAUT IMMOBILIER – SA
Director
Director
- SOCIETE DE TELEVISION DU NORD PAS DE CALAIS – SA
Permanent Representative of Caisse d’Epargne Nord France Europe Communication
Director
- LA COMPAGNIE 1818 BANQUIERS PRIVES – SACS
- CENEFE COMMUNICATION – SAS
Legal Representative of Caisse d’Epargne Nord France Europe, Chairman
- RACING CLUB DE LENS – (Association)
Permanent Representative of Caisse d’Epargne Nord France Europe, Director
- SAVOIRS POUR REUSSIR EN NORD-PAS-DE-CALAIS
(Association)
Permanent Representative of Caisse d’Epargne Nord France Europe, Director
- LA COMPAGNIE 1818 BANQUIERS PRIVES – SACS
1 - Overview
of Crédit Foncier
M. PHILIPPE MONETA
Chairman of the Executive Board of Caisse d’Epargne Loire Drôme Ardèche
Espage Fauriel – 17, rue des Frères Pontchardier - BP 147 – 42012 St Etienne Cedex 2
COMPANY
POSITION
EXECUTIVE OFFICES
- CAISSE D’EPARGNE LOIRE DROME ARDECHE – SACS
- SOCIETE DE DEVELOPPEMENT DE L’HABITAT – SAHLM
Director
- ECUREUIL GESTION – SACS
- GCE BUSINESS SERVICES – SACS
Permanent Representative of Caisse d’Epargne Loire Drôme Ardèche,
- LOIRE TELE – SAEML
Director
- ARPEGE – GIE
- GIE CAISSE D’EPARGNE GARANTIES ENTREPRISES
- LOIRE TELE – SAEML
M. PIERRE QUERCY
Managing Director of the “Union Sociale pour l’Habitat” - 14, rue Lord Byron – 75008 Paris
COMPANY
POSITION
EXECUTIVE OFFICES
- UNION SOCIALE POUR L’AHBITAT – SA
Managing Director
- AGENCE NATIONALE POUR L’INFORMATION
SUR LE LOGEMENT
Director
- AGENCE NATIONALE POUR LA RENOVATION URBAINE
Director
- CAISSE DE GARANTIE DU LOGEMENT SOCIAL
Director
Director
- GIE HLM PARTICIPATION
Sole Director
- HABITAT & TERRITOIRES CONSEIL
Director
- SOCIETE DE GARANTIE DE L’ACCESSION
DES ORGANISMES D’HLM
Director
1 - Overview
of Crédit Foncier
M. MICHEL SORBIER
Chairman of the COS (Orientation and Supervisory Board) of Caisse d’Epargne d'Auvergne et du Limousin
63, rue Montlosier – 63961 Clermont Ferrand Cedex 9
COMPANY
POSITION
- CREDIT FONCIER – SA
Director
- SOCIETE LOCALE D’EPARGNE LIMOGES VILLE – SA
- CAISSE D’EPARGNE D’AUVERGNE ET DU LIMOUSIN – SACS
- CNCE – SACS
- U.E.A. – SACS
- GCE COURTAGE – SAS
- CAISSE EPARGNE ET DE PREVOYANCE
AUVERGNE LIMOUSIN
- CAISSE EPARGNE ET DE PREVOYANCE
AUVERGNE LIMOUSIN
- FEDERATION NATIONALE DES CAISSES D’EPARGNE
ASSOCIATION LOI 1901
Director
- SCI DE LA RAMPE – LIMOGES
Manager
Mme CATHERINE STEPHANOFF
Secretary General of Nexity
1, Terrasse Bellini – 92919 PARIS La Défense Cedex
COMPANY
POSITION
EXECUTIVE OFFICES
Chairwoman & Chief Executive Officer
- SARI HARTFORD
Chairwoman & Chief Executive Officer (since 30/04/2008)
Director
- NEXITY SAGGEL PROPERTY MANAGEMENT – SA
Permanent Representative of Nexity Services, Director (since 18/11/2008)
- EUROSIC – SACS
- I SELECTION – SACS
Permanent Representative of GCE Immobilier, Member of the Supervisory Board
- FONCIER VALORISATION ET ARBITRAGE – SAS
Legal Representative of GCE Immobilier, Chairwoman (since 01/12/2008)
- FONDS HAUSSMANN REI – SAS
Legal Representative of GCEI Reim, Chairwoman (since 01/12/2008)
- GCE IMMOBILIER –SAS
Chairwoman
- GCE PROMOTION – SAS
Legal Representative of GCE Immobilier, Chairwoman
- GCE SERVICES IMMOBILIERS – SAS
Legal Representative of GCE Immobilier, Chairwoman
- GCEI CONSEIL IMMOBILIER – SAS
Chairwoman (since 01/12/2008)
- GCEI REIM – SAS
Legal Representative of GCE Immobilier, Chairwoman (since 01/12/2008)
- KEOPS – SAS
- NAXOS – SAS
Director
- NEXIS 1 – SAS
Director
- LE FLORE – SARL
Manager
OFFICES ABROAD
- NEXIBEL INVESTISSEMENT
Director
- NEXIBEL 6
Director
- NEXIMUR
- NEXITY
Secretary General and Member of the Group Legal Department
- SA EUROSIC
Member of the Audit Committee and Member
of the Sustainable Development Committee
1 - Overview
of Crédit Foncier
C.N.C.E.
COMPANY
POSITION
- AIR CALEDONIE INTERNATIONAL – AIR CALIN – SA
Director
- ALPHA DEMETER – SA
- BANQUE DE LA REUNION – SA
Director
- BANQUE DE NOUVELLE-CALEDONIE – SA
Director
- BANQUE DE TAHITI – SA
Director
Director
- CICOBAIL – SA
Non-Voting Director
- CINERGIE – SA
Director
- CIRRA – SA
Director
- COMPAGNIE HOTELIERE DE L’OPERA (VIETNAM)
Director
Director
- CREDIT LOGEMENT – SA
Director
- EUROTEVEA – SA
Director
- EUROTITRISATION – SA
Director
- FONCIER ASSURANCE – SA
Director
- FONGEPAR – SA
Director
- FRANCE ACTIVE GARANTIE – SA
Director
- GCE ASSURANCES – SA
Director
- GCE BAIL – SA
Director
- GCE COVERED BONDS – SA
- GCE DOMAINES SA
Director
- GESTITRES – SA
Director
- IDES INVESTISSEMENTS – SA
Director
- INGEPAR – SA
Director
Director
- LES EDITIONS DE L’EPARGNE – SA
Director
- MURACEF – SA
Director
Director
Director
- NEXITY – SA
Director
- SGFAS – SA
Director
- SOCRAM BANQUE – SA
Director
- SOFICA COFIMAGE 16 – SA
Director
- SURASSUR – SA
Director
- TRUST MISSION – SA
- BANQUE FIDUCIAL – SACS
- CILOGER – SACS
- COMPAGNIE DES ALPES – SACS
- ECUREUIL GESTION FCP – SACS
- EUROSIC – SACS
- GCE HABITAT – SACS
- NATIXIS – SACS
- NATIXIS EPARGNE FINANCIERE – SACS
- SOCFIM – SACS
- ALLIANCE ENTREPRENDRE – SAS
- CARTE BLEUE – SAS
Director
- ECUREUIL ASSURANCES VIE DEVELOPPEMENT – SAS
Director
- GCE ASAP – SAS
Chairman
- GCE MAROC – SAS
Director
- GCE NAO – SAS
Chairman
- GCE PARTICIPATIONS – SAS
Chairman
- GCE PROMOTION MEDITERRANEE – SAS
Chairman
- SAS ALYSE PARTICIPATIONS
- SAS DV HOLDING
- SAS GCE ECLAIR 07
Chairman
- SAS GCE ISSOIRE IMMOBILIER
Chairman
- SOCIETE D’INVESTISSEMENT FRANCE ACTIVE
– SIFA – SAS
Director
- STET – SAS
- VIGEO – SAS
Director
- CAPE 1158 – GIE
Director
- DRENNEC – GIE
Director
1 - Overview
of Crédit Foncier
- GCE BUSINESS SERVICES (MOA) – GIE
- GCE TECHNOLOGIES (MOE) – GIE
- GEMO-RSI – GIE
Director
- GIE CAISSE D’EPARGNE GARANTIES ENTREPRISES
- GIE CALLEN
Director
- GIE DISTRIBUTION
Director
- GIE ECOLOCALE
Director
- GIE GCE MOBILIZ
Director
- GIE MAEA
Director
- GIE VICTOIRE
Director
- GIRCE INGENIERIE – GIE
Director
- GROUPEMENT CARTE BLEUE – GIE
- GROUPEMENT CARTES BANCAIRES – GIE
- OCEOR INFORMATIQUE – GIE
Director
- PARTENARIAT CEMM – GIE
Sole Director (since 18/02/2008)
- PORT MATHURIN AVIATION BAIL – GIE
Director
- SEA 1 – GIE
Director
- SEDI-RSI – GIE
- TADORNE AVIATION – GIE
Director
- TREVIGNON – GIE
Director
- ECUFONCIER – SCA
General and Limited Partner
- LIVRET BOURSE INVESTISSEMENT – SICAV
Director
- ASSOCIATION POUR LA GESTION DE L’ACCORD
TRAVAILLEURS HANDICAPES DE L’ECUREUIL
Director
- ASSOCIATION POUR L’HISTOIRE
DU GROUPE CAISSE D’EPARGNE
Director
- ACTIFS IMMO EXPLOITATION – SCPI
DES PAYS DE LA LOIRE – SA
Statutory Non-Voting Director
LOIRE CENTRE – SA
Statutory Non-Voting Director
- CENTRE DE RELATION CLIENTS DIRECT ECUREUIL
BOURGOGNE FRANCHE COMTE – GIE
Member
- GCE DOMAINES
- NEXITY
Member of the Investment Committee
Conflicts of interest
In 2008, certain members of the Crédit Foncier Board of
Directors held executive positions at Caisse Nationale des
Caisses d’Epargne. CNCE owns 75% of Crédit Foncier.
These Board members are:
• Mr. Nicolas Mérindol, Chief Executive Officer of CNCE
until October 19, 2008,
• Mr. Alain Lemaire, Chief Executive Officer of CNCE
since October 19, 2008,
• Mr. Guy Cotret, member of CNCE's Executive Board
since January 1, 2004,
• Mr. Julien Carmona, member of CNCE's Executive Board
until October 19, 2008.
To the best of the company's knowledge, no other conflicts
of interest exist between the duties, with regard to the company, and the private interests and/or other duties of the
Executive Officers and members of the Board.
1 - Overview
of Crédit Foncier
4.3 Remuneration
4.3.1 Remuneration of Executive Officers
Summary table of remuneration, options and shares granted to each company Director
(In euros)
2007
2008
470,108
595,768
- Value of options granted during the financial year
0
0
- Value of performance related shares granted during the financial year
0
0
470,108
595,768
563,461
467,208
- Value of options granted during the financial year
0
0
- Value of performance related shares granted during the financial year
0
0
563,461
467,208
François BLANCARD
- Remuneration for the financial year
(details provided in the following table)
Total
Thierry DUFOUR
- Remuneration for the financial year
(details provided in the following table)
Total
Summary of remuneration for Executive Officers *
Amounts due
2007
Amounts paid
Amounts due
2008
Amounts paid
- Fixed remuneration
-
292,274
-
294,240
- Variable remuneration
-
143,420
-
230,000
- Bonuses
-
14,994
-
19,243
- Directors' fees
-
14,500
-
46,525
- Benefits in kind
-
4,920
-
5,760
Total
-
470,108
-
595,768
- Fixed remuneration
-
274,432
-
319,240
- Variable remuneration
-
256,500
-
110,145
- Bonuses
-
16,769
-
20,563
- Directors' fees
-
10,000
-
11,500
- Benefits in kind
-
5,760
-
5,760
Total
-
563,461
-
467,208
(In euros)
François BLANCARD
Thierry DUFOUR
* Gross remuneration before tax
Fixed remuneration
Directors' fees
This remuneration includes a base salary and remuneration related to the term as executive officer.
In accordance with the standards defined by Caisse
Nationale des Caisses d’Epargne, directors' fees paid by
Groupe Caisse d’Epargne companies can be collected
directly by members of these companies' boards of directors or supervisory boards.
Method used to determine variable remuneration
At the end of the pay period, the Chief Executive Officer
and the Deputy CEO receive variable remuneration that
can represent 80% and 50% of their fixed remuneration,
respectively.
At the beginning of each year, the Remuneration Committee
establishes the criteria for determining variable remuneration in accordance with the rules defined by Caisse
Nationale des Caisses d’Epargne. These criteria are mainly
based on specific indicators for Groupe Caisse d'Epargne
and Crédit Foncier.
When the annual accounts are closed, the Board of Directors
consults the Remuneration Committee and determines the
amount of the variable remuneration based on performance
as measured by the defined criteria.
The amount paid during year N is the amount due for the
year N-1.
Bonuses
This remuneration includes supplementary retirement
benefits, long-term incentives and employee profit-sharing.
The amount paid during year N is the amount due for the
year N-1.
Benefits in kind
Benefits in kind for Chief Executive Officers include a car
(about €480 per month for 12 months).
Executive officers are not granted stock options or subscription rights, or performance-related pay in the form of shares
Application of the "TEPA" law
Law No. 2007-1223 of August 21, 2007 "to promote
work, employment and purchasing power", known as the
"TEPA" law, now governs salaries, benefits and severance
pay for corporate officers (Chairman and Members of the
Executive Board, the Chief Executive Officer and the
Deputy CEO) of companies whose shares are traded on a
regulated market. In particular, according to this law, the
compensation granted must depend on the beneficiary's
performance.
Elements of executive remuneration
Employment contract
Yes
No
Supplementary
retirement benefits
Yes
No
Severance pay
Yes
No
Restrictive
covenant fees
Yes
No
François BLANCARD
CEO of Crédit Foncier de France
Start of term 23/07/2007
End of term 23/07/2012
a
a
a
a
a
a
Thierry DUFOUR
Deputy CEO of Crédit Foncier
de France
Start of term 23/07/2007
End of term 23/07/2012
a
a
1 - Overview
of Crédit Foncier
During its meeting on February 27, 2008, the Board of
Directors of Crédit Foncier defined the mechanism for
compensating the Chief Executive Officer and the Deputy
CEO, as proposed by the Remuneration Committee. The
Annual General Meeting of April 24, 2008 approved the
resolutions relating thereto.
based on actual attendance, in accordance with standards
defined by Caisse Nationale des Caisses d'Epargne.
Members in attendance are paid €1,500 per meeting and
are limited to a total of €7,500 in directors' fees. The
Chairman of the Board receives an additional set fee of
€10,000.
4.3.2 Subscription rights
and stock options
Members who attend audit and remuneration committee
meetings are paid €1,000 per meeting and are limited to
a total of €4,000 in fees. The chairman of each committee receives an additional set fee of €1,000.
Since September 2006, there has not been a stock option
plan and no new plan has been put in place.
Any remaining monies are not distributed. Directors are
not paid bonuses.
Total directors' fees paid to Board members in 2008
amounted to €164,000
4.3.3 Remuneration of
Board members
- €136,000 for participating in Board meetings,
The remuneration paid to members of the Board is disclosed pursuant to Article L. 225-102-1 of the French Code
of Commerce.
- €9,000 for participating in Remuneration Committee
meetings.
- €19,000 for participating in Audit Committee meetings,
The total amount of directors' fees paid to members of the
Board was fixed by the General Meeting on April 24, 2008
at €238,000. The amount paid to each Board member is
Directors' fees (in euros)
(In euros)
M. Alain LEMAIRE since December 19, 2008
M. Nicolas MERINDOL until December 19, 2008
2007
2008
-
3,500
20,500
17,000
M. Alain DININ
5,500
9,500
M. Pierre SERVANT until July 23, 2007
2,750
-
M. Pierre ADIER until July 23, 2007
3,000
-
M. Gérard BARBOT
7,500
6,000
M. Jean-Marc CARCELES
M. Guy COTRET
M. Hervé DENIZE
7,500
7,500
11,000
11,000
3,000
7,500
-
10,000
M. Jean DREVON
6,000
7,500
M. Christophe ESTIVIN until July 29, 2008
4,500
3,000
M. Jean-Paul FERRY until July 23, 2007
1,500
-
M. Laurent DIOT since February 27, 2008
M. Bernard FOUGERE
7,500
7,500
M. Michel GONNET
3,000
4,500
Mme Dorothée HACHEZ until July 23, 2007
3,000
-
M. Francis HENRY
7,500
7,500
M. Jean-Hervé LORENZI
9,000
7,500
M. Paul-Louis MARTY until July 29, 2008
5,000
5,000
-
4,500
M. Jean MERELLE since July 29, 2008
M. Philippe MONETA
12,250
9,500
M. Pierre QUERCY since July 29, 2008
-
1,500
M. Robert ROMILLY until July 23, 2007
7,500
6,000
Mme Catherine STEPHANOFF
4,500
7,500
M. Michel SORBIER
7,500
7,500
M. Jean-Eric VIMONT until February 27, 2008
6,500
1,000
M. Jacques-Henri WAHL
6,000
4,500
M. Michel Gonnet (as permanent representative of CNCE)
until July 23, 2007
1,500
-
M. Julien Carmona (as permanent representative of CNCE)
6,500
7,500
160,000
164,000
Total
It should be noted that:
• The remuneration of Mr. Nicolas Mérindol includes
directors' fees received for attending Board meetings,
and directors' fees received as Chairman of the
Remuneration Committee. In addition, the Board of
Directors decided to pay him €6,000 per month for his
role as Chairman of the Board (pursuant to Article L.
225-47 of French Code of Commerce).
• The remuneration of Mr. Alain Lemaire includes directors' fees received for participating in one Board meeting. In addition, the Board of Directors has decided to
pay him €6,000 per month for his role as Chairman of
the Board (pursuant to Article L. 225-47 of French Code
of Commerce).
• The remuneration of Mr. Philippe Monéta includes, in
addition to directors' fees, his remuneration as
Chairman of the Audit Committee.
• The remuneration of Guy Cotret, Paul-Louis Marty, JeanHervé Lorenzi, Julien Carmona, Alain Dinin, Jean-Eric
Vimont and Laurent Diot includes, in addition to directors' fees, amounts received for sitting on the Audit
Committee or the Remuneration Committee.
Board members do not receive benefits in kind from
Crédit Foncier.
In addition, some Board members receive remuneration
from Caisse Nationale des Caisses d’Epargne (which
controls Crédit Foncier de France) and if appropriate from
companies controlled by Crédit Foncier de France.
1 - Overview
of Crédit Foncier
Remuneration received by these Board members includes:
Table of directors' fees and other remuneration received by non-executive directors
n.a. : not applicable
(In euros)
2007 - Amounts paid
2008 - Amounts paid
N. MERINDOL (until December 19, 2008)
Fixed remuneration
Variable remuneration
Bonuses
Directors' fees
Benefits in kind
Total
502,345
288,750
150,000
212,297
5,524
1,158,916
359,585
354,596
255,534
7,024
976,739
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
73,236
n.a.
25,058
400
98,694
13,200
6,750
19,950
14,000
7,500
21,500
n.a.
n.a.
n.a.
20,500
n.a.
20,500
n.a.
n.a.
n.a.
27,418
n.a.
27,418
201,428
1,198
202,626
288,775
180,000
18 000
4,716
491,491
395,128
240,000
80,000
54,019
5,651
774,798
398,861
200,000
86,886
5,748
687,495
A. LEMAIRE (since December 19, 2008)
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
G. BARBOT
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
J.M. CARCELES
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
J. CARMONA
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
G. COTRET
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
(In euros)
2007 - Amounts paid
2008 - Amounts paid
H. DENIZE
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5,500
n.a.
5,500
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
133,652
17,550
4,500
4,025
159,727
3,000
3,000
4,500
4,500
n.a.
n.a.
n.a.
1,500
n.a.
1,500
n.a.
n.a.
n.a.
3,000
n.a.
3,000
A. DININ
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
L. DIOT
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
J. DREVON
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
C. ESTIVIN
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
B. FOUGERE
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
M. GONNET
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
1 - Overview
of Crédit Foncier
(In euros)
2007 - Amounts paid
2008 - Amounts paid
F. HENRY
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
4,500
n.a.
4,500
n.a.
n.a.
n.a.
2,500
n.a.
2,500
n.a.
n.a.
n.a.
2,500
n.a.
2,500
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-
n.a.
n.a.
n.a.
5,250
n.a.
5,250
n.a.
n.a.
n.a.
7,000
n.a.
7,000
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
4,500
n.a.
4,500
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
4,500
n.a.
4,500
P.L. MARTY
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
J. MERELLE
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
P. MONETA
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
P. QUERCY
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
M. SORBIER
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
C. STEPHANOFF
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
(In euros)
2007 - Amounts paid
2008 - Amounts paid
J.E. VIMONT
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
6,500
n.a.
6,500
n.a.
n.a.
n.a.
5,000
n.a.
5,000
n.a.
n.a.
n.a.
4,000
n.a.
4,000
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
4,500
n.a.
4,500
n.a.
n.a.
n.a.
3,000
n.a.
3,000
n.a.
n.a.
n.a.
3,000
n.a.
3,000
J.H. LORENZI
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
R. ROMILLY
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
J.H WAHL
Fixed remuneration
Bonuses
Directors’ fees
Benefits in kind
Total
4.3.4 Remuneration of statutory auditors
Details on the remuneration of the statutory auditors are provided in note 10.5.3 of the appendix to the consolidated
accounts Page 315 and in note 6.7 of the appendix to the individual accounts Page 378.
1 - Overview
of Crédit Foncier
4.4 REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
ON THE OPERATION OF THE BOARD AND INTERNAL AUDITING
Articles 117 and 120 of the LSF (Law on financial security)
4.4.1 Conditions surrounding the
preparation and organisation
of the board’s work
Terms of office
a) Composition of the Board
Start and end dates of terms of office
Board members
The Board of Directors now has 17 members whom are
elected by the General Meeting. The list of members is
provided in the notes.
The composition of the Board is made up as follows:
• 11 Directors appointed by Groupe Caisse d’Epargne,
• 4 Directors appointed by Groupe Nexity,
• 2 independent Directors.
Non-Voting Directors (Censeurs)
Three independent Non-Voting Directors assist the Board
of Directors.
People who regularly attend Board meetings
In connection with its public service role (Article L. 511
32 of the French Monetary and Financial Code), Crédit
Foncier de France has a government auditor appointed by
the Ministry of the Economy. Antoine Mérieux, the
Government Auditor, attends Board meetings and Audit
Committee meetings.
Delegates from the Central Works Council (see appended
table) and the Statutory Auditors also attend meetings of
the Board of Directors.
Meetings may be attended by any other person who may
usefully contribute to the Board's deliberations.
Positions and terms of office within the company
Members of the Board of Directors of Crédit Foncier de
France do not hold positions in the company.
All of the directors on the Board of Crédit Foncier were
appointed by the General Meeting of July 23, 2007.
Board members' terms of office will be renewed at
General Meeting that approves the accounts for the
2011 financial year.
Main activities performed outside the company
See the list of Board members in the appendix.
Other offices and positions held in other companies
As required by law, the Board members' terms of office and
positions are listed in the Board's management report for
the 2008 financial year.
Changes in the Board's composition
The General Meeting of April 24, 2008 ratified the Board
of Directors’ provisional co-optation of Mr. Laurent Diot as
Director, replacing Mr. Jean-Eric Vimont, following the latter's resignation.
At its meeting of July 29, 2008, the Board of Directors
acknowledged the resignations of Mr. Paul-Louis Marty
and Mr. Christophe Estivin from their offices as Director.
The Board of Directors co-opted Mr. Pierre Quercy and Mr.
Jean Mérelle to replace them.
At its meeting of December 19, 2008, the Board acknowledged the resignation of Mr. Nicolas Mérindol from his
position as Chairman of the Board of Directors and his
office as Director. The Board of Directors co-opted Mr.
Alain Lemaire as a replacement and named him Chairman
of the Board of Directors.
Other information
Directors' responsibilities
Under Article 14 of Crédit Foncier de France's Articles of
Association, each Board member must own ten shares.
This obligation has been met by all members.
Shareholders' agreements affecting the Board's composition
There are no shareholders' agreements affecting the
Board's composition or operations.
b) The Board's role and operations
Duties and powers of the Board
In accordance with the law, the Board of Directors determines the strategic orientations of the company’s business activities and monitors their implementation. The
Articles of Association specify that the Board's role is to
deliberate on the definition of strategic orientations, the
five-year business plan and the annual budget as presented by the Chairman.
Board meetings
General remarks
Board meetings are convened by the chairman in writing. An
agenda and information file are appended to this notice.
Number of Meetings – Main themes
The Board of Directors met five times in 2008.
• Quarterly monitoring of the company’s activities
- approved Crédit Foncier's budget for 2009
(meeting of December 19, 2008).
• Strategic projects
The Board also examines any project whose financial or
strategic importance warrants such an examination. It has
been called to deliberate on:
- the transfer of banking services to Banque Palatine
(meeting of April 24, 2008),
- the sale of shares held by Crédit Foncier to GCE SEM
(meeting of July 29, 2008),
- approval of the merger between Picardie Bail and
Cicobail (meeting of July 29, 2008),
- the acquisition of GCEI Conseil Immobilier (meeting of
December 19, 2008).
• Authorisation of regulated agreements
The Board has also been requested to authorise various
agreements falling under the regulated agreement regulations; these agreements are explained in the Statutory
Auditors' special report and were mainly concluded with
Caisse Nationale des Caisses d’Epargne, Nexity or subsidiaries of Crédit Foncier de France.
Board member attendance
The Board's overall attendance rate, in other words the
total number of members attending meetings divided by
the total number of current members, was 87.06%. The
Board's attendance rate was 88.23% for the meeting called to review the annual accounts and 94.12% for the
meeting called to deliberate on the 2009 budget.
The Board meets at least once every quarter. At each of
these meetings, it reviews the information it has received
about company and group activities.
Assessment of the Board's performance
The Board of Directors:
Rules concerning Board members
- approved the accounts for 2007
(meeting of February 27, 2008),
Special provisions concerning Board members
- approved the half-year accounts
(meeting of July 29, 2008),
The Board's performance was not assessed.
The Board adopted a set of by-laws at its meeting of
February 27, 2008.
1 - Overview
of Crédit Foncier
Rules restricting or prohibiting transactions involving
shares of companies about which Board members have privileged information
If this is called for by the nature of the information communicated to the Board, the Chairman will remind the
Board's members of their obligations as regards privileged
information and draw their attention to the applicable
regulations and possible penalties.
Operation of committees created by the Board
Committees
The company has an Audit Committee, a Remuneration
Committee and a Strategy Committee that operate according to by-laws approved by the Board of Directors at their
meeting on December 12, 2007.
Composition of the committees at the end of 2008:
AUDIT COMMITTEE
REMUNERATION COMMITTEE
STRATEGY COMMITTEE
M. Philippe Monéta, Chairman
M. Alain Lemaire, Chairman
M. Alain Lemaire, Chairman
M. Julien Carmona
M. Guy Cotret
M. Gérard Barbot
M. Guy Cotret
M. Alain Dinin
M. Alain Dinin
M. Laurent Diot
M. Pierre Quercy
M. Francis Henry
M. Jean-Hervé Lorenzi
Main duties and powers
Number of committee meetings and attendance rates
• Audit Committee
See appendix
The Audit Committee's main duty is to ensure the relevance and continued application of the accounting methods
adopted in drawing up the company's consolidated financial statements and the company's individual accounts. It
is also responsible for assessing the quality of internal
controls, in particular the consistency of measurement,
oversight, and risk management systems, and for proposing any additional measures required as a result. It prepares the deliberations of the Board of Directors.
Rules defining committees' powers, operating methods
and by-laws
• Remuneration Committee
The role of the Remuneration Committee is to assist the
Board by proposing the fixed remuneration for executive
officers. It determines the criteria for variable remuneration and measures performance against them.
• Strategy committee
• Audit Committee
Audit committee meetings are convened at least four
times a year, at the request of the chairman or the majority of its members: accounting and financial matters are
examined quarterly, whilst internal control issues are examined on a half-yearly basis. Additional meetings may be
held as necessary. Statutory Auditors are invited to attend
Audit Committee meetings when the annual and interim
accounts are examined, as well as other meetings, when
appropriate and invited by the committee chair.
The Remuneration Committee meets at least once a year.
The Strategy Committee examines the company's strategic
decisions and presents its findings to the Board of Directors.
• Strategy Committee
This committee meets at least once a year during the last
six months of the year and as often as necessary, when
convened by its chair or at the request of a majority of its
members.
The Remuneration Committee proposed to the Board of
Directors to fix the level of the variable portion of executive officer remuneration for the 2007 financial year, the
remuneration conditions applicable in the case of severance (Board meeting of February 27, 2008) and the performance criteria for the variable part of remuneration for
2008 (Board meeting of April 24, 2008).
It prepares and submits decisions to the Board of
Directors relating to the definition of strategic orientations
and avenues of growth for Crédit Foncier de France, the
preparation and revision of the business plan and the
review of projects related to strategic operations.
Presentation of the committees' activities during
the financial year-ended
• Strategy Committee
On April 16, the Strategy Committee gave its opinion on
the transfer of banking services to Banque Palatine and on
the Banco Primus project.
• Audit Committee
Directors' fees and remuneration
In 2008, the Audit Committee:
The amount of directors' fees to be paid to each member of
the Board is based on a predetermined amount per meeting
weighted for each person according to that person’s actual
attendance record compared to the total number of meetings held during the year and subject to an annual limit.
- examined the accounts at 31/12/2007 and 30/06/2008,
- was kept informed of counterparty and financial risks,
- reviewed the internal auditing work that was carried out
in 2008 (assignments and follow-up on recommendations) and validated the General Inspection Department's
budget and the audit plan for 2009,
- monitored progress on the action plan produced in the
wake of the Banking Commission's audit,
- examined the draft budget for 2009,
- received the report on the work carried out by the
Compliance Officer.
A one-off indemnity is added to the directors' fees paid to
the Chairman.
The same rules are applied when allocating directors' fees
for participation in Audit and Remuneration Committee
meetings.
If the budget is not fully allocated due to absences, the
remaining monies are not distributed.
Members of the Board of Directors, with the exception of
the Chairman, receive no remuneration other than directors' fees.
Directors' fees distributed in respect of the 2008 financial
year are presented in the appended table.
1 - Overview
of Crédit Foncier
4.4.2 Internal control procedures
a) Control principles and context
at Groupe Caisse d'Epargne
As a credit institution, Crédit Foncier de France is subject
to extensive legal and regulatory obligations that govern its
operations and controls its activities. These obligations
consist mainly of the French Monetary and Financial Code
and the regulations set forth by the French Banking
Regulations Committee (CRBF) and in particular, with
regard to internal controls, by CRBF Regulation No. 97-02
as amended. All of the group's credit institutions are subject to supervision by the Banking Commission.
In accordance with the regulations, Crédit Foncier's executive management is responsible for establishing internal
controls and implementing them. Internal controls encompass all procedures, systems and controls required to guarantee achievement of company objectives, compliance
with the laws, regulations and general or Groupe rules, as
well as ensuring that all risks to which the company is
exposed are properly managed. The structure of these
control systems is largely defined by regulations. The overall system relies on the one hand on various levels of permanent controls which are applied by departments or individuals that are independent of the operations they are
auditing and on the other hand on periodic controls carried out by designated departments.
• The Group’s permanent control system relies on procedures and standards determined by Caisse Nationale des
Caisses d'Épargne (CNCE). As the central entity of Groupe
Caisse d’Épargne, that body’s main purpose is to apply all
administrative, financial and technical measures regarding the organisation and management of the various
Caisses d’Épargne, their subsidiaries and joint entities.
The organisational and auditing rules determined by
CNCE are applicable to all affiliated establishments and
govern all commercial and financial activities as well as
the assessment, control and oversight of the risks relating
to credit and to markets by accounting, information technology and operational means. Within this framework,
particular attention, involving the definition of specific
standards and controls, is applied to the prevention of
money laundering and the financing of terrorism.
• Finally, the quality and operational effectiveness of permanent controls is periodically audited by CNCE's
General Inspection Department, which is subject to requirements governing credit institutions. Periodic audits are
governed by an auditing charter based on the auditing
charter of Groupe Caisse d'Épargne and are carried out by
a special office staffed by members of the CNCE General
Inspection Department. The purpose of this team is to
promote cooperation between the audit departments and
to ensure that the Group's control and auditing process is
as wide-ranging as required and is carried out as efficiently and cost-effectively as possible.
b) Organisation of internal controls
at Crédit Foncier
Corporate governance
Executive management is responsible for managing and
dealing with the operational concerns of Crédit Foncier
and its immediate subsidiaries. It is in charge of the
management of risks and internal controls, including the
system of permanent controls. The Board of Directors
exercises control over the management of the company
and directs strategy. It is involved in the most important
decisions and is kept regularly informed of changes in
major management ratios and indicators. Its work is prepared by the Audit Committee, which carries out the
essential missions of ensuring that relevant and consistent
accounting methods are used to prepare the company's
individual and consolidated financial statements, of
assessing the quality of internal controls, particularly the
consistency of measurement, monitoring and risk management systems, as and when necessary, of proposing appropriate additional courses of action.
Internal control
The internal control system is based on several levels of
permanent and periodic controls, and is given form in
various organisational measures (involvement of line and
staff managers, system of delegation, reporting structures,
and separation of functions) which are detailed below.
The different levels of internal control
Internal controls at Crédit Foncier are carried out at several different levels:
Permanent operational controls
Permanent operational controls are carried out in business units by the units' staff and management. The
controls are specified in procedural and operating
manuals, and unit heads are responsible for producing
and updating these manuals.
The responsibilities of the Head of Information Systems
Security are threefold:
• definition of policy regarding the security of information
systems,
• supervision of a network of staff members within the
various entities of the company,
• provision of assistance and advice to the IT Department
with respect to security issues.
It should be noted that business units are subject to rapid
changes and substantial IT changes, either completed or
underway, are constantly modifying the ways in which
transactions are processed, leading to the necessity for
frequent reformulation of instructions.
- Head of Business Continuity Planning: this person
reports directly to one of the Executive Officers and is
responsible for updating and keeping the business continuity plan in operational condition so Crédit Foncier can
continue operations after recording a material loss.
Permanent control carried out by specialised units
- Accounting Control and Regulatory Reporting Unit: operating from within the Accounting Department, this unit
is responsible for reviewing accounts and ensuring there
is sufficient documentation available to ensure correct
functioning of the accounting systems of Crédit Foncier
and its group.
These controls are the responsibility of units without operational responsibility.
• Departments that are heavily exposed to intrinsic risks
have their own internal control units that inform management about risk-related issues within the department.
These units are in charge of installing controls, implementing them and producing reports.
• Furthermore, they operate within specific entities or
departments:
- Risk Department: this entity is responsible for measuring, managing and monitoring loan and counterparty
risks as well as financial and operational risk.
- Compliance and Permanent Control Department: set up
in December 2004, this department is responsible for
controlling non-compliance risks and investment departments; its operations were organised in 2005 and its
responsibility for permanent control was added in 2007.
It is also in charge of mediation, ethics and the prevention of money laundering.
- Head of Information Systems Security: in 2004, the
Crédit Foncier group created the position of Head of
Information Systems Security, a post that reports directly to one of the executive officers.
- SCF and VMG Oversight Unit: this unit is connected to
the Financial Operations Department and is responsible
for the permanent control of all processes impacting
Compagnie de Financement Foncier (in particular, quality control for procedures).
The Crédit Foncier group's permanent control system is
structured around standardised and regularly updated risk
management control procedures for each business unit.
A special unit of the Compliance and Permanent Control
Department is responsible for coordinating the company's
permanent control activities.
The Internal Control Committee's primary missions are to:
• ensure that permanent controls for business activities
are comprehensive and well-organised and that monitoring and risk management systems are effective (including RMS oversight);
• coordinate actions to manage risks, to ensure compliance of internal procedures and transactions, and to guarantee the quality and availability of information processed by the information systems, as well as the security
of such systems;
1 - Overview
of Crédit Foncier
• oversee the resolution of malfunctions identified by the
General Inspection Department and the implementation
of recommendations.
Furthermore, each member of the Executive Committee is
authorised to act with full powers in the exercise of his or
her responsibility in each field of activity.
Chaired by the Chief Executive Officer, monthly, it brings
together representatives of control functions. The conclusions of the Committee's work are regularly reported to the
Audit Committee.
Specialised committees are responsible for decisions that
are not within the competence of Executive Officers or
that exceed the delegations granted to transaction managers. Among these committees, the most important are:
Periodic control
• national Loan Committee: authorises loans exceeding
the powers delegated to the operating units and business committees,
Periodic control is under the responsibility of the General
Inspection Department of Crédit Foncier. The shareholder’s
control unit also contributes to periodic control by auditing
the Crédit Foncier group and forwarding recommendations
to Crédit Foncier's General Inspection Department, which
in turn follows up on their implementation.
Role of line and staff managers in controlling
the activities of employees
A major component of permanent control, control by line
and staff managers is usually conducted by making full
use of:
• reports of anomalies, oversight procedures and regular
reporting, which enable those in charge to manage their
unit's activities effectively;
• the formal arrangements for determining decisionmaking authority, which are generally integrated into IT
procedures (authorisation by type of transaction or by
threshold, transactions subject to approval) or consist of
manual approval procedures.
Delegation system
The delegation system implemented by Crédit Foncier is
based on two series of measures:
• first, an internal system ensuring that decisions are
made at an appropriate level within the company, according to the magnitude of the risks they present, (involvement of the competent decision-making committees,
or the internal delegation systems);
• second, a system of mandates that allows Crédit Foncier
representatives to demonstrate to third parties that they
have the necessary authority to make certain commitments on behalf of the company.
• risk Committee: monitors overall changes in counterparty, financial and transactional risks and the ensuing
decisions (delegations, limits and scoring rules),
• national Committee for Sensitive Operations: manages
strategy and decisions regarding material debts that are
either in distress or exposed to risk,
• new Products Committee: supervises marketing of new
types of loans,
• asset and Liability Management Committee: analyses
ALM indicators and defines consequent courses of
action; a stand-alone committee implements ALM
Committee decisions,
• loan Conditions Committee: sets financial terms and
conditions of loans.
Risk oversight and measurement
Risk information, made available to Executive Officers
during committee meetings or by means of periodic activity reports, is communicated on a regular basis to the
Audit Committee and to the Board of Directors.
Reporting
Business critical information essential to enable Executive
Officers to direct activities effectively is provided by
monthly activity reports prepared by the Management
Control Department; senior management from each business sector is responsible for preparing reports related to
its activities
Principle of the separation of functions
• The units responsible for transactional commitments
and the units responsible for their accounting approval,
settlement and the monitoring and control of related
risks, are independent from one another.
• The independence of the control units vis-à-vis the operating units is ensured by:
- monitoring and control of counterparty, financial and
transactional risks by the Risk Department,
- accounting controls carried out by the General
Accounting Department and its dedicated unit,
- ethics and compliance controls carried out by the
Compliance Department,
- periodic control assignments carried out by the General
Inspection Department.
Accounting procedures and system
Crédit Foncier's accounting system is largely based on
the provision of data supplied by management control
systems.
An annual audit plan is prepared by the General
Inspection Department, working in liaison with the
Executive Officers and in consultation with the CNCE
General Inspection Department; the plan approved by
Crédit Foncier's executive management and submitted for
approval to the Audit Committee. It falls under the responsibility of the General Inspection Department, and is
imbedded in a multi-year plan that takes into account a
maximum audit cycle of two and a half years. Activities
that pose inherent risks are monitored more closely. The
auditing unit of the parent company takes part in the preparation of the annual audit plan.
During the year, special investigations and assignments may
be conducted at the behest of the Chief Executive Officer.
The assignments and follow-up on their recommendations
are reported to Crédit Foncier's Executive Management,
the Executive Committee, the Internal Control Committee,
the Audit Committee, and if necessary the executive bodies
of the subsidiaries in question.
Inspection assignments conducted in 2008
The methods used for internal accounting control are
described in the section covering the procedures for auditing accounting and financial data.
A total of 43 assignments were carried out by the General
Inspection Department of Crédit Foncier in 2008. In addition, 7 missions initiated at the end of 2007 were finalised
and their recommendations approved in 2008.
Work performed by the general
inspection department
Most of these assignments were included in the annual
audit plan approved by the Audit Committee on December
5, 2007, and concerned various sectors of the Crédit
Foncier group:
Organisation and resources
of the General Inspection Department
Evaluation of the systems for permanent control is the responsibility of the General Inspection Department.
The General Inspection Department reports on its assignments to the Chief Executive Officer and to the Audit
Committee.
At the end of 2008, this department had a staff of 23 graduates, drawn from a number of different fields (accounting, finance, legal, sales).
- Network of branches,
- Sales development,
- Commercial loans,
- Financial management,
- Management information,
- Logistics,
- Human resources,
- Risks,
- Subsidiaries.
1 - Overview
of Crédit Foncier
Particular attention was paid to regulatory compliance
(AMF, CNIL, anti-money laundering, privacy protection).
In addition, CNCE’s General Inspection Department looked
into the following areas:
- securitisation (as regards Basel II requirements),
- commercial lending (operating departments and specialised subsidiaries).
Follow-up on recommendations
from previous assignments
As previously, follow-up on the implementation of recommendations is carried out via half-yearly progress reports
drafted by the management of the audited unit. These
reports indicate the percentage of completion and, if
appropriate, an action plan and a new deadline. These
reports must be corroborated by records at the audited
unit justifying the reported state of advancement. The
actions taken by audited units are controlled for consistency and then included in reporting information prepared
for the governing bodies.
When re-audited, the status of previous recommendations
is systematically examined and the recommendations
repeated if necessary.
In the second half-year, a detailed statistical system was
developed to provide Executive Management, the
Executive Committee and the Audit Committee with clear
and concise information.
In 2009, there are plans to improve the updating process
by allowing audited units to access the database of recommendations and by reinforcing supervision of implementation by scheduling periodic meetings with the departments in question.
In this capacity, it defines and updates the Group’s accounting standards via an Accounting Plan from Groupe Caisse
d'Épargne (Plan Comptable du Groupe Caisse d’Epargne PCCE) together with accounting rules and methods applicable to all Group establishments. These rules and methods
include accounting tables and generic operating forms and
are summarised in a manual used by all the Group’s
centres, which is updated regularly as accounting regulations change. Furthermore, the rules for preparing the halfyear and annual Accounts are the subject of a specific
report aimed at harmonising accounting procedures and
statements among the different centres in the Group.
Crédit Foncier Audit Committee
Accounting and financial statements (annual and half-year
consolidated accounts and notes) are presented to the
Audit Committee. This committee analyses the statements,
receives the conclusions of the Statutory Auditors and submits its conclusions to the Board of Directors.
Organisation of the accounting function
in the Crédit Foncier group
The accounting function in the Crédit Foncier group is performed by the General Accounting Department, which is responsible for preparing balance sheets, income statements,
notes to the financial statements and statutory reports
concerning the different companies in the Group. Group
entities, with the exception of CFCAL, SOCFIM and Banco
Primus, were consolidated in the 2007 financial year.
The overall coordination is ensured by the General
Accounting Department of Crédit Foncier, which in turn
is divided into main units, the responsibilities of which
are described in the table below. The Chief Accounting
Officer reports to the Executive Committee member in
charge of finance.
c) Procedures for auditing accounting
and financial information
Role of CNCE
The CNCE Group Regulations and Consolidation
Department is responsible for standardisation, supervision, appraisal, oversight, forecasting, regulatory monitoring and Group representation concerning prudential,
accounting and fiscal matters.
In keeping with changes in technology and accounting practices, the Accounting Standards Unit adapts the internal chart
of accounts to ensure it is in complete compliance with the CNCE group chart of accounts.
Units
General Accounting Department
Loan Accounting Unit
Accounting Standards Unit
Accounting Control Unit
Regulatory Reporting Unit
Database Support Unit
Principal responsibilities
in accounting system operations
Principal responsibilities
in compiling and summarising data
Individual financial statements:
- Balance sheets, income statements and
- Accounting for Crédit Foncier, notes for these entities
Compagnie de Financement Foncier
- Monthly profit statements for the
and other entities and subsidiaries
Group's three main credit institutions
- Tax returns
(CF and SCF)
Consolidated financial statements:
- Centralisation of consolidation docu- - Reports on the cost of risk
ments
- Balance sheets, income statements and
notes for the Crédit Foncier group
- Definition and implementation of consolidation procedures (using Magnitude - Consolidated quarterly results for the
software adopted by the CNCE group)
group
- Oversight and control of interface oper- - Reports on outstanding loans and loan
ations between the loan management flows
system, accounting software packages
and reporting databases
- Definition and monitoring of Crédit - Procedural manuals
Foncier group accounting standards,
verification that they comply with those
of the CNCE group
- Maintenance of the chart of accounts
and implementation of audit trails
- Permanent accounting controls
- Accounting audit reports
- Prudential reporting to the Banking - Reporting to the Banking Commission
Commission (via CNCE, central body)
(via CNCE, central body)
- Calculation of regulatory ratios (liquidity, ESR, etc.) and specific SCF ratios
- Monitoring the Group's position in
terms of regulatory requirements
- Parameters for daily income accounting forms
- Follow-up on technical problems related to production
- Management of accounting software
packages
- Maintenance of accounting parameters for loan servicing chains
1 - Overview
of Crédit Foncier
Accounting controls
Control of financial data
Crédit Foncier's accounting system is largely based on
accounting data supplied by management control systems.
The financial data disclosed to third parties (annual
reports for shareholders, regulatory restitutions intended
specifically for the Banking Commission and reference
documents submitted to the Financial Markets Authority
— Autorité des Marchés Financiers — ) are audited in
detail by the competent departments (Management
Control, ALM Management and General Accounting).
Special arrangements have been made to satisfy the
requests of rating agencies concerning Compagnie de
In the context of large-scale decentralisation of tasks, the
organisational principles of accounting control were formalised in the new “Accounting Charter” distributed throughout the company in 2007. Operational accounting
controls are the responsibility of decentralised accountants
(bookkeepers and operations managers). Standardised
financial statements are substantiated and certified every
quarter in a single centralised computer system (the
Account Justification Database), managed by the
Accounting Control Unit. Activity reports track the progress
made in substantiating the accounts (in terms of quantity
and quality). These reports are used to verify the quality of
the supporting documentation and to assist on-site audits
APPENDIX
BOARD OF DIRECTORS
These auditing assignments are part of an annual programme approved by the Head of the General Accounting
Department and result in audit reports. A summary is presented to all business areas and is sent to the external
auditors if necessary.
Members elected by the GM
Between
3 and 18
Actual number of members:
17
Number of Board meetings:
5
Recommendations from the Statutory Auditors and the
General Inspection Department are presented to the management of the centres concerned and a summary is submitted to the Audit Committee. Periodic verifications are performed to ensure that recommendations are implemented.
Average attendance rate
Consolidation documents are drafted by subsidiaries and
certified by their respective statutory auditors. These
documents are then reviewed in detail and controlled for
consistency by the Consolidation Unit. The consolidated
income statement is reconciled with the income statement drafted by the Management Control Department.
Date term of office expires
Number of shares held
GM 2012
10
COMMITTEES
Audit Committee
Number of members
5
Number of meetings
5
All of these prudential and regulatory reports are cleared
by CNCE, which runs automated consistency controls
before sending them to the Banking Commission.
87.06%
72%
Remuneration Committee
Number of members
4
Number of meetings
2
100%
Strategy Committee
Number of members
4
Number of meetings
1
100%
Surname
First name
Company Title
Date of
appointment
Function
on the Board
and Board
Committees
Function in
the company
Offices
held
outside
the company
Attendance rate
Directors' fees
(for 2008)
100%
€1,500
+ €2,000
(pro rata
chairman's
indemnity)
Remuneration
Committee
(Chairman)
—
—
Strategy
Committee
(Chairman)
—
—
100%
€6,000
+ €8,000
(pro rata
chairman's
indemnity)
100%
€2,000
+ €1,000
(chairman's
indemnity)
—
—
100%
€7,500
Remuneration
Committee
(Member)
100%
€2,000
Strategy
Committee
(Member)
—
—
80%
€6,000
—
—
BOARD OF DIRECTORS
Since
19/12/2008
A. LEMAIRE
Chairman
Until
19/12/2008
N. MERINDOL
Chairman
Chief Executive
Officer of CNCE
Chairman
Chairman
Remuneration
Committee
(Chairman)
—
NOT
APPLICABLE
Strategy
Committee
(Chairman)
23/07/2007
A. DININ
Vice-Chairman
Vice-Chairman
23/07/2007
G. BARBOT
Strategy
Committee
(Member)
Chairman and
CEO of Nexity
1 - Overview
of Crédit Foncier
Surname
First name
Company Title
Offices
held
outside
the company
Attendance rate
Directors' fees
(for 2008)
23/07/2007
Chairman of the
Executive Board
of Caisse
d’Epargne
Languedoc
Roussillon
100%
€7,500
23/07/2007
Membre of the
Executive Board
80%
€6,000
60%
€3,000
100%
€2,000
Date of
appointment
Function
on the Board
and Board
Committees
Function in
the company
BOARD OF DIRECTORS
J.M. CARCELES
Audit Committee
(Member)
G. COTRET
Remuneration
Committee
(Member)
H. DENIZE
23/07/2007
—
Deputy CEO,
NEXITY
100%
€7,500
As for
27/02/2008
—
Nexity Chief
Financial
Officer
80%
€6,000
100%
€4,000
100%
€7,500
L. DIOT
NOT
APPLICABLE
Audit Committee
(Member)
J. DREVON
23/07/2007
—
Chairman of the
Orientation and
Supervisory
Board, Caisse
d’Epargne
Bourgogne
Franche Comté
Ch. ESTIVIN
Until
29/07/2008
—
Director, CNCE
100%
€3,000
B. FOUGERE
23/07/2007
—
—
100%
€7,500
—
Chairman
of the Executive
Board,
Financière Océor
60%
€4,500
M. GONNET
23/07/2007
Surname
First name
Company Title
Date of
appointment
Function
on the Board
and Board
Committees
Offices
held
outside
the company
Attendance rate
Directors' fees
(for 2008)
—
Chairman of the
Orientation and
Supervisory
Board, Caisse
d’Epargne
Lorraine
ChampagneArdenne
100%
€7,500
Strategy
Committee
(Member)
—
—
—
—
—
100%
€3,000
Remuneration
Committee
(Member)
—
100%
€2,000
—
Chairman of the
Executive Board,
Caisse d'Epargne
Nord France
Europe
100%
€4,500
Chairman the
Executive Board,
Caisse d'Epargne
Loire Drôme
Ardèche
60%
€4,500
Function in
the company
BOARD OF DIRECTORS
23/07/2007
F. HENRY
Until
29/07/2008
P.L. MARTY
J. MERELLE
As for
29/07/2008
23/07/2007
—
Ph. MONETA
Audit Committee
(Chairman)
—
80%
€4,000
+ €1,000
(chairman's
indemnity)
—
Managing
Director, Union
Sociale pour
l’Habitat
33%
€1,500
Remuneration
Committee
(Member)
—
—
—
—
Secretary
General, Nexity
100%
€7,500
—
Chairman of the
Orientation and
Supervisory
Board, Caisse
d'Epargne
d'Auvergne et
du Limousin
100%
€7,500
As for
29/07/2008
P. QUERCY
Mme STEPHANOFF
M. SORBIER
NOT
APPLICABLE
23/07/2007
23/07/2007
1 - Overview
of Crédit Foncier
Surname
First name
Company Title
Date of
appointment
Function
on the Board
and Board
Committees
Offices
held
outside
the company
Attendance rate
Directors' fees
(for 2008)
—
Deputy CEO,
Nexity
—
—
Audit Committee
(Member)
—
100%
€1,000
—
—
100%
—
Function in
the company
BOARD OF DIRECTORS
Until
27/02/2008
J.E. VIMONT
CNCE
(M. Carmona)
23/07/2007
BOARD OF DIRECTORS - PERMANENT REPRESENTATIVE
23/07/2007
J. CARMONA
Permanent
Representativ,
CNCE
Executive
Director reporting to the Chief
Executive Officer
of CNCE
60%
€4,500
Audit Committee
(Member)
—
60%
€3,000
BOARD OF DIRECTORS - NON-VOTING DIRECTORS (CENSEURS)
23/07/2007
—
—
60%
€4,500
Audit Committee
(Member)
—
60%
€3,000
80%
€6,000
60%
€4,500
J.H. LORENZI
R. ROMILLY
23/07/2007
—
National
Managing
Director for
Personal
Services
J.H. WAHL
23/07/2007
—
—
NOT
APPLICABLE
REPRESENTATIVES OF THE CENTRAL WORKS COUNCIL
M. M. LAMY or M. A. LETESSIER
—
—
80%
—
Mme N. VOCORET or Mme D. DELAVEAU
—
—
100%
—
—
80%
—
GOVERNMENT AUDITOR
A. MÉRIEUX
—
4.5 STATUTORY AUDITORS’REPORT ON THE REPORT
BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
Statutory Auditors' report, prepared in accordance with Article L.225-235 of the French
Commercial Code, on the report prepared by the Chairman of the Board of Directors of Crédit
Foncier de France.
Year ended 31 December 2008
This is a free translation into English of a report issued in French and is provided solely for the convenience of English-speaking readers.
This report should be read in conjunction and construed in accordance with French law and the relevant professional auditing standards
applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of Crédit Foncier de
France – S.A. and in accordance with Article L.225-235
of the French Commercial Code (“Code de commerce”),
we hereby report to you on the report prepared by the
Chairman of your company in accordance with Article
L.225-37 of the French Commercial Code for the year
ended 31 December 2008.
It is the Chairman's responsibility to prepare, and submit
to the Board of Directors for approval, a report on the
internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L.225-37 particularly in terms of
the corporate governance measures.
It is our responsibility:
• to report to you on the information contained in the
Chairman's report in respect of the internal control procedures relating to the preparation and processing of the
accounting and financial information, and
• to attest that this report contains the other disclosures
required by Article L.225-37 of the French Commercial
Code, it being specified that we are not responsible for
verifying the fairness of these disclosures.
We conducted our work in accordance with professional
standards applicable in France.
Information on the internal control procedures relating to
the preparation and processing of accounting and financial
information
These standards require that we perform the necessary procedures to assess the fairness of the information provided
in the Chairman's report in respect of the internal control
procedures relating to the preparation and processing of
the accounting and financial information. These procedures consisted mainly in:
• obtaining an understanding of the internal control procedures relating to the preparation and processing of the
accounting and financial information on which the information presented in the Chairman's report is based and
existing documentation;
• obtaining an understanding of the work involved in the
preparation of this information and existing documentation;
• determining if any significant weaknesses in the internal
control procedures relating to the preparation and processing of the accounting and financial information that
we would have noted in the course of our engagement are
properly disclosed in the Chairman's report.
On the basis of our work, we have nothing to report on the
information in respect of the company's internal control
procedures relating to the preparation and processing of
accounting and financial information contained in the
report prepared by the Chairman of the Board in accordance with Article L.225-37 of the French Commercial Code.
1 - Overview
of Crédit Foncier
Other disclosures
We hereby attest that the Chairman’s report includes the
other disclosures required by Article L.225-37 of the
French Commercial Code.
Paris La Défense and Neuilly-sur-Seine, 26 March 2009
The Statutory Auditors
KPMG Audit
PricewaterhouseCoopers Audit
Division of KPMG S.A
Rémy Tabuteau
Anik Chaumartin
Jean-Baptiste Deschryver
Partner
Partner
Partner
cff UK_part5:Mise en page 1 07/08/09 17:05 Page120
5 - Human and
environmental aspects
6 - Risk management
7 - Financial statements
8 - Additional information
5 Human and environmental
aspects
5.1 HUMAN RESOURCES
5.1.1 Staff members
5.1.2 Training
5.1.3 Employment matters
122
122
125
126
5.2 SUSTAINABLE DEVELOPMENT
128
5.3 FACILITIES PLANNING
130
5
Human and environmental aspects
5.1 Human resources
Crédit Foncier continues to pursue its policy of getting all
employees involved in the company's transformation.
A major three-year agreement on jobs and skills management was signed on April 3, 2008. This agreement covers,
but is not limited to, a definition of the company’s tools and
policy for managing future jobs and skills needs (GPEC) and
support for employees close to retirement, known as the
Retirement Incentive Scheme (DIEDRE). This latter scheme
gives employees born before December 31, 1951 (nearly
450 employees) the opportunity to retire at age 60 and
entails one replacement for every three departures. A little
over 300 employees have opted for this scheme, which will
help Crédit Foncier reach the appropriate staffing levels for
its business with its current configuration. In addition, pursuant to the Fillon law of August 20, 2003, the Autorité de
Contrôle des Assurances et des Mutuelles (ACAM) approved
on March 11, 2009 the transfer, to selected insurers including AXA, of reserves and provisions of the Caisse de
Retraite (pension fund) du Crédit Foncier de France (CRCFF)
that covers employees that entered into the fund before
March 1, 2000. This transfer occurred on March 31, 2009.
As a result, Crédit Foncier no longer has any net accounting
commitment under this scheme.
Furthermore, the common concern shared by Crédit
Foncier's employees and management to adapt labour
conventions to current economic realities resulted in an
agreement being signed on July 11, 2008, which effectively replaces the collective agreement of March 22, 1991.
Its provisions have been in force since August 1, 2008. It
supplements the agreement of the Association Française
des Banques (AFB) which has served as the general framework since the company acquired its status as a bank on
June 1, 2005.
Crédit Foncier also decided to promote promising young
employees by creating a special Crédit Foncier promotion
for the 2008-2009 period.
Finally, newly implemented social barometers have created a new dynamic for Crédit Foncier's human resources
(HR) policy. HR workshops conducted in partnership with
Managing Directors from different businesses have helped
determine the main courses of action to take by 2010.
5.1.1. Staff members
Policy in 2008
Transparent processes with immediate implementation:
• internal advancement favoured, financial support for
geographic relocation,
• prioritise current staff: company employees are solicited first for all vacancies. This has been facilitated by
using specific new tools (internal bidding for example).
Promoted employees are granted an adjustment period
during which they receive special attention: training,
mentoring, etc.,
• standardise career orientation interviews at least once
every five years. The goal of this interview is to determine the experience and skills acquired on the job and discuss the employee's career outlook. Training needs and
salaries are also discussed,
• remuneration: minimums that recognise job specificities according to the AFB classification system,
• accompanying newly promoted staff (change of category).
Outlook for 2009
The HR policy has been strengthened with new commitments to reflect the Company's changed positioning in
light of the financial crisis.
These commitments reflect to two of Crédit Foncier's
major ambitions:
• be an employer of choice: attract talent, retain
employees, develop a sense of pride of belonging to the
company,
5 - Human and
• encourage performance of each individual: a shared responsibility for schemes benefiting both the employee
and the company (win-win contracts) on different topics
such as career development, remuneration and management policy.
6 - Risk management
• standardised HR processes (recruitment, training,
contracts, etc.),
• systematic mentoring for new company hires,
• targeted partnerships with schools,
• establishment of a Managers Charter,
The new human resources policy was finalised in
November 2008 and its action plan was initiated
immediately.
Starting in December 2008, procedures were introduced
on Intranet to centralise job vacancies, as well as training
schemes to assist employees in job mobility.
In 2009, the newly reorganised Human Resources
Department will facilitate the implementation of a more
innovative HR policy. This policy focuses on commitment
to actions and more structured procedures and is monitored over the intranet via quarterly performance indicators.
• creation of a school dedicated to real estate,
• HR marketing (communication, more visible offers, etc.),
• job cartography (prospects for movement between different jobs),
• a new dynamic: adopt an active role towards the handicapped,
• promote teleworking arrangements,
• formalise career path committees by job sectors.
Staff
Actions to be undertaken in 2009 include:
• Annual Assessment Interviews (AAI) updated for specificities of each business sector and taking into account
the remuneration policy in light of labour commitments.
The programme starts in January 2009,
Movement in average staff numbers at Crédit Foncier
Average staff numbers
2006
2007
2008
4,023
3,914
3,643
Number of employees at December 31, 2008 *
- Men
- Women
including fixed-term contracts
3,451
1,363
2,088
98
Breakdown of employees by qualification structure
- Management
- Client executives, banking
1,783
1,668
Geographical breakdown of employees
- Paris - Charenton- Ile-de-France
- Laval
- Rest of France
2,329
105
1,017
Number of employees on leave of absence
135
Number of part-time employees
- Management
364
75 and 80%
other
96
229
8
31
104
260
* Figures from the 2008 employment report, including permanent contracts and fixed-term contracts with the company and seconded staffs
5
Breakdown of current staff numbers at the end of 2008: 3 451
Managers
Women
25%
Managers
Men
27%
3 451
Client
executives, banking
Men
12%
Client
executives, banking
Women
36%
Age pyramid at the end of 2008: current staff numbers 3,451
2,088 Women - 1,363 Men
392
55 and over
311
769
45 to 54
470
510
35 to 44
349
386
25 to 34
222
Women
Men
31
under 25
11
0
250
500
750
1000
5 - Human and
6 - Risk management
5.1.2. Training
Staff members frequently ask Crédit Foncier's training
department about the various ways they can get onto training programmes. In 2008, Crédit Foncier's professional
training department renewed its role as the "Centre for
Information and Counselling":
Parallel to this approach, Crédit Foncier continues to pursue the training activities outlined in its annual plan, in
terms of improving on-the-job skills and assisting
employees to meet the demands of their position and to
reinforce their personal development.
- receiving employees and listening to their needs,
In the coming months, Crédit Foncier will transform the
organisation of professional training for its staff. The
School of Real Estate Employment, which is in its early
planning stages, takes the "Centre for Information and
Counselling" idea once step further. The School will serve
as a stand-alone training centre, answering Crédit
Foncier's needs for diploma-qualifying training as well as
training for its different businesses.
- counselling for planned or potential training solutions,
- training that is best suited to staff needs and the company's organisation during the employee's absence
(Training Plan, individual training rights [DIF], individual
training leave [CIF]).
This approach to professional training gets both employer
and employee on board as joint-stakeholders in a training
project or a professional project whose outcomes (sometimes a degree, diploma or certificate) are necessarily
beneficial for both parties. The goal is to match the skills
needs of the company with the development needs of its
employees.
Percentage of payroll expenses devoted to training
Amount spent on training (in millions of euros)
Number of training hours
Number of trainees per category
- Management
Average duration of trainings (number of hours)
- Management
This merger between the current "training department" and
the future "training organisation" will optimise business
practices and staff skills by drawing on external as well as
internal expertise.
4.2%
7.8
70,846
2,137
1,169
968
35.15 h
30.74 h
5
5.1.3. Employment matters
Absenteeism
Average days of absence per employee
- Illness
- Maternity
- Workplace accident
- Authorised leave
Number of work and transit-related accidents
Number of occupational illnesses
Number of CHSCT meetings (committee on safety and working conditions)
10.8 days
5.1 days
0.4 day
1.4 day
46
None
53
Employment
Total hires
- Permanent
- Fixed-term contract
579
127
452
Total departures
- Permanent
- Fixed-term contract
877
384
493
Number of handicapped employees
Number of promotions*
- Management
81
225
150
75
* All changes of category.
Remuneration
Average monthly gross earnings (in euros)
- Unclassified
- Category J
- Category H
- Category E
- Category B
4,246
12,409
5,770
3,904
2,832
2,617
5 - Human and
6 - Risk management
Company expenditures for employee benefits
Total expenditures (in millions of euros)
- Transport
- Allotment to employees
- Works council and miscellaneous grants
10.4
1.1
2.7
6.6
Employee incentives and profit-sharing
€9,263,096
€4,795,090
- Total incentives in 2008
- Total profit-sharing in 2008
Changes in employee incentives and profit-sharing over the last five years
- Incentives
- Profit-sharing
2004
12.9
5.9
2005
13.0
3.4
2006
13.7
0.9
2007
6.8
4.9
2008
9.3
4.8
Staff relations and miscellaneous
Number of meetings with staff representatives
358
Cost to the Company for additional benefits (in millions of euros)
- Illness not covered by health insurance
- Maternity
- Workplace accidents
- Social security contributions and management
12.4
5.4
2.7
0.2
4.1
Official working week
Expenditures on workplace improvements (in millions of euros)
37h 35m
7.3
5
5.2 Sustainable Development
Sustainable development action plan
- promoting responsible marketing,
Crédit Foncier follows through on its commitment
to sustainable development
- modernising its role as a socially responsible banker.
In 2008, Crédit Foncier followed through on its commitment to develop in such a way that meets its current
needs without compromising the ability of future generations to meet theirs. This approach is part of the sustainable development approach being rolled out by Groupe
Caisse d’Epargne.
In April 2008, Crédit Foncier joined Bénéfices Futur, a
programme that Groupe Caisse d’Epargne launched in
2007 to place sustainable development at the heart of all
its banking activities. This programme is divided into four
main areas of action:
These efforts reaffirm Crédit Foncier's willingness to promote sustainable development.
The translation of Crédit Foncier's sustainable
development commitment into strategic and
operational specifics
The issue at the heart of Crédit Foncier's approach to sustainable development is to produce differently while
maintaining performance. This challenge has a strategic
and operational impact on policy preparation and deployment for all of Crédit Foncier's businesses.
- climate change prevention,
- promoting Socially Responsible Investment (SRI),
Strategic impact: policy deployment
ENVIRONMENT
SOCIAL
ECONOMY
Purchasing Policy
Hiring Policy
Innovation Approach
Real Estate Policy
Training and IT
Customer Relationship Management
Waste Policy
Workplace Conditions
Quality Assurance
Transport Policy
Governance
Product Range and Partnerships
Operational impact: some examples
ENVIRONMENT
Ratings for carbon offsetting, real estate inventory, procurement, staff travel and transport policy, direct and
manufactured waste management, staff cafeteria, compliance with standards, etc.
SOCIAL
Male/female staff balance, recruitment policy, retirement support, training, management of future jobs and skills
needs, workplace health, philanthropy, ratings, access to information, policy for the employment of handicapped people, etc.
ECONOMY
Business practices, innovation, specific products, information transparency, risk policy, labelling, anticipating
client needs, mediation, ethics, investor and shareholder activism, quality assurance, alerts, etc.
5 - Human and
6 - Risk management
Actions in 2008
In line with the course of action announced in 2007,
Crédit Foncier's 2008 sustainable development strategy
focused on the environment. Work was carried out to reduce its environmental impact, or ecological footprint.
As part of its efforts to stem global warming, Crédit Foncier
decided to quantify its greenhouse gas emissions. To do so,
it drew up a Bilan Carbone ® (carbon footprint) based on
ADEME standards, with help from Climat Mundi.
Crédit Foncier opted for a comprehensive carbon footprint
covering its direct and indirect greenhouse gas emissions
at its main offices as well as at all of its sales offices. This
report is based on data from 2007 and showed total emissions amounting to 45,000 tonnes of CO2 eq/year or
12 tonnes of CO2 eq/year per FTE. Crédit Foncier is committed to reducing its emissions by 3% by 2010. In order
to accomplish this goal, it will roll-out a carbon reduction
plan in 2009 with concrete measures for all businesses
and employees.
In addition to the carbon footprint report, Crédit Foncier
conducted energy audits at its main offices. Following
these audits, a decision was made to redefine its office
building policy in Ile-de-France:
- optimise the office space occupied at Charenton by
moving different activities to a single site,
- renegotiate its lease on the main site and earmark a
renovation budget to improve energy performance of the
building.
The company travel policy has been revamped to be more
respectful of the environment. CO2 emissions are now
required criteria when selecting company cars. In addition, the maximum fiscal category of a car qualifying for
reimbursement is limited to 7 fiscal horsepower (and that
is regarded an exceptionally high HP level).
In order to assess and justify compliance with its commitments, Crédit Foncier has put in place two indicators.
The tonne oil equivalent (toe) is used to measure quarterly
energy consumption at central sites such as sales offices.
The tonne of CO2 equivalents (T CO2-eq) has been chosen
as the measurement for the annual carbon footprint report.
The data miner manages these indicators, analyses results
and ensures their independence.
In 2008, Crédit Foncier demonstrated its commitment to
responsible banking. It proactively managed the economic crisis by offering exceptional measures to its customers facing financial difficulties.
In January, Crédit Foncier capped interest rates between
5.75% and 6.5% (depending on the type of loan and the
index used in the contract). These measures were indiscriminately granted to 150,000 customers whom had taken
out a variable-rate loan regardless of whether or not they
were affected by the crisis.
By October, Crédit Foncier was the first bank to announce
concrete measures for bridging loans. It offered to
extend, for up to six months, the loan terms of customers
who were having difficulties reselling their property due to
the crisis. This measure was put in place on October 30,
2008 for "customers whose bridging loan matures in three
months and at a preferential rate corresponding to the
current legal rate (currently 3.9%)".
In November, Crédit Foncier added to its collection of
information (aimed at education rather than marketing)
with the "Financing my home" guidebook and its corresponding website. This guide is an educational tool designed to help people make decisions: it gives readers the
keys to understanding how a mortgage loan works and in
particular, in light of current events, how a variable-rate
loan works.
5
In 2008, Crédit Foncier did not shy away from its traditional role of monitoring and participating in public
debates: it actively engaged the government in discussions about the eco-loan and the green PTZ.
Keen to reduce its ecological footprint, compliance
with the "Facteur 4"23 initiative was the backbone of
the action plan in 2008.
In 2009, Crédit Foncier intends to strengthen its social
and public role. Training and staff awareness about
sustainable development, increased philanthropy and
its "handicap policy" are but a few of the challenges
Crédit Foncier is committed to tackling.
(Groupe Caisse d’Epargne’s commitment
to sustainable development)
5.3 Facilities planning
both in connection with the office consolidation plan or
investment property management.
In 2008, the primary focus of Facilities Department was
to actively work towards complying with the guidelines set
forth in the 2008-2012 plan. The goal of this plan is to
optimise Crédit Foncier's overhead costs, while allowing
all employees to carry out their duties in the most efficient, flexible, and relaxed environment possible.
In terms of logistics, a new interior layout charter was put
in place to optimise the use of office space. As a result,
1,875 staff members were relocated this year. Furthermore,
a new vehicle leasing policy was implemented to both reduce costs and CO2 emissions in connection with sustainable
development undertakings.
Under this plan, new offices have been opened or transferred, either abroad (Brussels, Tokyo, etc.) or in France.
The office and regional sales department renovation and
consolidation programme continued while new Partner
Financing Departments (DIFI) were being created in
Marseille and Lyon.
A multi-technology contract has been in place since April
1, 2008 to optimise maintenance at all the offices in the
Ile-de-France region.
Finally, the new "MEGASTORE" concept for the building
located at 43 Capucines reached another milestone on
October 20, 2008 with the filing of building permits.
As far as real estate management is concerned, acquisitions and commercial title or leasehold disposals were carried out throughout 2008 in collaboration with KEOPS,
(23) Commitment made by France after the Grenelle Environmental Forum to reduce its greenhouse gas emissions by a factor of four by 2050, from 1990 levels.
5 - Human and
6
6 - Risk management
Risk management
1 GENERAL ORGANISATION: INFORMATION CONCERNING RISK MANAGEMENT
2 SCOPE OF APPLICATION
3 INTERNAL CAPITAL ADEQUACY AND EQUITY REQUIREMENTS
4 MANAGEMENT OF CREDIT AND COUNTERPARTY RISKS
5 RISK MITIGATION TECHNIQUES
6 SECURITISATIONS
7 G7 REPORTING
8 MARKET RISK
9 ASSET & LIABILITY MANAGEMENT RISK
10 SHARE RISK
11 OPERATIONAL RISK
12 INTERMEDIATION RISK
13 SETTLEMENT RISK
14 NON-COMPLIANCE RISK
15 OTHER RISKS
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An important feature of the 2008 financial year is the application of the new Basel agreement, stipulating, in Pilier 3,
new requirements for risk transparency. In its desire for clarity and coherence, Crédit Foncier has chosen to unify the
information provided under the requirements of IFRS 7 and Pilier 3 of Basel II.The information on risk management
required by IFRS 7, Section IX of the decree of 20 February 2007 (Basel II) and information concerning capital required by amendment IAS 1, form an integral part of the financial statements certified by the Statutory Auditors (with the
exception of information indicated as "unaudited").
6
Risk management
1 - GENERAL ORGANISATION: INFORMATION CONCERNING RISK MANAGEMENT
1.1
1.2
1.3
1.4
1.5
General risks of the Crédit Foncier group
Missions entrusted to the Risk and Compliance Departments
Organisation of the Risk and Compliance functions
Information system and quality of Crédit Foncier group data
Key events 2008
2 - SCOPE OF APPLICATION
2.1 Scope of financial statements consolidation and of prudential consolidation (Basel)
2.2 Scope of application within Crédit Foncier
3 - INTERNAL CAPITAL ADEQUACY AND EQUITY REQUIREMENTS
3.1
3.2
3.3
3.4
Capital management
Composition of prudential capital
Capital requirements
Management of regulatory ratios
4 - MANAGEMENT OF CREDIT AND COUNTERPARTY RISKS
4.1
4.2
4.3
4.4
Summary of procedures and methods
Breakdown of commitments at December 31, 2008
Diversification of risks and concentration risk
Comments on commitments at December 31, 2008
5 - RISK MITIGATION TECHNIQUES
5.1
5.2
5.3
5.4
Valuation and management of collateral instruments
Insurers
Effect of credit risk mitigation techniques
Balance sheet and off-balance sheet netting
6 - SECURITISATIONS
6.1 Objectives, activities and level of involvement
6.2 Approaches and external credit ratings
6.3 Crédit Foncier group's exposures to securitisation transactions
7 - G7 REPORTING
7.1
7.2
7.3
7.4
7.5
7.6
7.7
CDO and exposures to monoline insurers and other credit enhancers
Exposures to commercial mortgage-backed securities (CMBS)
Other subprime and Alt-A exposures (RMBS, loans, etc.)
Special purpose entities (SPE)
Leveraged buyouts (LBO)
Other major risk exposures (Lehman Brothers, Madoff)
Securitisation glossary
8 - MARKET RISK
8.1 Capital requirements for market risk
8.2 Interest rate, liquidity and foreign exchange risk measurement systems and limits
8.3 Special case for the trading portfolio
134
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144
147
151
151
151
151
151
152
154
156
157
157
167
184
186
193
193
194
195
197
198
198
199
199
207
207
209
212
212
215
217
217
218
218
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219
5 - Human and
6 - Risk management
9 - ASSET & LIABILITY MANAGEMENT RISK
221
9.1 Organisation of ALM risk monitoring
9.2 Methodology used by Crédit Foncier for assessing liquidity,
interest rate and exchange rate risks
9.3 Liquidity risk monitoring
9.4 Overall interest-rate risk oversight
9.5 Foreign exchange risk monitoring
9.6 Medium/long-term portfolio management (MLT)
221
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226
228
229
10 - SHARE RISK
230
10.1
10.2
10.3
10.4
230
230
231
231
Investment approaches and procedures
Objectives
Accounting techniques and valuation method
Entity exposure
11 - OPERATIONAL RISK
233
General approach
Governance
Management environment
233
233
233
12 - INTERMEDIATION RISK
235
Trading on behalf of third parties
Proprietary trading (according to the definition of investment services by the AMF)
235
235
13 - SETTLEMENT RISK
236
14 - NON-COMPLIANCE RISK
237
Non-compliance risk monitoring and measurement
Non-compliance risk identification and monitoring
Non-compliance risk control
Investment service compliance
Malfunction monitoring
Training
Approval of new products or services
Ethics – Market abuse – Conflicts of interest
Prevention of money laundering and terrorist financing
15 - OTHER RISKS
Insurance
Outsourced operations
IT Risks
Organisation of business continuity plans (BCP)
Legal risks
Caisse de Retraite (pension fund) of Crédit Foncier
for employees who entered employment before March 1, 2000
237
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237
237
237
238
238
239
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241
241
241
242
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6
Risk management
1 - General organisation: Information concerning risk management
1.1 - General risks of
the Crédit Foncier group
Crédit Foncier is potentially exposed to three main types
of risk:
• credit and counterparty risk;
• liquidity and interest rate risk (Asset and Liability
Management Risk);
• operational risks inherent in its business given the
diversity of its credit distribution and financing operations as well as the size of its gross exposure to on and
off-balance sheet items (hedging,etc.), corresponding to
its business model.
1.1.1 - Credit risks
Credit risk on customer lending mainly corresponds to the
risk of a deterioration in the financial situation of the borrower or of a default that could result in non-repayment of
a part of the capital and interest on a loan.
The credit risk profile (low risk) of the Crédit Foncier group
is based, at one and the same time, on:
• the intrinsic quality of its customers: the public sector
in France and abroad and retail banking (private individuals),
• the robustness of its lending policy based on both
expert systems and procedures and on a more and more
sophisticated scoring system,
In contrast, Crédit Foncier does not really conduct any
financial market business for its own account and does
not therefore directly assume any financial market risk on
its ordinary transactions other than ALM.
• the nature of its financings (asset-backed financing in
general, no opening of credit facilities or lines),
The general business orientation of the establishment has
been described and formalised in the "Risk Policy" memorandum which represents the reference framework in
terms of selection, monitoring, surveillance and management of risks. Its main purpose is to enable development
across all business lines and entities of the Crédit Foncier
group, in a context that provides a secure environment for
profitability and equity capital.
Individual sector customers
In this respect, it serves as a bridge between the strategic
directions set by executive management, the business
development plan and resulting equity allocations, as well
as commitment rules reflecting the risk profile decided on.
The recent international diversification of the Group (purchases of foreign debt, financing of transactions in the
international public sector, extension of lending to individuals abroad) are all part of a model based on mortgage
and public sector financing.
This model is based on solid guarantees and therefore has
a structurally low level of risk.
• the extent and diversity of its security coverage.
Crédit Foncier is a long-standing protagonist in the mortgage lending market for individuals, and in particular for
customers entitled to social housing benefits, through the
distribution of regulated loans (interest-free loans, social
loans – Prêt à l'Accession Sociale [PAS] – with a guarantee from the French Public entity ."Fonds de Garantie à
l'Accession Sociale à la propriété" [FGAS]).
The financing of housing projects for individuals has widened over recent years, in particular since the merger with
Entenial, and now comprises all types of customer, looking
to buy either new or existing properties, for owner occupancy or for rental investment, via a comprehensive range of
products (fixed-rate loans, controlled variable-rate and/or
capped loans, repayment or interest-only loans as well as
loans with specific terms), backed by collateral (mortgages).
More than 90% of outstandings loans are secured by a
mortgage guarantee, and sometimes also a counter-guarantee (e.g. FGAS). The remainder are secured by a Saccef or
Crédit Logement guarantee, or other type of mutual insurance security.
In 2008, Crédit Foncier offered customers that had taken
out variable-rate loans, a rate cap designed to strengthen
5 - Human and
6 - Risk management
pre-existing security mechanisms (see Section 4). A new
range of variable-rate loans was launched, incorporating
set periods of various durations at fixed rates.
Operating in France through direct financing, Crédit
Foncier has diversified internationally mainly by purchasing debt securities (prime A) in the form of FOC (titrisation), whose underlying assets are mortgages to individuals, thereby securing international transactions.
Public sector customers
The Crédit Foncier group finances the French Public sector, consisting of local authorities and institutions in
France including healthcare facilities and social housing
institutions.
This business has grown since the French public sector business portfolios were transferred from the Group, in particular Ixis in 2007, for which the Caisse Nationale des Caisses
d'Epargne granted a €5.1 billion guarantee in favour of the
Crédit Foncier group.
The Dynamic Debt Management activity (G2D) that accompanied this development has been introduced in a cautious
and restricted manner, in full compliance with the principles
of prior disclosure for customers and based on a selection of
traditional products (including systematic possibility of a
fixed-rate for the loans offered).
The credit risk on these customers is low. For social housing,
Crédit Foncier benefits from guarantees by local authorities
or, at the very least, for transactions not covered by a local
authority guarantee, from a mortgage.
Crédit Foncier and Groupe Caisse d’Epargne are considering reorganising the local authority business; the solution
envisaged involves making Crédit Foncier the management
and refinancing arm (via its subsidiary, Compagnie de
Financement Foncier) for the regional Caisses d’Epargne
operating in this sector.
Crédit Foncier also operates internationally through the origination of direct loans and purchases of securities or loans
to International Public sector customers. This business has
developed gradually since 2005 with support from GCE and
as an extension of the domestic business. Its target customers are often sovereign counterparties directly or in their
role as guarantors to foreign local authorities.
Private sector corporate customers
(Companies & Investors)
Crédit Foncier finances several types of private sector
businesses:
• Real estate development, housing developments and, to
a lesser extent, property dealers, via short-term loans or
off-balance sheet undertakings.
• Real estate leasing transactions (REL). Financing professional real estate assets (for business users of financed assets, investors) in the form of loans or off-balance sheet commitments, where Crédit Foncier benefits
from an intrinsic guarantee.
• Since 2007, Public-Private Partnerships (PPP), where
Crédit Foncier usually provides specialised financing
characterised by a revenue stream from the transaction
as well as control over the financed assets.
Given developments in the economy, special attention was
paid to this activity in 2008 and loan selection criteria
and risk monitoring were consequently reinforced (detailed risk indicators by segment, etc.).
Crédit Foncier is currently exploring the possibility of a
controlled development of these activities abroad. For
that purpose, after setting up a dedicated team in 2008,
Crédit Foncier is now updating its risk policy based on a
prudent approach.
The Corporate business as a whole only represents a small
fraction of Crédit Foncier’s activities (about 8% of total
assets).
Interbank counterparties
Given the structure of its activities and its refinancing
needs, Crédit Foncier manages a significant volume of
6
Risk management
exposures to banks on an ongoing basis; most of these
exposures are the result of hedging requirements related
to its various activities (swap derivatives in particular) or
investment of its cash holdings (as a result of issues, or
ECB refinancing since 2008). These transactions concern
very high gross volumes (nominal) but ultimately very low
net amounts because of the impact of offsetting (about
€10 billion at end 2008); it should be noted that the transactions are accompanied by hedging mechanisms with
almost systematic collateralisation, in full compliance
with the highest standards of the profession.
A significant part of these banking transactions representing the net balance is also guaranteed by sovereign or
semi-sovereign signatures.
1.1.2 - Financial risks (ALM)
Crédit Foncier assumes practically no financial risk on its
own account. Transactions that could be assimilated to
own account risks correspond exclusively to isolated open
positions resulting from previous hedging transactions for
which the underlying asset has been unwound.
Crédit Foncier is however subject to balance sheet risk in
the form of liquidity, interest rate or currency risk. These
risks are managed by the ALM Department and, for shortterm liquidity, by the Group Financial Transactions
Department. Significant liquidity constraints in financial
markets was a major factor in 2008. In spite of this
context, Crédit Foncier was able to complete an issue programme of more than €8.5 billion; in addition, Crédit
Foncier has significant reserves that can be refinanced by
the ECB (€62.1 billion), a fraction of which has already
been refinanced (about €6.9 billion at end 2008).
Currency and interest rate risk is controlled by a policy of
systematically hedging production; residual risk is contained by the ALM Committee with the aim of preserving the
net interest margin.
Sections 8 & 9 provide details on these risks.
1.1.3 - Operational risks
Operational risk is inherent in banking activities. It is defined as the risk of loss resulting from an unsuitability or a
breakdown that can be imputed to procedures, or to staff
and internal systems or to external events, including events
with a low probability of occurrence, but a high risk of loss.
While legal risk is considered part of operational risk, strategic and reputation risk are not.
Crédit Foncier has an operational risk management system
deployed throughout its group. It is governed by the rules
applicable to Groupe Caisse d'Epargne and is organised on
the basis of four pillars (a network of correspondents, a risk
mapping system, an incident reporting and management
system, and a set of internal and external report systems).
Section 11 provides further information on monitoring of
operational risks.
1.1.4 - Other risks
The other risks inherent in the Crédit Foncier group’s businesses are as follows:
• Intermediation risk (see Section 12).
• Settlement and settlement-delivery risks (see Section 13).
• Non-compliance Risk (see Section 14).
• Other risks including insurance, information technology,
legal, etc. (see Chapter 15).
5 - Human and
6 - Risk management
1.2 - Missions entrusted to the Risk
and Compliance Departments
The Risk Department (RD) and the Compliance and
Ongoing Control Department (COCD) carry out their missions under the authority of the chief executive of Crédit
Foncier respecting principles laid down in regulatory texts,
in particular CRBF Regulation 97-02 as amended.
The missions of the RD are twofold:
• Define and implement monitoring and risk control measures within the area of risk as defined in CRBF
Regulation 97-02 as amended.
• Develop and integrate into risk monitoring and control procedures, the new requirements of Basel II as transcribed
in the European Directive and French application texts.
The tasks of the COCD complement those of the RD with
regard to the scope of operational risks on the one hand and
the implementation of risk management procedures and
ongoing controls on the other: operational and Level 1
controls for business lines and Level 2 controls for support
functions. The tasks of the COCD focus more particularly on
the risk of non-compliance as defined in CRBF Regulation
97-02 as amended.
Risk and compliance are monitored by two bodies under
the authority of Executive Officers : the Risk Committee,
the umbrella committee responsible for measuring and
monitoring risks, and the Internal Control Committee
which deals with internal control procedures and operational risk management.
1.2.1 - Missions of the Risk Department
While primary responsibility for risk lies with the business
lines that generate it, the Risk Department has responsibility for ensuring that risks taken by the group are compatible with the Risk Policy as well as with profitability
and credit rating objectives.
The Risk Department is involved at every stage of risktaking and monitoring:
• Analysis and monitoring of all risks: credit and counterparty risk, market and financial risks, operational risks,
overall interest-rate risks resulting from asset-liability
management, currency risk, liquidity/transformation risk
and settlement risk.
• Control and monitoring of risks as defined by CRBF regulations and the Basel Committee, including ex-ante
contre-expertise and the ex-post analysis and control of
risk, as well as implementation of Basel II and ongoing
monitoring to ensure that procedures have been correctly
applied.
• Management, monitoring and control of risks, essentially through the Risk Committee and Commitment
Committees for which the RD provides organisational
and secretarial services. The RD is also involved in the
work of other committees which deal with risk issues,
such as the Litigation Committee (sensitive transactions), the ALM Committee, the Finance Committee,
etc. (see below).
The RD is positioned within the organisation in such a way
as to ensure it is independent from operational activities
that generate banking income.
The RD continued its redeployment and strengthening
throughout 2008, taking on board all issues related to the
Basel II environment. With a staff of approximately 64, it
covers the following three areas:
• Contre-analysis and monitoring of commitments using a
specialised section for each business line to ensure close
links with commitment sectors: Individual, Corporate and
Public, International Corporate and Public and banking
transactions.
• Risk consolidation and control, ensuring in particular risk
reporting and collection monitoring.
• Implementation of standards, risk policy and risk management including the monitoring of equity capital and balance sheet risks.
6
Risk management
These measures were completed by setting up an integrated
unit responsible for ongoing controls and operational risks.
The following actions were taken in 2008:
• Formalisation of a comprehensive risk policy for 2008.
• Updating of a committee structure to ensure consistency
with the new governance and Group standards.
• Consolidation of risk centralisation tools, integrating subsidiaries and improving reporting.
The Compliance Department also ensures functional
management of the controllers of compliance and ongoing
control that report to operational departments. In this respect, it continued to strengthen its control procedures in
operational departments throughout 2008.
Its activities are the subject of regular reports to executive
management, the Internal Control Committee, the Audit
Committee and the central entity.
• Compliance with regulations concerning the organisation
of activities, in particular via process mapping and the
drawing up of procedures that are revised yearly.
1.3 - Organisation of the Risk
and Compliance functions
• Development of appropriate tools for measuring and
monitoring capital and creation of an Equity Committee
effective early 2009.
1.3.1 - The Risk Department of Groupe Caisse d’Epargne
1.2.2 - Missions of the Compliance Department
The compliance and control measures are an integral part
of the ongoing controls initiated by the Consultative
Committee on Legislation and Financial Regulations,
comprising all resources deployed by the Group to ensure
the respect of legislation and regulations, rules of professional ethics and good conduct , as well as Group rules.
Reporting to the Chief Executive Officer, the Compliance
and on-going control Department follows application procedures drawn up on the basis of guidelines set forth by
the Compliance/Security Department of Groupe Caisse
d’Epargne. In this context, it is responsible for organising
and monitoring level 1 and 2 controls concerning risks of
non-compliance and general business risks; it is also responsible for specific controls regarding compliance of
investment departments, general business ethics and
money laundering and terrorist financing prevention.
Risk, compliance and ongoing control functions at GCE
comprise the Group Risk Department (GRD), Group
Compliance and Security Department (GCSD), and the
Risk Departments (RD) and Compliance/ongoing control
Departments (CD) of Group entities (Caisses d’Epargne
and subsidiaries) of the Groupe Caisse d’Epargne.
The GRD’s mission is to develop a coordinated policy for
risk control in Groupe Caisse d'Epargne (CNCE, Caisses
régionales, specialised subsidiaries) under the authority of
the Chairman of the CNCE. It ensures, in particular, that
risk-taking is appropriate to the financial resources, human
resources and systems of the entities, and with the Group's
profitability and credit rating objectives. It therefore has
authority on the subject over all entities and business lines
of Groupe Caisse d’Epargne. It ensures that limit allocations are made, first and foremost, on the basis of business
development requirements, and to the leading entities in
each type of activity.
The GRD ensures, in terms of risk, that the entities making
up the Group comply with regulatory obligations and that
their organisational structures (independence, size,
resources, etc.) are adequate to the task. It is the main liaison channel with the French regulatory banking authority
(La Commission Bancaire) on risk matters.
5 - Human and
6 - Risk management
It ensures a consolidated vision and a control over the
totality of Group risks, with the level of detail and frequency it deems appropriate for the proper management of
risks and on the basis of the common methodologies that
it has approved.
The main tasks and responsibilities of the GRD are as
follows:
• Making proposals to the CNCE Executive Board for the
allocation of overall limits (for credit, market, etc.) to
entities and business lines in accordance with Group
risk policy.
• Establishing a system of committees and delegations
approved by the CNCE Executive Board.
• Managing Group risk committees.
• Ensuring that limits are respected by entities and monitoring possible overruns.
• Validating internal rating methodologies and calculating
every type of risk involved in tools deployed within the
Group.
• Defining standards governing the organisation and functioning of risk control as well as risk processing and
supervision.
• Ongoing controls to ensure that the above risk standards
are applied by entities.
Lastly, the GRD is responsible for preparing consolidated
reports on credit, market and operational risks for the
governing bodies of GCE and supervisory authorities.
Governance and Committees
The GRD monitors and controls risks through a number of
committees, for which it provides management services:
• The Group Credit Committees: large counterparties and
Group SME Credits, which analyse commitments in
excess of entity authorisations and decide on maximum
authorisations (at least twice a month).
• Group Watch List and Doubtful Loans/Provisions Committees (quarterly). The Watch List Committee's mission is
to monitor, on a quarterly basis, sensitive commitments
with major counterparties which can give rise to the
constitution of provisions.
• Group Financial Market Risk and Funds (UCITS) Risk
Committees (monthly).
• Group Operational Risk Committees (quarterly).
• New Products and New Financial Activities Committees
(monthly).
1.3.2 - Crédit Foncier Risk Department
The Crédit Foncier Risk Department monitors all types of
risk: credit, counterparty, market and financial, overall
interest rate and currency, liquidity, and settlement and
delivery risk. It provides ex-ante analysis in the framework
of delegations as well as ex-post analysis and control of
risks. Its scope of authority covers all subsidiaries (for
which it approves appointments of Risk Managers)
controlled by Crédit Foncier.
In addition, as a real estate specialist, the Crédit Foncier
Risk Department provides specific expertise on risk
methodologies and analysis for market segments within its
jurisdiction, under the authority of the Group Risk
Department.
The Crédit Foncier Risk Department reports to the Group
Risk Department (GRD) in the same way as other subsidiaries and the Caisses d'Epargne.
• The Group Risk Committee, which determines the overall framework governing risk issues, their measurement
and tracking (monthly).
6
Risk management
Key tasks of committees responsible
for risk management
It is the permanent contact point for the GRD and is responsible for applying national procedures and projects,
initiated by the GRD, within the entity.
The RD manages,monitors and controls risks through a
number of committees, which it organises and/or participates in. The principles of risk governance were determined in early 2008. The Risk Committee is the umbrella
committee and with the Internal Control Committee (ICC),
covers all risks.
In 2008, the RD formalised the general risk policy of
Crédit Foncier in a document which describes its various
missions and organisation; the department supervises
business development and management of equity capital.
Links between committees
Crédit Foncier group
Risk Committee
Equity Committee
• Includes Operational Risks
and Compliance Committee
New Products
Approval Committee
• Supervision of equity capital
• Basel II Pillars (1,2,3)
• Accounting/risk consistencymanagement control
• Financial reporting
Equity Investment
Committee
Internal Control
Committee
• Main risk committee
• Defines risk policy (including
counterparty limits)
and main ALM risk principles
• Supervises correct execution
National Commitments
Committee
• Applies commitment policy
ex-ante based on
the delegation system
Individual Commitments
Committee
Comefi
Security Committee
• Defines bank
counterparty limits
Commitee for the Business
Continuity Plan (BCP)
National Sensitive
operations Committee
Asset & Liability
Management Committee
• Monitors recovery of sensitive
files until provisions or loss
Business Line Sensitive
Operations Committees
• Implements orientations
dictated by the risk policy
• Deals with interest rate,
liquidity and foreign
echange risks
Interest rate Committee
(Business line
committees acting within
delegated authorities)
Social Housing/
SPT Committee
DEI* Commitments
Committee
DOF** Commitments
Committee
* Private Corporate Customers
** Financial Transactions
Liquidity Crisis
Committee
Finance Committee
Loan Conditions Committee
Assets/
liabilities
5 - Human and
6 - Risk management
The Risk Committee is chaired by the Chief Executive
Officer. Meeting quarterly, its main tasks, from a consolidated accounting standpoint, are to:
• Manage overall risk policy.
• Committees which approve new products and services
(loans to customers) and new financial products (markets/financial transactions), as well as the Equity
Committee.
• Review limits for all activities and monitor compliance.
Note that for banking counterparties, a review of limits
is carried out on a monthly basis by a specific committee, the Coméfi.
Risk policy highlights in 2008
• Analyse and monitor the general risk profile of the
group, based on scoring systems, risk measurement
and evaluation systems (stress scenarios, etc.) and
major exposures.
• Distinguish commitment selection principles from the
detailed rules contained in separate commitment
guides broken down by business line and approved by
the RD.
• Measure the quality of commitments and recoveries on
the basis of summary reports.
• Ensure that these principles are consistent with the risk
profile sought.
• Verify that the various risk procedures and systems are
correctly applied.
• Emphasise more clearly the supervision function of the
RD vis-à-vis business lines and finance.
• Manage risk: review prudential ratios, development
and analysis of stress scenarios and monitoring of
equity capital.
• Complete the list of indicators for close monitoring of
business activities, in particular Corporate customers.
Several other committees, which the risk department participates in or provides secretarial services for, contribute
to the management and monitoring of risk-taking.
These include in particular:
• National Commitment Committees and Business Line
Commitment Committees which take decisions within
their respective authorisation levels on the basis of the
delegation system.
The formalisation of risk policy in 2008 enabled the
group to:
• Establish a link between the risk profile of various sectors and transactions with pricing policy (integration of
cost of risk in ROE under Basel II).
In terms of financial risk, in 2008, the RD put in place a
dedicated expert unit to ensure that it could fulfil its secondlevel control function as required under the new financial
control charter: control of new commitments and portfolios,
(monitoring of financial compartments, indicators and ALM
limits), control of the valuation of transactions.
• National and Business Line Sensitive Operations
Committees for decisions on the treatment and provisioning of transactions in litigation.
Commitment selection and monitoring system
• Committees dealing more specifically with financial risks
(ALM Committee, Interest rate Committee, Finance
Committee, Liquidity Crisis Committee).
• A procedure for assessing the creditworthiness of borrowers and the quality of transactions. Scoring plays an
important role in risk assessment.
Commitment selection and monitoring is based on four
pillars:
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Risk management
• A counter analysis by a department (Business line or
RD) independent from the business activity.
• Limits set by the Crédit Foncier group and by GCE for
common counterparties.
• Risk monitoring based on an overall consolidation of
detailed indicators and controls.
The various commitment committees are responsible for
authorising the commitments of Crédit Foncier and its
subsidiaries within the limits they have been assigned.
They decide on whether credit risk should be assumed for
a counterparty or group of counterparties, based on the
delegation system of the establishment, the limits applicable to the entity and its current risk policy. All of the
Crédit Foncier group’s commitment committees function
on the basis of the following principles:
• The presence of a majority of voting members is required for any decision.
• The Chairman, a Board Director in the case of the
National Committee, has the power to take decisions,
except in the event of an unfavourable opinion by all
other participants with voting rights. In this case, the
Chairman is bound by the opinions of the rest of the
committee and cannot approve the file.
• The opinion of the Risk Department is independent of
the assessment process: the RD has a right of appeal to
the National Committee with regard to Business Line or
commitment committees in the subsidiaries.
During a first stage, credit files are analysed by the operating entities of the various Business Lines (Individual and
Corporate) and are then re-examined by a specialised,
independent unit.
This re-examination is carried out under the sole responsibility of the Risk Department for all financing requests that
require a decision by a national or business line commitment committee. In 2008, it was made systematic for all
such files, with the exception of transactions involving
individual customers and small amounts, where an automated risk selection procedure (scoring/expert system),
adapted to the volume and type of the transaction, is used.
Compliance with the risk policy and commitment rules,
correct segmentation and scoring of counterparties and
transactions, as well as the risk-adjusted profitability of
transactions are systematically examined.
Individual sector
For individual customers, the mechanism for assessing
the creditworthiness of a borrower is based on a scoring
system designed to assist decision-making, in particular
through a delegation system. The scoring is based on eligibility rules that vary by type of clientele and financing,
as well as a predictive default score based on the historical records of the Crédit Foncier group. Revised in early
2007, the system covers nearly all loans to individual customers and takes into account the specifics of projects,
the financing requirements and the customer profile. It is
supplemented by a counter analysis (see below) carried
out on a case-by-case basis if the score or the amount of
the loan requires it.
An additional rating system was introduced in July in
connection with Basel II; it is designed to facilitate an
understanding of how risk on loans is likely to evolve over
time.
French Private and Public sector
The assessment of a borrower's creditworthiness is based
firstly on the business line's analysis of the counterparty
and secondly on a scoring system.
For private sector customers, the delegation scheme
does not include any individual delegations. All credit
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6 - Risk management
requests are submitted for approval by the various levels
of committees depending on the amounts to be committed (see above).
For public sector customers (local authorities, local institutions, etc.), the delegation scheme provides for a certain
number of individual delegations at various levels subject
to specific conditions related to the type of counterparty
(major accounts and other accounts) and/or the type of
facility, the amount of new commitment, existing exposure and score. Requests that do not fall into any of these
delegation levels are reviewed by committees.
International Private and Public sector
The commitment process corresponds to that of Groupe
Caisse d’Epargne. The decision-making process has to
address several key principles:
• The transaction must fall within country limits, as determined by GCE.
• Prior authorisation is required (existence of an available
limit or specific committee authorisation) for any transaction involving a counterparty risk.
• Transactions under the authority of international corporate production or other investment related transactions
that are held to maturity are subject to a dual analysis
(Business line and Risk Management). The decisionmaking level is determined according to the type of
transaction, amounts and scores. Beyond a certain size,
CNCE gives its opinion on the transaction. The risk/yield
balance is one of the criteria used in selecting a commitment.
• Prior approval from the New Products Committee is
required for any transaction with new characteristics.
The risk monitoring system
for business lines and subsidiaries
The Risk Department of Crédit Foncier consolidates risks
for the whole of the Crédit Foncier group and provides
consolidated information to the Banque de France.
Quarterly reporting on the activities and risks assumed by
subsidiaries is provided by the Risk Committee. Specific
business indicators for each business line or subsidiary
will be finalised in stages over the first half of 2009.
The RD also supervises the risks of subsidiaries (Socfim,
Locindus, Cicobail, Picardie Bail and CFCAL in particular)
and assists them in establishing their risk control and
monitoring procedures, validates methods used for risk
selection and ensures that Crédit Foncier standards are
respected. Subsidiaries, specialised in a particular type of
activity, are monitored by the business line they report to
(Socfim, Locindus, Cicobail and Picardie Bail report to the
Corporate and Institutional business line; CFCAL, Banco
Primus and the Belgian branch to the Individual business
line). As an illustration, the limit system for counterparties
within the Crédit Foncier group does not depend on the
entity concerned but rather the business line and sector.
Subsidiaries are classified into two groups:
• Those with their own risk committees or other committees dealing with risk and having the necessary
resources (Socfim, CFCAL and Banco Primus). Charters
of incorporation have been put in place in these subsidiaries, providing local interpretation of the Crédit
Foncier risk policy and defining the conditions for the
exchange and centralisation of information. This work
will be extended to Banco Primus in 2009. Certain specifics may need to be taken into account, given the
business activity and history of relations with the Crédit
Foncier group.
• Those with no independent resources and which rely on
Crédit Foncier to provide essential services via contractual service agreements: Compagnie de Financement
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Risk management
Foncier and leasing subsidiaries. Given its size and
independent listing, Compagnie de Financement
Foncier is monitored independently and has a specific
Risk Committee and ALM Committee.
1.3.3 - Compliance and Ongoing Control Department
The Compliance and Ongoing Control Departments of the
various entities respect the guiding principles and organisational structure defined by the GCSD. They interpret
and apply operating standards defined by this latter
department. They cover the scope of application covered
by GCSD in the entities.
1.4 - Information system and quality
of Crédit Foncier group data
1.4.1 – Scope and nature of systems of declaration,
centralisation and measurement of risks
(CNCE national system)
The system for declaring and measuring credit risk is
based on the use of two tools: consolidation of exposures
and monitoring of limits, and calculation of weighted
assets for the purpose of calculating credit risk for the solvency ratio. Both tools rely on the national reference base
for third parties and scores that incorporates all the administrative features and risks of third parties.
The exposure and limit monitoring consolidation tool is
operational throughout GCE (CNCE, Caisses d’Epargne
and subsidiaries). It covers all counterparties and products that generate credit risk. The tool is updated each
month for all counterparties and on a weekly basis for all
counterparties, with the exception of retail banking exposures. Information fed into the tool is as detailed as possible and is extracted at contract level. In order to ensure
continuing improvements to data quality, efforts to impro-
ve reliability have been pursued for the whole system, in
particular with regard to information received from subsidiaries.
This tool allows exposures and limits to be measured and
monitored as well as distributions and concentrations of
exposure on the basis of various risk parameters such as
the nature of the counterparty, the scoring, the country or
geographical area, the sector of activity, etc.
The information available in the tool can be accessed
through an intranet portal and is also be presented in the
form of standardised reports that can be updated when
new data is available.
The system is complemented by a national risk indicator
system designed to make it possible, at the entity level, to
calculate the cost and burden of risk.
The calculation of weighted assets for credit risk purposes
is carried out on a quarterly basis, at contract level. The
Group calculation of weighted assets for credit risk purposes for the production of Corep occurs at the level of the
GCE, but only data from the Group local banks and CNCE
is taken into account in calculating demands on the equity capital of the Group. Crédit Foncier plans to join this
scheme in 2009 for Individual and Securitisation asset
classes. In the meantime, Corep production is provided
locally on a quarterly basis by the Accounting Department,
in conjunction with the Risk Department.
The reporting and measurement of market risk system
relies on the tool for calculating parametric Value at Risk
(VaR) with a confidence interval of 99% for a 1 day horizon. VaR calculations are carried out daily for all own
account commercial banking activities (CNCE, Caisses
d’Epargne and subsidiaries) and the Investment Bank.
Throughout the Group and therefore also in Crédit Foncier,
the VaR calculation process is based on the Scénarisk system developed by Natixis. An indicative calculation of VaR
is also carried out daily for transactions involving medium
and long-term investment portfolios in Group entities.
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1.4.2 - Accounting consistency of risk data
Principle
In the context of implementing Basel II reforms, GCE entities have to ensure that all information provided to Group
regulated production systems have been subjected to a
procedure to ensure accounting consistency. A national
system has been established for this purpose. The rules
require two levels of quarterly controls: C1A and C1C. The
first, C1A, is a local verification of Crédit Foncier management data and accounting data prior to it being sent to
CNCE. The C1C is an a posteriori verification, after inclusion of outstandings in national systems.
The accounting consistency work initiated by Crédit
Foncier in 2007 meets this requirement by ensuring that
management information fed into the Group Risk
Supervision tool is consistent with accounting data.
Its main purpose being to process the whole of the consolidation scope and balance sheet of Crédit Foncier, the
Accounts Consistency project aims to constantly improve
the process given the diverse nature of the Crédit Foncier
group’s operations in order to reduce discrepancies to a
minimum.
Improvements in 2008
Major changes were successfully introduced as a result of
the Accounts Consistency project working in collaboration
with the CNCE Group Risk Department throughout 2008
to improve the system launched in 2007. These changes,
affecting both Individual and Corporate customers mainly
concern the scope of application and improvements to the
quality of risk data:
• Inclusion of subsidiaries (Compagnie Foncière de
Crédit, Locindus, SOCFIM and CFCAL, [excluding
Banco Primus and the Belgian branch]).
• Finalisation of the integration of the real estate leasing
division.
This work resulted in a significant improvement in the
results of C1A and C1C, reducing to less than 1% the
unexplained gap between the risk presentation and the
accounting presentation.
Changes planned for 2009
Some of the work related to the Accounts Consistency project, initiated in 2008, will be completed in 2009:
• Integration of the subsidiary Banco Primus and the
Belgian branch.
• Automation of the C1A accounts consistency verification process (see above).
• Greater detail in Accounts/Risk reconciliation (contract
level).
1.4.3 - Crédit Foncier group data quality system
CNCE national system
In December 2007, the Executive Board of the CNCE decided to establish a National Data Quality system based on
two new national bodies, the National Advisory Committee
on data quality and the Operational Committee on data
quality, both of which cooperated closely with existing
bodies, in particular the Internal Controls Monitoring
Committee (ICSC).
Management of the system was entrusted to a data quality
management unit and a charter was drawn up to clarify the
roles and responsibilities of key players in the program of
quality assurance, in particular those incumbent on the
GRD, responsible for determining objectives associated
with the Basel rating system.
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Risk management
These national bodies rely on a network of Data Quality
correspondents, who put in place the necessary measures
within each Caisse d’Epargne, and local agents responsible for coordinating measures implemented by project
managers.
The main tasks of this body are:
• Analyse the quality improvements achieved for a predefined data set, according to the importance of the data
for the Group.
• Confirm the diagnosis with each establishment.
• Develop and monitor action plans to capitalise on best
Group practices.
• Provide support for entities when launching and implementing the measures.
• Report on work and results of joint efforts in existing or
to-be-developed Group bodies.
Definition of the range of data that undergoes quality
enhancement is the responsibility of business line users,
subject to validation by the CSCI which reaches its decision on the basis of Group priorities. This committee has
identified a range of reported or calculated data requiring
priority quality enhancement based on their criticality for
the processing systems that use them.
GCE has put in place a National Data Quality Monitoring
Centre to centralise the various measures taken to improve the quality of source data. This centre validates diagnoses and supervises measures taken to enhance the
reliability of data.
Supervision and control of the system has been entrusted
to the Quality Department responsible for ensuring its
across the board application throughout Crédit Foncier. In
this regard, the Quality Department monitors action
through a team of data quality experts in the various business lines; it oversees the organisation and planning of
measures and the mobilisation of human and material
resources in a context in which cross-functional dialogue
is a key factor for success.
The Quality Department is also responsible for extending
the quality enhancement process to subsidiaries of Crédit
Foncier whose information systems are not fully integrated
into those of Crédit Foncier.
Two governance bodies have been set up:
• An oversight committee which meets monthly and in
which the sponsor, the project director, the project
manager, business line departments, risks and information systems and a representative of the CNCE participate. The Committee's role is to monitor, alert and take
decisions.
• The "Analysis and Decision Review" with business line
representatives, the purpose of which is to monitor
action plans.
The approach that has been adopted for this project is
designed to ensure the sustainability of the data quality
surveillance and control process.
Outlook 2009
The objectives of the Data Quality project for the beginning of the 2009 are to:
Transposition to Crédit Foncier
Crédit Foncier has established a data quality monitoring
and control system which meets GCE’s regulatory requirements. The system also takes into account more specific
business line requirements in the Crédit Foncier group.
• Verify and improve the quality of the batch of 40 data
sets identified as priorities by Crédit Foncier business
lines and the Risk Department, including GCE priority
data.
• Map data across the entire Crédit Foncier information
system.
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6 - Risk management
• Establish relevant controls for each set of data: ongoing
controls, indicators, etc. This stage of the process will
be backed up by a data quality assessment tool.
• Assess data quality and monitor it for non-conformity.
The introduction of more reliable preventive and corrective measures with associated documentation and production of indicators for the Regional Operational Data Store
(ODS) for the 174 Basel II datasets identified by the
Crédit Foncier Risk Department.
and banking sector (bankruptcy of Lehman Brothers on
September 15, implementation of a rescue plan for
Dexia on September 29). In the last quarter of 2008,
some financing institutions were facing acute liquidity
problems or even insolvency, prompting the majority of
sovereign states in Europe and the U.S. to take action to
recapitalise the banks and provide support for the interbank market.
The outlook for the first half of 2009
1.5 - Key events 2008
1.5.1 - Economic situation
2008 highlights
2008 saw two major changes in the economic situation:
• The downturn in the real estate sector which began in
late 2007 and early 2008 gathered pace throughout
2008, especially in the second half of the year. It more
particularly concerned certain European markets like
Spain and to a lesser extent France. The deterioration in
the real estate market (downturn in both the new and
existing residential housing and office sectors) could
affect the solvency of certain categories of borrowers or
accelerate the negative trends observed in some professional sectors.
• The financial crisis itself gathered pace during 2008
gradually spreading to every segment of the credit market. Beginning with a restricted number of categories of
assets (sub-prime transactions in the United States, ABS
CDOs), difficulties spread to the monolines. These entities have now lost their AAA rating with stable outlook.
The crisis then spread widely throughout the financial
The deterioration in real estate markets since the second
half of 2008 is likely to continue, and may even accelerate over the first half of 2009. The real estate development
sector is likely to continue to be badly affected and the real
estate investment sector may begin to experience some difficulties. In contrast, demand in the public sector and for
social housing is likely to remain stable and may even rise
due to government stimulus plans.
The outlook for interest rates over the coming months is
difficult to assess although a downward trend seems likely
in the beginning of 2009. Besides interest rate risk, which
will continue to require special vigilance, monitoring of
liquidity will remain a major concern in 2009.
The worsening of the financial crisis is not likely to affect
the liquidity of Crédit Foncier, which has substantial available reserves (€62 billion – see details in Section 9.3
Monitoring of liquidity risk). On the other hand, it will call
for special vigilance regarding asset-liability management
pending full recovery of long-term refinancing capabilities.
The impact of this situation was addressed at the beginning of 2009 by drawing up a financing budget for each
business line with priority given to Crédit Foncier’s traditional sectors. A conservative approach was adopted for the
allocation of these budgets, with regular reviews as the
situation develops.
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Risk management
1.5.2 - Key events in 2008 affecting credit risk
The deterioration in the economic and financial situation
in 2008 has not fundamentally called into question the
overall quality of outstanding loans or the risk profile of
Crédit Foncier.
Despite the context, overall exposures continued to grow.
Only international activities—purchases of foreign mortgages and to a lesser extent International Public sector
financing (IPS)—have slowed down or virtually stopped.
The slowdown also concerned exposed real estate segments (Property, Development) in the second half of
2008, following a sharp deterioration of risks in these sectors.
However, the slowdown in volumes has been offset by a
marked increase in margins.
Despite this context of crisis, Crédit Foncier has not significantly changed its credit acceptance rules, considering
them to be both sound and relevant. However, great attention has been paid to ensure compliance with standards
and maintainance of a risk-return balance.
Tighter supervision has specifically concerned sectors that
are particularly sensitive or vulnerable to a worsening of
the economic situation (developers, financial investors,
LBO, unlet office buildings). However these areas only
represent a fraction of Crédit Foncier’s total exposure.
Individual sector
The overall quality of the Individual loan portfolio has
been maintained. Delinquency rates at one month and
three months on outstanding assets rose slightly over the
last half year, but are still below the levels at the end of
2007. Similarly, doubtful loans have remained practically
stable, excluding the impact of a change in accounting
rules (loans are considered doubtful after 180 days of
delinquency rather than 90 days), following application of
Basel II standards.
Four sectors have been targeted in the context of risk surveillance:
• Bridging loans: an ad-hoc action plan has been introduced involving tighter conditions to take into account lower
property values. Crédit Foncier has committed to extend
bridging loans maturing within three months for a period
of six months at a preferential rate (statutory rate in
force). As a precaution, doubtful bridging loans (i.e. standing due for more than 180 days) have been provisioned
in full, pending the realisation of the security. This measure led to a provision of €20.3 million for 2008.
• Rental investment loans: an action plan has been
drawn up to manage rental transactions where there is
an overabundance of supply. Precise mapping has been
carried out for these areas and counterparties are being
monitored closely.
• Variable-rate loans: a detailed analysis of the situation
of vulnerable customers has been completed and preventive action vis-à-vis customers exposed to variable
rates has been introduced via caps or the restructuration of loans into fixed-rate loans with staggered payments). Customised solutions have been proposed to
worst-affected customers and a new secured product
range introduced.
• Loan restructuring (located in the special purpose subsidiary CFCAL): in this area, the doubtful loan rate has
increased, but this reflects more a return to normal
levels (given the specific nature of the business), after
a very favourable period. Noteworthy also was the acquisition of a controlling investment at the end of 2008 in
Banco Primus (assets: €285 million), specialised in
credit restructuring in Portugal and Spain and car loans
in Portugal and Hungary.
Exceptional measure: Crédit Foncier decided to freeze
the repayment of mortgage loans for six months for customers affected by the severe storm in late January 2009.
5 - Human and
6 - Risk management
International mortgage lending business (“pure” RMBS
without associated recourse to the Public sector) was virtually frozen in 2008; outstandings were approximately
€16 billion. Moreover, it should be pointed out that Crédit
Foncier does not have any exposure (direct or indirect)
on the US mortgage market. The portfolio stood up particularly well despite the difficult context in the second half
of 2008 (financial, real estate and banking crises) and is
beginning to absorb the shock.
Public Sector
Local authority financing has not grown rapidly, a reflection of the elections at the beginning of the year and the
financial crisis in the second half of the year. In contrast,
financing for social housing grew rapidly.
Domestic public sector outstandings with structured rates
have been closely monitored by both Crédit Foncier and
GCE; no alerts or specific requests have been received.
Corporate and Institutional sector
For private sector customers, loan commitment procedures
were tightened to reflect the deterioration in the economic
situation (see above: measures taken in Section 4 Management of overruns and early-warning procedures).
The real estate downturn was widely anticipated in the
sector. Exposures are under control in the most sensitive
areas such as real estate development. Long-term investors are resisting as rental risk is still little-affected. LBO
and unlet office risk exposure represents a fraction of
outstandings for Crédit Foncier and in part concerns secured lending outside the real estate sector. Real estate leasing offers intrinsic security.
Exposure of Crédit Foncier to "Corporate" securities
backed by commercial mortgages
CMBS, less than 1% of the overall portfolio of securitisations, is very limited and concerns real estate assets located in Europe, very largely in France. Two securities (€99
million) for the same underlying asset (office buildings),
publicly rated in the speculative category and located in
France, have been formally listed in the Watch List since
mid-2008, i.e. at the time of a bailout operation involving
the borrowing company in this transaction. These two
assets are the only two securitisation positions classified
as "at risk" by Crédit Foncier. Nevertheless, the intrinsic
value of the office buildings in question remains strong
and its fair value, as of the fourth quarter, remains in line
with its book value.
Another key event in 2008 was the start of operations
under the Basel II environment
In 2008, Crédit Foncier continued to prepare for formal
Basel II approval of asset classes for the retail bank and
the securitisation positions which are linked together
through the underlying asset (mortgage lending to individuals). These segments account for half of the overall
outstandings of Crédit Foncier and generate the bulk of
the capital savings expected during the transition to
Basel II IRB standards.
An important milestone in the rollout of this program was
reached in mid-2008, with the introduction of a new segmentation and stock rating mechanism adapted to the
specificities of Crédit Foncier.
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Risk management
Work over the second half of 2008 contributed to:
• Monitoring of scores.
• Improving the reliability of the risk assessment process
which was brought in line with Basel II at the end of the
first half of 2008 (based on a Basel II credit assessment
score and outstandings rating).
• Anticipatory measurement of equity capital requirements based on Basel II advanced methods.
• Putting in place supervision instruments, in particular
backtesting which will facilitate verification of the performance of the risk assessment system, and the datamart risk, which will improve the reporting process.
• Introducing Basel II reform into Business Line processes, in particular lending to the Individual sector:
updating of procedures and training.
• Preparation of the approval file presenting Crédit
Foncier procedures and, in parallel, finalisation of the
internal procedures of the RD on the basis of an updated mapping of processes.
• Pursual of work on data reliability.
The timetable for approval was discussed with the
Banking Commission with the prospect of a visit before
the end of 2009. It should be formally confirmed after the
nd
examination by Group Audit scheduled for the 2 quarter
of 2009.
At the same time, Crédit Foncier is continuing work on
implementing Basel II reform for corporate asset classes.
The Basel II project represents an opportunity to bring
together projects designed to integrate information systems and to carry out a basic review of procedures, the
information system and to formalise and converge procedures.
Another key event affecting the general risk environment
in 2008 was the adaptation of procedures to the Basel II
environment:
• Optimisation of the risk/return ratio (monitoring of the
admissibility of transactions on the basis of ROE).
• Progressive enhancement of the quality of systems
and data.
Real estate risks
In 2008, the Crédit Foncier group participated in a GCE
study on real estate risk based on a cross-functional analysis of various areas of risk (market, credit, operating and
business). The purpose was to identify within each of
these areas, factors sensitive to a deterioration in the real
estate cycle and to measure the nature and magnitude of
their potential impacts on the balance sheet or the Group.
Three main objectives were identified for this study:
• Production of a set of internal indicators to measure real
estate risk and its impact on Group solvency and profitability (equity capital requirements and regulations,
results).
• Incorporation of real estate risk management in equity
capital requirements planning through the development
of stress scenarios.
• Creation of a specific external financial communications system for regulators, rating agencies and investors, and groundwork to facilitate responses to market
demands in light of the current economic situation and
recent acquisitions.
This study has already enabled a first risk mapping of GCE
real estate risks and a more accurate assessment of the relative importance of real estate exposures (deterioration of the
real estate economy, declining prices) on the overall assets
of the Crédit Foncier group. These risks are very diverse both
in terms of counterparties and type of financing.
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2 - SCOPE OF APPLICATION
2.1 - Scope of Financial statements
consolidation and of prudential
consolidation (Basel)
The scope of prudential consolidation, as defined in the
decree of February 20, 2007 on capital requirements is
identical to that of the scope of accounts consolidation
(see note 11.2 of the consolidated financial statements of
Crédit Foncier).
The insurance company Foncia Assurance has been
consolidated using the equity method, a method which
was also applied for its prudential treatment.
The major changes in consolidation scope are discussed
in note 11.1 of the consolidated accounts of Crédit
Foncier.
The enlargement of the scope of prudential and accounting consolidation is related to the inclusion of Banco
Primus and SIRP in the balance sheet of Crédit Foncier.
Banco Primus is a Portuguese bank operating in the personal loan market (restructuring and car loans). SIRP is
the result of a financial arrangement between Crédit
Foncier and AIG in 1992 involving the issuance of €457
million of undated subordinated notes (see Section 7.4
Special purpose entities).
2.2 - Scope of application
within Crédit Foncier
3 - INTERNAL CAPITAL ADEQUACY
AND EQUITY REQUIREMENTS
3.1 - Capital management
Senior Executive management is responsible for managing
the equity capital of the Crédit Foncier group, with the
dual goal of respecting regulatory ratios and optimising
allocations and profitability of group activities.
Management of capital requirements
Management of regulatory capital is based on work carried
out jointly by the Finance Department, Risk Department
and Management Control Department. This monitoring
concerns in particular:
• The solvency ratio and quarterly Corep reporting based
on data from the financial statements of each entity
included in Crédit Foncier’s consolidation scope.
• Simulations/projections of capital requirements by business line based on various methods of calculation due
to be applied in Crédit Foncier by the end of 2010.
• Integration of projected capital requirements for each
business line in income statement forecasts in the strategic plan and in the definition of political risk.
• A product pricing approach which includes a degree of
risk adjusted returns, in particular for the Corporate and
Public sectors.
Credit institutions for which individual surveillance of
management ratios is carried out within the framework of
Group consolidated management ratios in conformity with
the provisions of articles 4.1 and 4.2 of CRBF regulation
n° 2000-03, have been identified in the statutory consolidation scope (see note 11.2 of the appendix to the
consolidated financial statements of Crédit Foncier).
6
Risk management
An equity committee was created in 2009 to maintain
effective capital management. Its main objectives are as
follows:
3.2 - Composition of prudential
capital
• Implement equity allocation and return on equity strategy defined by senior executive management, taking
into account regulatory and supervisory constraints.
Prudential capital is determined in conformity with
Regulation 90-02 of the Banking and Financial Regulations
Committee of February 23, 1990 as amended. Prudential
capital consists of two broad categories.
• Measure impacts in terms of risk policy: limits, supervision of new production by scoring, etc.
• Review and plan (capital planning) equity capital requirements and ratios in planning exercises (regulatory,
internal, supervisory authorities).
• Define and implement measures to optimise the
consumption of capital and the cost of raising capital.
• Define and put in place indicators to measure profitability in economic terms and integrate results into pricing.
Core capital (Tier 1)
Core capital is calculated from equity capital resulting
from the consolidation of the Crédit Foncier group. It is,
however, restated on the basis of "prudential filtering"
which consists in making an adjustment for unrealised
gains or losses on equity instruments, on loans and available-for-sale outstandings and deducting goodwill and
other intangible assets.
• Participate in internal capital adequacy assessment processes (ICAAP).
• Liaise with the GCE capital management function:
methods of measurement (correlations).
It is intended that this committee will make adjustments
to capital management procedures to take into account
changes in refinancing conditions that may occur in 2009.
Supplementary capital (Tier 2)
Supplementary capital consists in redeemable subordinated loans which meet the requirements of Article 4 of the
above-mentioned regulations. They are restated for unrealised gains or losses on available-for-sale assets.
Deductions
Deductions result mainly from investments that exceed
10% of the capital of credit institutions or financial institutions, shares in insurance companies consolidated on
the basis of the equity method and securitisation positions
weighted at 12.5%. These items are deducted half from
core capital and half from supplementary capital.
The following table summarises the composition of prudential capital of the Crédit Foncier group at December
31, 2008.
5 - Human and
6 - Risk management
TABLE OF PRUDENTIAL EQUITY CAPITAL
31/12/2008
Core capital
Capital
Reserves and retained earnings
Minority interests
Profit or loss
Issues of Tier One hybrid
1,082
1,265
240
220
280
Deductions from core capital
Of which goodwill
Of which other intangible fixed assets
(72)
(30)
(41)
Other elements of core capital
Core capital before deductions
(103)
(A)
2,912
Supplementary capital
First level supplementary capital
Second level supplementary capital
Deductions from supplementary capital
Supplementary capital before deductions
3
513
0
(B)
516
Deductions from equity capital
Investment and subordinated loans in credit institutions or financial institutions
Other deductions
Deductions from equity capital
(2)
(111)
(C)
Of which
Deductions from core capital
Deductions from supplementary capital
TOTAL PRUDENTIAL CAPITAL
Of which Core capital
Of which Supplementary capital
(113)
(56)
(56)
(A)+(B)+(C)
3,316
2,856
460
Source Corep 31/12/2008
As of December 31, 2007, prudential capital calculated under the new Basel II rules amounted to €3,339 million, including €2,725 million of core capital.
The decline in prudential capital (- €23 million) resulted from the consolidation of SIRP in the second half of 2008.
6
Risk management
3.3 Capital requirements
Crédit Foncier group entities calculate their weighted
exposures in conformity with the standard approach for
credit risk, market risk and operational risk.
The Crédit Foncier group calculates regulated capital
requirements, for both credit risk and operational risk,
according to Basel II standards. The Crédit Foncier group
is not subject to market risk.
Regulatory capital requirements based on Corep
31/12/2008 can be broken down as follows:
REGULATORY CAPITAL REQUIREMENTS (Corep)
31/12/2008
Credit risk
National governments and central banks
Institutions
Companies
Individual clientele
Shares
Securitisation position
Other assets that do not correspond to credit commitments
7
404
895
1,055
28
391
60
Total requirements for credit risk
(A)
Total requirements for market risk
(B)
0
Total requirements for operational risk
(C)
131
(A) + (B) + (C)
2,971
CAPITAL REQUIREMENTS
2,840
As of December 31, 2007, capital requirements calculated
under the new Basel II rules amounted to €2,899 million.
The Crédit Foncier group initiated a certification process
with regard to the utilisation of Basel II internal rating
methods by December 2009 for its portfolio of loans to
individual customers and securitisation assets.
5 - Human and
The table below indicates capital requirements for credit
risk with a breakdown of value at risk on the basis of Basel
Gross Exposure
(On and Off-Balance Sheet)
Value at risk*
6 - Risk management
II regulatory weightings used in the standard approach
applied in the group:
Public
administra- Banking
Individual
tions and establish- Companies
clientele
central
ments
banks
Securitisations
Shares
Totals
10,391
39,090
19,882
48,404
232
23,386
141,384
9,878
37,046
16,909
46,578
232
23,386
134,030
Weighted
assets
Credit risk
requirements
192
11,438
8,377
2,058
2,194
7,182
2,774
84
446
-
15
915
670
165
175
575
222
7
36
-
34,745
2,780
Weighting after taking into account the technique of credit risk reduction
0%
9,443
10%
20%
433
35%
50%
75%
100%
150%
2
200%
350%
Other weightings (subsidised loans)
Deducted from equity capital
Total value at risk
Total weighted value at risk
10,933
1,919
24,167
18
1
9
-
571
5,055
3,234
7,028
1,021
-
10,234
4,730
23,935
420
2,925
130
585
-
0
232
-
-
-
3,620
-
24
88
31,181
1,919
57,191
23,935
4,116
2,925
7,182
1,849
24
3,620
88
9,878
37,046
16,909
46,578
232
23,385
134,030
90
5,048
11,188
13,180
348
4,891
34,745
22,806
444
23
Other assets that do not correspond to credit commitments
60
Total credit risk requirements
2,840
* Value at risk corresponds to on and off-balance sheet items to which is applied a credit equivalent conversion factor
Almost 90% of value at risk is weighted 50% or less, a
reflection of the high quality of Crédit Foncier’s assets;
this level of weighting corresponds to the highest credit
scales of the Banking Commission.
6
Risk management
3.4 Management of regulatory ratios
At December 31, 2008, the solvency ratio stood at 8.9%
compared to 9.2% at December 31, 2007.
At December 31, 2008, the Tier One ratio stood at 7.7%
compared to 7.5% at December 31, 2007.
The Tier One ratio is obtained by multiplying the ratio of
Tier One capital to equity capital requirements by 8%.
%
10,0
9,5
9,3%
9,2%
9,4%
9,3%
8,9%
9,0
8,5
8
7,6%
7,5%
7,7%
7,8%
7,7%
June 2008
September 2008
December 2008
7,5
7
6,5
6
December 2007
March 2008
Solvency ratio
Tier 1 ratio
Source corep 31/12/2008
The deterioration in the solvency ratio between December
2007 and December 2008 was due primarily to a reduction in capital resulting from the consolidation of SIRP,
which led to the neutralisation of perpetual subordinated
notes worth €136 million.
5 - Human and
6 - Risk management
4 - MANAGEMENT OF CREDIT AND COUNTERPARTY RISKS
4.1 - Summary of procedures
and methods
4.1.1 Risk control procedures
Each entity of GCE is responsible for developing its own
risk policy which must be consistent with its business
development policy. Market departments are informed of
risk policy by the Risk Department. Risk policy is described in the procedures of each establishment.
Business Lines are responsible for their risks
Within the Crédit Foncier group and in accordance with
GCE standards, Business Lines are responsible for the
risks they assume as a result of the transactions they enter
into, both at the time they are entered into and throughout
the term of each transaction. They are therefore responsible for controlling and monitoring first level risks
through the ongoing control mechanism and therefore
need to have a risk monitoring and analysis capability.
4.1.2 Procedures for assessing the creditworthiness
of borrowers
French private and public sector
The assessment of a borrower's creditworthiness is based
firstly on an analysis of the security obtained by the
Business Line and secondly, on a scoring system.
For French public sector customers (local authorities, local
institutions, etc.), the delegation scheme provides for a certain number of individual delegations at various levels subject to specific conditions depending on the type of counterparty (major accounts and other accounts) and/or type of
facility, amounts of new commitments, existing exposure
and scores. Loan requests that do not fall into any of the
delegation levels are sent for review by committees:
• For the largest amounts to the National Commitments
Committee (Comité national des engagements - CNE).
• For other requests, the decision is taken by a specific
Business Line Committee set up at the end of the
second half of 2008.
For private sector customers, the delegation scheme does
not involve any individual delegations. All credit files are
subject to approval by various levels of committees according to the amounts to be committed:
Individual sector
• The National Commitments Committee (CNE), chaired
by a company director for the largest commitments or
those with less favourable scores.
For individual customers, the procedure for assessing a
borrower's creditworthiness is based on systematic use of a
scoring system which was revised and updated in 2007 to
reflect Basel II rules, and which comprises:
• Business Line Committees (Corporate and Institutional
Department, Real Estate Leasing, Socfim) for the
others; the Risk Department sits on these committees
and has an advisory role and a right of appeal.
• Detailed creditworthiness rules: a comprehensive set of
rules adapted to the profile of applicants and the risks
involved.
Decision-making system for international transactions
• A loan score based on both an expert system and a predictive statistical module.
The commitment process corresponds to that of Groupe
Caisse d’Epargne. The decision-making process has to
address several key principles:
• A delegated decision system which requires a counter
analysis of loan applications for larger amounts.
• The transaction must fall within country limits, as determined by GCE.
6
Risk management
• Prior authorisation is required (existence of a limit or
specific authorisation in Committee) for any transaction
involving counterparty risk.
• Transactions under the authority of the International
sector or other investment related transactions dealt
with in the framework of assets held to maturity, are
subject to a dual analysis (Business Line and Risk
Department). The decision-making level is defined
depending on the type of transaction, amounts and
scores. Beyond a certain size, CNCE gives its opinion on
the transaction. The risk/yield balance is one of the criteria used in selecting a commitment.
• Prior approval by the New Products Committee for all
transactions with new characteristics.
Outstandings for individual customers are automatically
scored on a monthly basis. Corporate outstandings are
scored manually each year and half-yearly for real estate
development activities, housing developments and property dealers.
Unusual scores must be commented on and explanations
provided.
4.1.3 Attribution of credit limits
Presentation of the method employed for allocating
internal capital and setting counterparty risk limits
Within GCE, there are three main types of credit risk
limits: by country, by economic sector (for large counterparties, small businesses and professionals) and by customer/counterparty.
Country limits are reviewed annually and approved by the
Group Risk Committee, based on internal ratings, analysis
and proposals by the GRD after taking into account needs
expressed by GCE entities.
Limits by sector are set for all major Corporate counterparties (and related third parties). The process of setting
limits is based on macro-economic criteria and the risk
profile of each sector compared with aggregate individual
limits and commitments. These limits are reviewed at
least annually and even more frequently if a deterioration
in sector credit quality occurs. Limits are approved by the
Group Risk Committee.
Currently, limits are monitored a posteriori by the GCE RD,
each entity maintaining its system of sectoral limits with
its own rules and territorial specificities, based on the
same classification system.
A review of sector limits for each entity is conducted several times a year. An alert is sent to the Group Risk
Committee by the GRD when the consolidated exposure of
the GCE in a single sector corresponds to 80% of the limit
for the sector. The Group Risk Committee may then decide to send a warning to the various entities concerned.
Given its specificities, a specific study was carried out for
the real estate sector and presented to the Group Risk
Committee.
Individual limits for major counterparties are proposed
based on an analysis of each counterparty, its internal
rating, commitments and the specific needs of GCE entities. These limits are approved by the Major Counterparty
Credit Committee or by the Group Risk Committee if the
delegation ceiling of the Major Counterparty Credit
Committee is exceeded. Natixis counterparty limits are
approved by the monthly Combined Risk Committee for
major risks.
Limits for major CIL accounts are also approved by the
Major Counterparty Credit Committee. Proposals to the
Committee are submitted by the GRD on the basis of
internal ratings derived from the E-local algorithm as well
as local entity requirements.
5 - Human and
6 - Risk management
Limits on SMEs or SME groupings are also determined by
the Group Credit Committee for the regional development
banking business if they exceed subsidiary delegations or
application thresholds attributed to Caisses d'Epargne
(CEP) according to the level of their equity capital.
In addition, entities have to respect limits, at their level,
on financial transactions, determining rules governing
portfolio risk diversification.
Limits set at the level of the Crédit Foncier group or GCE
Methods used for calculating exposure and limits are defined and approved by the Group Risk Department (GRD).
The size of limits is determined by the Crédit Foncier
group for each activity, within the overall context of the
GCE limits system.
The limits system has the same types of limit as GCE: by
country, sector and counterparty.
Country Limits
The GCE determines geographic "country risk" limits.
These are defined as a combination of sovereign risk
(inability of a country to honour its commitments), political risk (risk of non-transfer of assets) and economic risk
(increase in credit risk).
The elements to be considered in any commitment involve the nationality of the borrower or guarantor, the geographical area in which operations occur and the location of
the entity that carries the commitment in its books.
In the context of its international activities (public sector,
purchases of mortgages, banks), country limits are attributed to Crédit Foncier on the basis of CNCE group policy.
They are authorised by CNCE on the recommendation of
the Group Risk Department (GRD).
Sector limits
Crédit Foncier aims to put in place a system of sector limits
which take into account its business development policy
and pre-eminent positioning in the real estate sector.
In 2008, a methodology for setting sector limits for Crédit
Foncier in the Corporate and Institutional sector was developed with the dual purpose of establishing:
• Business and professional sector limits (excluding
counterparties in the real estate sector, property dealers, developers and real estate investment companies),
in particular real estate lease purchase subsidiaries but
also including property dealers; limits were determined
on the basis of a reasoned grouping of General
Industrial Classification of Economic Activities within
the European Communities (NACE) codes and are included in GCE’s sectoral limits.
• Sector-specific limits for counterparties in the real estate and specialised real estate financing sectors, are
based on two considerations: type of activity (real estate development, housing developments, real estate dealings and real estate investment companies) and type of
asset financed.
This dual approach will be implemented gradually over
2009 and monitored by the Risk Committee.
Individual limits
In the broader context of regulatory limits designed to
control major exposures, counterparty limits have been set
at the level of individual counterparties or groups of counterparties financed by the Crédit Foncier group or banking
establishments. Individual borrowers are not concerned by
these limits.
With regard to the French Public sector and social housing, as Crédit Foncier primarily participates through
financings, specific counterparty limits in addition to
Crédit Foncier Group limits do not seem to be necessary.
For the International Public sector, an area which Crédit
Foncier is developing on behalf of the Group, individual
counterparty limits have been set.
6
Risk management
Approved by the Risk Committee and presented to the
Audit Committee, these individual limits are proposed,
examined, updated, controlled and monitored by the Risk
Department. Various reports are also prepared by the Risk
Department or by the Financial Committee (Coméfi) for
banking establishments. The latter committee meets on a
monthly basis.
During 2008, particular attention was paid to the real
estate development and investment sectors and the banking sector, with a downward adjustment of limits.
4.1.4 - Management of overruns and alert procedures
General GCE principles
Monitoring of limits is presented in the context of the
Group Risk Committee. Overruns may lead to an investigation of the entities in question or, if necessary, to
updates to risk information systems.
Furthermore, during the annual review of counterparties or
when specific transactions are being examined, the Major
Counterparty Credit Risk Analysis Department may evaluate potential overruns and suggest revised limits, which
then have to be approved by the Major Counterparty Credit
Committee or Group Risk Committee.
Similarly, the Credit Analysis Department of the commercial bank will analyse any overruns at the time of annual
reviews or analysis of specific financing requests.
A deterioration in the situation of a counterparty may lead
to it being listed on the watch list or in doubtful loans &
provisions. Specific Watch List and Doubtful Loans &
Provisions Committees meet quarterly to take decisions on
internal ratings, limits and possible provisions.
Crédit Foncier general principles
The Risk Department of Crédit Foncier has also strengthened its procedures for monitoring and enforcing rules fixed
internally or by regulations. This has resulted in the establishment of a specific program of controls tailored to each
of the various activities of the Group.
Compliance with Crédit Foncier and CNCE limits is verified
when systematic counter-analyses are conducted before
requests are examined by commitment committees.
Whenever commitments for a consolidated group of counterparties are close to the limit, a commitment verification
and updating process is requested from the Business Line
by the RD.
Finally, for groups of counterparties where outstandings are
in excess of €20 million, a commitment report is prepared
by the RD to clarify how limits have been used.
Corporate and Institutional customers
Individual counterparty limits for companies and investors
are monitored and controlled when new commitments are
analysed and counter-analysed, as well as when financial
statement information is updated, which occurs at least
once a year.
The Risk Department provides information on the use of
limits, any overruns and action taken by:
• The National Commitments Committee for any overrun;
an alert may be given if the utilisation rate seems excessive.
• The Risk and Audit Committees and the Group Risk
Department quarterly on the same basis.
5 - Human and
6 - Risk management
International Public Customers and Refinancing
Limits on counterparties for financial transactions are
monitored and controlled for conformity by operational
units, the middle office of the Market Transactions
Department and the Risk Department.
These limits have been put in place essentially for Crédit
Foncier’s major banking counterparties and are regularly
reviewed in Committee. In 2008, the financial crisis led
the Risk Department to introduce measures to withdraw,
reduce or freeze limits with certain banking counterparties
in addition to the adoption of measures designed to secure exposures (signature of collateral agreements, redefinition of margin call limits, limits applicable to eligible
counterparties for cash management activities) Loan purchases or International Public Financing (IPF) are subject
to specific authorisations agreed to in committee.
Monitoring and supervision is provided daily by observation on D+1 that authorised limits have been respected.
Limits and their associated utilisations are updated in real
time by the front office.
Weekly, monthly and quarterly reports are prepared for the
Market Transactions Department, Risk Committee and
Senior Executive Management.
Any overruns are reported in real-time to Senior Executive
Management; the Risk Department and Market
Transactions Department analyse the reasons for the overrun and study the corrective action that needs to be taken.
4.1.5 Ratings
External credit assessments
In carrying out its regulation calculations as of
31/12/2008, Crédit Foncier relied on the credit assessments of three rating agencies (Moody's, Standard & Poor's
and Fitch) selected among the seven organisations approved by the French Banking Commission.
With regard to fixed-income securities (bonds), external
ratings for the issue take precedence over the issuer’s
external rating. Assessments of the credit rating of the
issue are taken into account in determining the weighting
of the position on the bond, with a priority given to the
short-term rating over the long term. If no external rating
exists for an issue, the long-term rating of the issuer is
used for Senior debt only, except for the specific case of
exposure to banking institutions (credit institutions or
French Public sector) in which case the weighting is
deducted from the credit quality scale of the country in
which the exposure is located.
Under very special circumstances, where there is no external assessment of credit quality directly applicable to an
exposure, but there is a general credit assessment for the
issuer or a credit assessment for a specific issue program
which the exposure is not a part of, the methods for determining weightings within Groupe Caisse d'Epargne comply
with Article 37-2 of French legislation (decree on capital
requirements applicable to credit institutions and investment firms).
Internal ratings
METHODOLOGY
Each customer is rated on the basis of an internal rating
methodology for the asset class to which it belongs and
which is unique throughout the GCE, even if the customer
does business with several Group entities:
• Methodologies based on "scoring" for Individual and
French Public sector customers.
• Methodologies based on a "mixed" statistical and qualitative approach for SME customers, or an expert approach
for certain specific sectors. The ratings of SMEs and SME
groups are reviewed annually at entity level and by the
GRD for loans that fall under the jurisdiction of the Group
Credit Committee of the commercial bank.
6
Risk management
• Methodologies known as “expert” for major counterparty customers. Each internal rating for such customers is
reviewed at least annually or more frequently if the risk
deteriorates. Alerts and updates are carried out if any
significant event occurs.
Loans followed by the Watch List and Doubtful &
Provisions Committees are updated on a quarterly basis
and the internal rating is confirmed or revised.
The rating system for Individual customers, specific to
Crédit Foncier (real estate loans without any deposit
account) and the system used for International Public sector customers is described below. The other segments are
governed by GCE rating systems.
INDIVIDUAL SECTOR LENDING
Loan acceptance score system
The loan acceptance scoring system combines a statistical score with an expert system which formalises commitment rules based on a comprehensive manual describing
the risk policy. These rules are determined jointly by the
Commitments Department of the Individual sector and
the Risk Department. They are modified on a regular
basis to reflect changes in risk policy and new products
brought to market.
These two components are combined into a single score,
and the appropriate level of decision-making authority is
based on the risks estimated by the loan scoring algorithm.
Original loan information
(amount, term, etc.)
Expert elements in the loan acceptance algorithm
Risk policy governing loan acceptance is set out in the
"admissibility guide" and in various "admissibility scores".
The expert element of the scoring system is then configured on the basis of this information.
The admissibility guide deals with rules governing the
structure and examination of loan applications from individuals , family-owned sociétés civiles immobilières (SCIs or
real estate investment companies) and partnership type
companies (e.g. family-owned French SARLs) if their shareholders provide a joint and several guarantee.
Admissibility sheets (also called segment sheets) describe
the majority of the rules in the expert scoring system. The
sheets differentiate 15 unique cases.
Loan acceptance scores for Individuals
Original customer information
(age, SPC, etc.)
The loan acceptance score cannot under any circumstances replace the final expertise of a business line specialist. The score determines the right level of decision but
does not prevent a loan application from being accepted.
The statistical part of the loan acceptance algorithm
In parallel with this expert system, two statistical scores
(one for rental investment lending and the second for
ownership lending) are calculated.
Ownership and rental scores are used to determine the
risk of default during the term of the loan and are based
on the characteristics of the transaction and the borrowers
in question.
BEST
Crédit Foncier
Algorithm
Expert system
+
Statistical score
Decision-making assistance
when assessing loan request
Best loan
acceptance
score
Pricing
Delegation
Loan decision
5 - Human and
6 - Risk management
Description of the monthly scoring model for Individual customers (outstanding loan score)
The Crédit Foncier monthly scoring system used for individual customers uses the information that characterises
the real estate transaction and borrower at the time the
loan was granted, as well as information concerning any
payment incidents.
Two statistical models distinguish ownership and rental
lending and assign ten classes of homogeneous risk
(homogenous risk class in the range 0 to 9, 9 being the
most risky) based on the characteristics of the transaction
and borrower.
Loans (commitments) that have been classified as doubtful are assigned the value "X" and commitments in default
that are not doubtful are assigned the value "D". A rating
of "C" is assigned to loans not eligible for these two rating
models (consumer loans, loans to condominium owners’
associations, etc.).
Each homogeneous class of risk (HCR) is assigned a probability of default (PD). The HCRs and PDs are then monitored using a back-testing procedure designed to control
the stability and homogeneity of the HCRs over time. PD
predictive capabilities for each HCR are also tested.
International Public Sector
For the International Public sector, the Crédit Foncier
rating model closely tracks rating criteria used by independent agencies in their ratings, thereby enabling the
results of the model to be directly correlated with the
scales of rating agencies. The rating system identifies five
key factors for determining the medium-term credit quality of a local authority:
• economy and demography,
• institutional system,
• credit quality of the sovereign state,
• debt and off-balance sheet risk,
• performance management and financial flexibility.
Each of these general criteria is subjected to a multi-score
assessment (mostly quantitative but also leaving room for
more qualitative assessment parameters), and each score is
weighted on the basis of a specific methodology.
4.1.6 Risk supervision
General approach
The supervision system comprises:
Control of models (Back-testing)
The GRD routinely monitors the performance of scoring
models on the Group's behalf and provides annual updates
for figures related to probabilities of default within one year
and losses given default (LGD).
In the Individual segment, back-testing of models used in
Crédit Foncier is carried out by the RD.
In addition, the Risk Department examines the functioning
of the scoring algorithm on a regular basis.
A review of these examinations is routinely sent to the Risk
Committee.
• Measurement, identification and analysis of "sensitive"
exposures (exposures with major risk elements) in
connection with commitment monitoring implemented
by the Risk Department and Business Lines or with Risk
Committee reporting and indicators analyses.
• Customer or counterparty risk monitoring in connection
with risk consolidation.
• Surveillance of sensitive exposures in connection with
the Watch List system.
• Monitoring of collections: business line delinquency
committees, business line and national sensitive operations committees and annual review of risks.
6
Risk management
RISK CONSOLIDATION
Watch list
Consolidation of groups of counterparties
Risk deterioration is monitored through surveillance of
certain counterparties (Watch List) which require special
attention because of the amount of their outstanding
loans and/or high risk they represent. Surveillance of
these counterparties enables changes in risk to be monitored and should help anticipate bankruptcy risk. A counterparty placed on the Watch List needs to be followed
more carefully, but this does not automatically lead to suspension of credit lines or classification among doubtful
loans. Counterparties or transactions that meet certain criteria, approved by the Risk Committee and which may be
changed as necessary, are placed on the Watch List.
Groups of counterparties are consolidated using a tool that
consolidates information provided by management entities.
This effectively centralises outstanding loans to corporate
customers and provides both direct (transactional) and shared access. The scope of application covers almost all loans
financed by the Crédit Foncier group. The source used is
identical to that used for regulatory reports, thereby ensuring consistency.
A customer reference base can also be accessed directly,
which makes it possible to view information on guarantees
associated with customer commitments.
Database of loan outstanding with risk analysis
A database with information provided by management
sources is used to provide input for CNCE risk centralisation tools. In particular, it enables work on accounting
consistency to be carried out (C1A and C1C see § 1.4.2).
It is therefore in line with the accounting system; any discrepancies are reviewed on a quarterly basis. It powers the
Corep and is used, pending completion of the Risk
Datamart (see below) to breakdown outstanding loans
according to different risk analyses.
The Risks Datamart will soon be the main comprehensive
and permanent tool for centralising Crédit Foncier's risks. It
will make it easier to monitor exposures, approvals, outstanding loans (with commitment dates and scores), and provide information on losses suffered by the Crédit Foncier
group both on and off the balance sheet. It will provide a
global vision of risk providing substantially more data (historical data since 1995), than the current system and will
also be capable of generating automatic reports. A first version of the Datamart will be delivered in early 2009.
For Corporate customers, loan procedures were tightened
in 2008 to take into account the worsening economic
outlook:
• For the real estate investment business, and pursuant
to GRD instructions, activites have been monitored
more closely.
• Investment fund financing was frozen in the second
half of the year.
• Real estate development activities were the subject of
special attention, in particular with the completion in
late 2008 of an in-depth sector study covering the
majority of companies in the sector. A reduction in
limits for this sector of activity was decided in 2008.
As of 30/09/2008, a total of €350 million was available for the 23 developers subject to a limit. Twothirds of this envelope was to the top 3 developers,
leaving only €100 million for all other developers.
• The financing of unlet office buildings (limited in
amount even under normal circumstances) has also
been frozen.
5 - Human and
6 - Risk management
Review of risks
The Risk Department regularly reviews credit risks. This
regulatory review is designed to assess the quality of credit
commitments. Produced half yearly, the review examines
doubtful loans, loans in litigation or loans on the Watch
List with the aim of assessing potential risk and hedging
possibilities in light of the current economic situation. The
risk review is widened to include transactions that are neither in litigation, nor doubtful, nor on the Watch List, but
which merit further examination given the circumstances.
Organised by the Risk Department, it calls for considerable
involvement by Business Lines and requires validation of
each transaction which, depending on the limit, may be
under the responsibility of either Senior Executive
Management, the Risk Department or the Business Line.
National Sensitive Operations Committee
The monthly National Sensitive Operations Committee,
chaired by a company director, examines doubtful or litigious loans whose recovery prospects could be affected by
management decisions. It also examines loans transferred
to litigation and those on the Watch Lists.
Sensitive Operations business line Committee
A Sensitive Operations Business Line Committee for each
division (Individual and Corporate), is chaired by the
Director of the business line in question. It meets weekly,
monthly or by request and deals with loans that are below
the national committee threshold.
• Acquisitions of domestic and international RMBS portfolios.
• Refinancing transactions, investment, management of
cash surplus transactions, as well as hedging of assets,
liabilities and ALM (mainly banking counterparties).
The Risk Department ensures compliance with counterparty and country limits as well as procedures in an independent and ongoing manner on a daily basis. It is also
responsible for:
• Counter-analysis of all transactions in the International
sector and all production or acquisition transactions.
• An annual review of counterparties, especially International Public sector counterparties as the Crédit Foncier
Group is GCE's main financing arm for this sector.
• Risk monitoring, analysis and breakdown (production of
performance indicators, updates to the Watch List, etc.).
In 2008, efforts focused on monitoring the credit quality
of underlying assets, including the monoline-insured portfolio, and on modelling stress tests to ensure that the
Group's mortgage portfolio is capable of resisting worstcase scenarios combining an explosion in the default rate,
a sharp decline in the real estate market and lower prepayments.
The financial crisis also led the Risk Department to introduce measures to withdraw, reduce or freeze limits with
certain banking counterparties and to adopt measures
designed to secure exposures (signature of collateralisation agreements, redefinition of margin call limits, limits
applicable to eligible counterparties for cash management
activities).
Procedures for international and banking transactions
The control and supervision of risk on such transactions
has been strengthened by allocating new resources to the
various underlying assets:
• Financing for the International Public sector (sovereign
or semi-sovereign counterparties).
6
Risk management
MEASURING RISKS INVOLVED IN INTERNATIONAL AND BANKING TRANSACTIONS (EXPOSURES AT RISK)
Balance sheet positions (cash and investments) are marked to market. The Group measures exposures tied to offbalance sheet derivatives by applying an "add-on" (BIS
weights) to current exposures. Crédit Foncier has a policy
of systematically signing framework agreements with its
banking counterparties. The vast majority of the time,
these are collateralisation agreements with margin call
triggers that reduce the actual exposure. In the special
case of Compagnie de Financement Foncier, these agreements are asymmetrical, meaning that only the counterparties provide collateral if need be.
In 2008, the Crédit Foncier group increased staff dedicated to monitoring special cases. Securitisation transactions in particular are monitored quarterly: management
reports (levels of arrears, prepayments, vacancy rates,
compliance with financial ratios, amortisation of various
tranches in accordance with the cash flow cascade) transaction by transaction, monitoring of ratings, compliance
with limits, updating of the Watch List and Migration List
(transactions whose ratings risk being downgraded but for
which no real risk of loss can be detected at the current
time).
Monitoring efforts have focused on the credit quality of
the underlying assets of monoline-insured portfolios and
modelling stress scenarios based on extreme assumptions
for the portfolio of residential mortgage backed securities
and commercial mortgage backed securities (see Section
6 - Securitisations for further details).
5 - Human and
6 - Risk management
4.2 - Breakdown of commitments at December 31, 2008
ment, required under IFRS 7, section 9 of the Decree of
February 20, 2007 (Basel II) and information on capital
requirements under amendment IAS 1, form an integral
part of the financial statements certified by the Statutory
Auditors (excluding information identified as "unaudited").
2008 was marked by the introduction of the new Basel II
agreement, defining, in Pillar 3, new demands in respect of
risk transparency. Crédit Foncier, in the interest of clarity
and legibility, chose to unify information provided pursuant
to IFRS 7 and Pillar 3. The information on risk manage-
4.2.1 Exposure to credit and entity dilution risk
4.2.1.1 - Overall exposure to credit risk (IFRS 7 summary)
Table summarising overall exposure to credit risk
(In millions of euros) (end of year)
Consolidated contribution under IFRS
31/12/2007
31/12/2008
Appendix*
140,737
140,596
Note 6.8.1
- Financial assets at fair value through profit or loss (exc. floating rate securities)
of which loans to customers of financial assets at fair value through profit or loss
1,599
1,561
2,988
2,529
Note 6.8.1
Note 5.1.1
1,929
5,246
Note 6.8.1
14,914
2,144
Note 6.8.1
OVERALL NET EXPOSURE TO CREDIT RISK
(1)
- Available-For-Sale financial assets
(excluding variable-income securities)
- Interbank receivables
- Customer transactions
Of which loans and advances to customers
8,235
7,405
Note 6.8.1
92,600
92,600
108,693
108,693
Note 6.8.1
Note 5.4.2
566
Note 6.8.1
119,277
94,161
127,042
111,222
3,446
1,251
Note 6.8.1
18,013
12,303
Note 6.8.1
141,211
141,219
0%
119,752
57,496
40,145
17,351
39,034
21,417
9,973
7,644
10,517
10,367
150
12,705
127,639
59,369
43,707
15,662
43,719
22,641
13,494
7,584
11,214
11,034
180
13,337
7%
3%
9%
(10) %
12 %
6%
35 %
(-1) %
7%
6%
20 %
5%
- Financial assets held to maturity
s/t (excluding off balance sheet guarantees and signed undertakings)
of which s/t loans and customer transactions
Financial guarantees given
Off-balance sheet commitments
Variation 2008/2007
OVERALL GROSS EXPOSURE TO CREDIT RISK
(2)
(2)
of which without fin. guarantees given and contingent commitments
(2) (3) (a)
Individual sector
of which direct loans (France and Europe)
of which acquisitions of residential mortgage backed Securities (RMBS)
(2) (3) (b)
Public sector
of which direct loans to the French public sector
including direct loans and commitments to IPF and Sovereigns
of which acquisitions of IPF securities and loans
(2) (3) (c)
of which direct loans
of which acq. of commercial mortgage backed securities (CMBS)
(3) (d)
Banks and Other
* Cf. notes to the consolidated financial statements
(a), (b), (c), (d): diagram on the next page of the relative weight in percentage terms
(1) Net Outstandings after depreciation.
(2) Gross outstandings before depreciation
(3) Adjusted management figures
Note: management Data from the Risk Department has been segmented by Basel class. This
breakdown may be slightly different from that of profit centres described elsewhere in the
annual report.
6
Risk management
80% of Crédit Foncier group exposures (*) involve an underlying individual customer risk (highly secure) or public sector risk.
Exposures by Basel classification in 2007
Exposures by Basel classification in 2008
Banks and other(d)
10%
Banks and other(d)
11%
Corporate &
Institutional
sector(c)
9%
Corporate &
Institutional
sector(c)
9%
€119 752 M
Public sector(b)
33%
Individual
sector(a)
47%
€127 639 M
Individual
sector(a)
47%
Public sector(b)
34%
(*) Source: adjusted management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
credit risk under IFRS consolidated norms, in gross figures (performing and doubtful).
(a), (b), (c), (d): the bases are indicated in the above table
The following tables break down the gross loan total (performing + doubtful) excluding contingent commitments and financial guarantees given, corresponding to a total of €127,639 million at end December 2008 based on IFRS.
Crédit Foncier group Risk Coverage - summary at end December 2008
RISK COVERAGE TABLES
Exposures at 31 December 2008*
Balance Sheet
Doubtful loan percentage
Doubtful loan percentage
(excl. subsidised sector)
59,369
1.4%
1.3%
France
International residential mortgages
Public Sector
43,707
15,662
43,719
1.9%
ns
0.1%
1.7%
0
0.1%
French public sector
IPF and Sovereign states (direct loans)
Acquisition of IPF securities and loans
22,641
13,494
7,584
11,214
0.1%
ns
ns
3.3%
0.1%
ns
ns
3.3%
Exposure to the banking sector and other counterparties
Total
13,337
127,639
0.2%
1.1%
0.2%
1.0%
Retail
(*) Source: adjusted management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
credit risk under IFRS consolidated gross figures (performing and doubtful).
5 - Human and
6 - Risk management
Analysis by business segments:
4.2.1.2 - Exposure to credit risk by category
• In the Individual segment (excluding subsidised sector),
the ratio of doubtful loans to total outstanding loans fell
to 1.7% compared to 2.2% at the end of 2007. The
main reason for this improvement was a rule change stipulating when to downgrade a loan to doubtful in the
individual housing sector (homebuyers) which was introduced in the second half of 2008 (loans now become
doubtful after 180 days in arrears compared to 90 days
previously), in order to comply with Basel II rules.
The distribution of data presented below only concerns
balance sheet commitments. The distribution of exposures
by Basel category concerns counterparties excluding guarantees received and other credit risk enhancing elements.
• In the French Public sector segment, the ratio remained
unchanged at 0.1%; borrowers in the social and French
local authority sectors are rarely downgraded to doubtful.
• In the Corporate & Institutional sector, the ratio of
doubtful loans to total outstanding loans remained
stable at 3.3%. Downgraded loans are concentrated in
the property development sector (total assets for this
sector represent less than 1% of Crédit Foncier's total
outstanding loans) and the write-off of a major investor
account.
• Finally, with regard to International Public Customers,
no assets in the portfolio of securitised residential mortgage backed securities and other financial portfolios
have been classified as doubtful.
The distribution of balance sheet commitments (loans,
securities and financial transactions) of the Crédit Foncier
group at December 31, 2008, by Basel category, indicates
a concentration in the Individual segment (34%),
Securitisation segment (18%) and Public sector segment
(of which 18% in France and 7% International) and, finally, the Banking sector (10%).
The Securitisation segment represents more than 99% of
securitisation transactions whose underlying assets are
either European mortgages to individual customers with a
high level of granularity, or loans to highly-rated public
entities or that are guaranteed by such entities. The breakdown at December 31, 2008 remained comparable to that
of December 31, 2007.
The Banking segment (10%) corresponds to banking counterparties of the Crédit Foncier group's liquidity management transactions and hedging activities initiated by Crédit
Foncier. It also includes customer transactions if the
public institution in question also operates as a bank.
The Sovereign risk segment (5%) concerns government
securities issued by European Union sovereign states
including France.
6
Risk management
Exposures by Basel category in percentage terms
At December 31, 2008, the overall exposure of the Crédit
Foncier group to credit risk amounted to €127.6 billion. The
relative weight of Basel categories as percentages has remained generally stable, except for two cases mentioned above.
Table of exposures* by Basel category as a %
2007
2008
Individual***
Professionals and associations***
SMEs
Social housing institutions (HLM)
French Public Sector
Private real estate professionals
Large companies**
Bank
Sovereign states
Securitisation
Private finance intiatives
International Public sector (IPF) **
Total
34%
1%
2%
4%
12%
4%
3%
12%
4%
22%
0%
2%
100%
34%
2%
3%
5%
13%
2%
0%
10%
5%
18%
1%
7%
100%
119,752
127,639
Amount (in millions of euros)
*
Source: adjusted management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
** Changes to segmentation methods which occurred at the end of the first half of 2008 for major counterparty calculations essentially explain the variations in
the opposite direction between the "Large companies" and "International Public sector (IPF)" segments. These loans are made to public entities or entities
that benefit from public sector guarantees and which are therefore similar to public exposures.
*** The Basel "Individual" classification consists mainly of individuals and to a lesser extent professionals and associations.
Exposure by Basel classification on the basis of COREP of total exposures including commitments
Exposures to credit risk for total exposures* including contingent commitments and guarantees given, are as follows:
Exposures to credit risk by category
National governments and central banks
Institutions
Companies
Individual customers**
Shares
Securitisations
Exposure to credit risk
31/12/2008
Average 2008
Amounts
As a %
As a %
10,391
39,090
19,882
48,404
232
23,386
141,384
7%
28%
14%
34%
0%
17%
100%
8%
26%
14%
35%
0%
18%
100%
Source Corep
* Source Corep, based on a slightly different presentation to that of overall exposure to credit risk IFRS 7: the COREP table takes into account specific provisions, in particular when the distribution of overall exposure to credit risk is on the basis of the gross contribution (performing + doubtful) without netting out
provisions.
** The Basel "Individual customers" classification consists mainly of individuals and to a lesser extent professionals and associations.
Exposures to credit risk have been analysed below in terms of geographical and sectoral diversification (diagrams expressed as percentages).
5 - Human and
6 - Risk management
4.2.2 Breakdown of credit risk exposures
4.2.2.1 - Breakdown of exposures by geographic zone*
As in 2007, the location of assets in the portfolio at the end
of December 2008 remained concentrated in the European
economic area (91%) and in France in particular (67%).
Commitments located in the European economic area
mainly concern eligible assets of mortgage lenders; other
commitments in the European economic area are almost
entirely made up of commitments to banks for refinancing
purposes.
Commitments located in the United States consist only of
loans to states or highly rated local authorities that are
guaranteed by the federal government and do not include
any direct or indirect real estate exposures.
Breakdown of exposures by geographic zone
2007
2008
North America
(US and Canada) 3% Japan 1%
North America
(US and Canada) 5%
Other countries
of the European
economic
area 27%
Japan 2%
Other European
countries 2%
Other European
countries 1%
€119 752 M
France 68%
Other countries
of the European
economic
area 24%
€127 639 M
France 67%
* Source : adjusted management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
6
Risk management
4.2.2.2 - Breakdown of exposures by sector*
The breakdown of outstanding loans by sector of activity
confirms the vocation of Crédit Foncier to provide services
to the real estate sector and public sector. The most important sectors are securitisation (29%) whose underlying
assets are exclusively real estate or public sector assets,
sovereign states (32%) which includes the GCE classification "government administrations", and real estate (12%).
Furthermore, other sectors that are financed mainly receive financing for real estate assets.
Breakdown of exposures by sector of activity
2007
Holdings 1%
Real Estate
Investment Companies 1%
2008
French local
authorities** 1%
Other 3%
Medical Service 3%
Real Estate 12%
Securitisation
36%
French local
Tourism, hotels,
authorities** 1%
restaurants 1%
Holdings 1%
Real Estate
Other 3%
Investment Companies 1%
Medical Service 4%
Securitisation
29%
Real Estate 12%
€71 212 M
€81 903 M
Sovereign Risk** 20%
Sovereign Risk**
32%
Banks 16%
Banks 23%
*
Source: adjusted management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
** According to the CNCE classification, commitments to government administrations (8411Z) are included in "Sovereign states"; the "Local authorities" class
includes ancillary activities.
5 - Human and
6 - Risk management
4.2.2.3 - Breakdown of exposures by product family
The breakdown of the Crédit Foncier group's balance sheet
commitments (loans, securities and financial transactions)
by product family at December 31, 2008, shows a concen-
tration of loans (62%) and securitisation (18%). It remains
comparable to that observed at end 2007.
Product families* Distribution as a %
31/12/07
31/12/08
0%
8%
5%
2%
56%
8%
0%
22%
0%
0%
5%
4%
62%
11%
0%
18%
100%
100%
119,752
127,639
Shares/Funds
Other Balance Sheet products
Cash advances
Derivatives
Loans**
Bonds ("Banking")
Bonds (“Trading”)***
Securitisation
TOTAL BALANCE SHEET
BALANCE SHEET ASSETS* €million
The increase in the relative share of loans is partly due to
the growth of outstanding loans and partly to accounting
reclassifications made to other lines, pursuant to IAS 39
amendment and IFRS 7 of October 13, 2008. Information
on this subject is provided in the notes to the financial
statements (note 4.2.5).
Breakdown of exposures by product family
2007
2008
Other products in the
balance sheet 8%
Cash advances 5%
Securitisation 22%
Bonds
(Banking) 8%
Cash
advances 5%
Securitisation 18%
Derivatives 4%
Derivatives 2%
€119 752 M
Loans*
56%
Bonds
(Banking) 11%
€127 639 M
Loans*
62%
*
Source: adjusted management data. Balance-sheet commitments at year end (excluding off-balance sheet commitments and liabilities) representing overall
exposure to credit risk under IFRS consolidated gross figures (performing and doubtful).
** Customer loans excluding cash advances
*** Crédit Foncier does not own any trading securities; bonds are held in connection with credit transactions or for hedging the ALM portfolio.
6
Risk management
4.2.3 - Quality of portfolio exposed to credit risk
4.2.3.1 Breakdown of exposures by credit quality
RATING (INTERNAL) AND QUALITY OF OUTSTANDING*
INDIVIDUAL LOANS
The distribution below indicates the quality of outstanding
retail lending: 60% of retail lending is of high or very high
quality and has a rating between 0 and 5. Including average quality ratings (6 and 7), the percentage is 85%
Internal ratings of outstanding Individual loans
60%
60%
57%
2007: €40,145 M
50%
2008: €43,707 M
40%
30%
30%
25%
20%
10%
6% 6%
2% 2%
2% 2%
Doubtful or
in default
Ratings or
scores from
other sources**
3%
5%
0%
0 to 5:
High or
very high quality
6 & 7:
Average
quality
8 & 9:
Low
quality
Unrated or
not rateable
*
"Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure
to credit risk under IFRS consolidated gross figures (performing and doubtful).
** Ratings or scores from other sources: outstanding loans of a subsidiary whose scores will be migrated to the Crédit
Foncier group information system in the coming months.
*** Pro forma 2007 outstanding loans: breakdown taking into account CFCAL outstandings.
FRENCH PUBLIC SECTOR PORTFOLIO
– BREAKDOWN BY BASEL II RATING
Ratings for French Public sector
For French public sector financing activities, the Crédit
Foncier uses the internal rating tools provided by GCE. Of
the total outstanding loans, 82% (excluding unrated/not
rateable) obtained a "favourable" rating (0 to 5). This percentage rises to 97% if "acceptable" ratings are included
(ratings 6 and 7), a reflection of the excellent quality of
loan production.
Ratings for the social housing segment
Social housing institutions are rated using GCE rating
tools. Specific tools are used for rating associations, public
health institutions and retirement homes. 89% of the loans
(excluding unrated/not rateable) obtained a "favourable"
rating (0 to 5). This percentage rises to 98% if "acceptable" ratings are included (ratings 6 and 7).
5 - Human and
6 - Risk management
French public sector portfolio - Breakdown by Basel II rating
79%
80%
70%
French public territorial
67%
Social housing
60%
50%
40%
30%
20%
17%
12%
10%
10%
9%
3%
0%
Favourable
Acceptable
0%
0%
Uncertain
0%
0%
Other ratings
0%
Defaults
Unrated or
not rateable
For the investors segment, 62% of the portfolio has a Basel
II rating. More than three-quarters of the outstanding loans
rated have favourable or acceptable ratings. This segment
has the lowest proportion of "uncertain, X and Z" ratings.
CORPORATE & INSTITUTIONAL SECTOR PORTFOLIO
– BREAKDOWN BY BASEL II RATING
For the Corporate & Institutional sector as a whole, Crédit
Foncier uses tools developed by CNCE (PIM intranet,
Anadefi, CNCE model for large accounts, etc.).
The proportion of loans that had been rated remains significantly higher for the real estate developer/property dealer
activity given how recent these outstanding loans are. More
than three-quarters of the portfolio in this segment has a
Basel II rating. Ratings for this portfolio are mainly favourable or acceptable (74% of rated outstanding loans).
For corporate lending, 64% of the loans have a Basel II
rating. Of the loans rated, more than 62% of them have
favourable or acceptable ratings. Less than 14% of the
portfolio (which has been rated) has been given an uncertain rating, X or Z.
Corporate & Institutional sector portfolio - Breakdown by Basel II rating
39% 39%
40%
35%
Companies
38%
36%
Long-term investors and specialised financing
32%
Real estate developers and dealers
30%
24%
25%
20%
17%
15%
15%
10%
8%
10%
9%
8%
5%
4% 4%
5%
7%
2%
3%
0%
Favourable
Acceptable
Uncertain
Other rating
Defaults
Unrated
6
Risk management
External ratings are public long-term ratings attributed by one
of the three major rating agencies: S&P, Moody’s or Fitch.
INTERNATIONAL PUBLIC CUSTOMERS
– FINANCIAL TRANSACTIONS
External credit rating agencies
The GCE rating is GCE's internal rating which has been
assigned to each counterparty.
Each GCE rating is attributed by the managing entity of
the Group in this segment of activity. For the IPF activity,
Crédit Foncier acts as the management unit within the
Group; GCE ratings therefore reflect the internal rating
model approved by Crédit Foncier for this asset class.
In terms of securitisation, the GCE rating has been aligned
with external ratings issued by external rating agencies.
For securitisations, Crédit Foncier relies on external
ratings, and the GCE rating, pursuant to Basel II standards, is based on the following rules:
Agency Ratings
available
2 public ratings
3 public ratings
Ratings retained by the Crédit Foncier
pursuant to GCE methodology
Lower of the 2
Lower of the 2 best
Grade
Long-term
Exposures
E1
E2
E3
E4
E5
E6
Fitch
AAA
A+
BBB+
BB+
B+
to
to
to
to
to
AAABBBBBB-
<= CCC+
Breakdown of exposures* on MAJOR COUNTERPARTIES by
internal rating: Securitisations, Banks, Sovereign states,
International Public Financing, Large Companies and
Specialised financing
The breakdown of ratings for balance sheet commitments
at 31/12/2008 involving major counterparties illustrates
the high quality of the portfolio: almost all (99.7% of
rated outstanding loans) are of investment grade. The only
Absence of external rating. Procedure adopted to use, for banking portfolio items, the issuer's credit assessments
As of 31/12/2008, the weighting of securitisation positions was determined based on the external ratings of the
tranche in question using ratings issued by the three
major rating agencies Moody's, Standard & Poor's and
Fitch. In the event that there is no external rating of a
tranche, a weight of 1250% of the exposure is applied, in
line with the standard method.
Cross-reference table for external assessments and various
grades of credit quality
The correspondence between grades of credit quality as
defined in Basel II and the ratings of the three agencies
used by the Crédit Foncier are shown in the table below:
Moody's
Aaa to Aa3
A1 to A3
Baa1 to Baa3
Ba1 to Ba3
B1 to B3
<= Caa1
S&P
AAA
A+
BBB+
BB+
B+
to
to
to
to
to
AAABBBBBB-
<= CCC+
Securitisation
20%
50%
100%
350%
1,250%
1,250%
assets in the speculative category are limited to a total of
€99 million and these have been classified as "at risk" by
Crédit Foncier.
Sections 6 (Securitisations) and 7 (G-7 Exposures) of this
document provide further information on these assets.
The Basel step 1 Category (AAA to AA-) represents 86%
of outstanding loans.
5 - Human and
6 - Risk management
Large counterparties 2008
A
A+ 2%
4%
AA17%
Securitisations by internal rating 2007
BBB BBBn.s. n.s.
BBB+
A2% 1% Not informed 5%
€52 938 M
BBB
0,4%
€25 390 M
AAA
58%
AAA
99,4%
AA
6%
AA+
5%
* Source: restated management data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall
exposure to credit risk under IFRS consolidated gross figures (performing
and doubtful).
Investment grade
AAA/AA+/AA/AA-/A+/A/ABBB+/BBB/BBBNon-investment grade (speculative)
BB+/BB/BB-/B+/B/BCCC+/CCC/C
Securitisations by internal rating 2008
B
0,2%
BB0,3%
A1,8%
The following tables provide information about the breakdown of internal ratings by major counterparties in order of
relative importance for the most significant portfolios.
BREAKDOWN OF SECURITISATION EXPOSURES* BY INTERNAL
RATING
Approximately 96% of securitisations are rated AAA.
Positions in the AA and A- categories are limited in amount
and are monitored carefully by the bank. The AA+ position
is a German RMBS transaction rated by two public agencies; the A- position corresponds to a healthcare securitisation transaction in Italy. This A rating is a direct reflection of the local authority’s credit rating.
There are only two assets in the speculative category (€99
million), and they have been on the Watch List since mid2008 and classified as "at risk" by Crédit Foncier.
€23 426 M
AA+
1,9%
AAA
95,6%
Investment grade
* Source: restated management data. Balance-sheet commitments at year
end (excluding off-balance sheet commitments and liabilities) representing
overall exposure to credit risk under IFRS consolidated gross figures (performing and doubtful).
Additional detail is provided
in Section 6 – Securitisations.
6
Risk management
Focus on the breakdown of exposures* for residential mortgage backed securities by internal rating
Crédit Foncier's RMBS portfolio comprises securitisations
of residential mortgages that were for the most part granted to individuals. These are prime assets with a high level
of granularity and are located in Europe. The shares acquired are all granular senior tranches rated AAA by one or
more agencies (with one exception, a transaction representing less than 3% of the portfolio which was downgraded
to AA in December 2008).
Securitisations
(underlying Individual mortgage asset)
AA+
2,8%
Netherlands that is very similar to the FGAS in France.
These transactions therefore represent a final risk with
the Dutch government and are rated AAA.
• Securitisations of US FFELP student loans (€2,962
million) with a guarantee from the US federal government for at least 97% of the loan principal and therefore also has a AAA rating.
• Three Italian public sector transactions (€500 million),
one representing a final risk with the Italian government
(rated AA-), the other two corresponding to Italian healthcare securitisations (one is enhanced by FSA and therefore rated AAA, the other is in the A- category, a reflection
of the credit quality of the underlying local authority).
Securitisations
(underlying International Public sector assets)
€15 662 M
AAA
97,2%
AA0,2%
A5,7%
Investment grade
* Source: restated management data. Balance-sheet commitments at
31/12/2008 (excluding off-balance sheet commitments and liabilities)
representing overall exposure to credit risk under IFRS consolidated gross
figures (performing and doubtful).
€7 584 M
AAA
94%
Investment grade
Focus on the breakdown of exposures* of public sector securitisations by internal rating
Crédit Foncier's portfolio of public sector securitisations
comprises three types of transactions:
• Securitisations of Dutch mortgages with an NHG guarantee (€4,122 million). NHG is a public entity in the
* Source: restated management data. Balance-sheet commitments at
31/12/2008 (excluding off-balance sheet commitments and liabilities)
representing overall exposure to credit risk under IFRS consolidated gross
figures (performing and doubtful).
5 - Human and
6 - Risk management
Focus on the breakdown of exposures on other securisations
by internal rating
mortgages on commercial assets. See details in Section
6.1 Securitisation exposures.
These securitisations concern the underlying assets of private operators and mainly concern CMBS with first-rank
Other SECURITISATIONS *
INVESTMENT GRADE
SPECULATIVE GRADE
INTERNAL RATING
31/12/08
AAA
AA+
AA
AAA+
A
ABBB+
BBB
BBB-
21,2%
4%
1,6%
5,4%
12,7%
BB+
BB
BBB+
B
BCCC+
CCC
C
33%
22%
NOT RATED
TOTAL
TOTAL in millions of euros
100%
180
* Source: restated management data. Balance-sheet commitments at 31/12/2008 (excluding off-balance sheet commitments and liabilities) representing overall
6
Risk management
BREAKDOWN OF EXPOSURES* ON THE INTERNATIONAL
PUBLIC SECTOR** BY INTERNAL RATING
The diagrams indicate portfolio concentration in the
higher rating categories. The "Not Rated" category (7%)
can be explained by the lack of public ratings for certain
assets. On the internal Crédit Foncier rating scale, the
underlying assets are mainly Class A or better.
Exposures by internal rating for the International Public Sector
2007
2008
A+
15%
AAA
35%
AA24%
A+
3%
€2 967 M
AA
21%
A
6%
A7%
AA+
5%
Investment grade
AA35%
Not informed
7%
AAA
17%
AA+
14%
€8 445 M
AA
10%
Investment grade
After taking into account the credit rating of guarantors and/or monoline insurers at the end of December
*
**
Balance-sheet commitments at 31/12/2008 (excluding off-balance sheet commitments and liabilities) representing overall exposure to credit risk under IFRS
consolidated gross figures (performing and doubtful).
Bonds issued by local authorities; based on "Basel" segments.
5 - Human and
6 - Risk management
BREAKDOWN OF EXPOSURES* ON SOVEREIGN STATES
BY INTERNAL RATING
The sovereign state portfolio is at the top of the rating scale,
with a majority of AAA ratings which can be explained by
investments in government securities, in particular French.
Exposures to A and BBB categories are from government
securities issued by sovereign states that are members of
the European Union.
Breakdown of exposures on sovereign states by internal rating
2007
BBB
5%
AA14%
AA
31%
2008
Not informed
2%
AAA
13%
A
8%
BBB+
3%
Not informed
2%
€6 170 M
€4 667 M
AA+
34%
Investment grade
AAA
46%
AA40%
Investment grade
* Source: adjusted management data. Balance-sheet commitments at 31/12/2008 (excluding off-balance sheet commitments and liabilities) representing overall
6
Risk management
EXPOSURES* ON BANKS BY INTERNAL RATING
The percentage increase in the AAA Bank segment
reflects Crédit Foncier's liquidity management strategy;
cash surpluses are invested short-term with sovereign or
semi-sovereign institutions such as the Banque de France,
Caisse des dépôts et consignations and Banque Postale.
As in 2007, more than four-fifths of exposures to banks in
the balance sheet had ratings greater than or equal to AA-
Breakdown of exposures on banks by internal rating
A+
14%
BBBA
1%
1%
Not informed 4%
Investment grade
AAA
30%
€13 199 M
AA26%
AA+
8%
* Balance-sheet commitments at 31/12/2008 (excluding off-balance sheet
commitments and liabilities) representing overall exposure to credit risk
under IFRS consolidated gross figures (performing and doubtful).
AA
16%
Note: The distribution of exposures to banks is based on management figures.
4.2.3.2 - Payment arrears and fair value adjustments
Crédit Foncier's exposure to credit risk includes €2,081 million of payment arrears and €922 million of impaired assets.
These exposures are presented after deduction of €350 million of fair value adjustments and
€279 million for collective impairments.
The movement in collective impairments and fair value adjustments during the period is broken down as follows:
Fair value adjustment
Collective impairment
Total
Balance as of January 1, 2008
Provisions (allocations)
Reversals used
Reversals unused
Other variations
(356)
(275)
29
238
13
(159)
(125)
14
0
(9)
(514)
(400)
43
238
4
Balance at December 31, 2008
(350)
(279)
(629)
Source Finrep 31/12/08
During the period, the Crédit Foncier group recorded €72
million in uncovered losses, and €12 million in reversals
on previously impaired assets.
Impaired assets, payment arrears and collective impairments or fair value adjustments are discussed below in
terms of sectoral diversification.
5 - Human and
6 - Risk management
4.2.3.3 - Cost of risk
After a low level of risk charge-offs in 2007 and early
2008, the end of the year saw the first signs of deterioration, in particular due to the downturn in the real estate
market leading to failure of certain real estate developers
or other companies that specialise in the real estate sector.
The volumes affected by this deterioration are limited but
are likely to increase over the first half of 2009.
As for individual customers, the market downturn has more
specifically affected bridging loans, in particular those that
have matured.
Given this context, a prudent provisioning policy was adopted to take into account likely future developments.
Collective provisioning models have been stress tested with
this in mind and new sectors of activity have been covered
by this type of provision (RMBS/CMBS and unlet offices).
The cost of risk in 2008 led to a total net provision of
approximately -€165.6 million. The cost of risk has three
components:
• An individual risk charge of -€38.8 million, of which
-€23.1 million for real estate developers and -€20.3 million for bridging loans that have been downgraded to
doubtful; these have been provisioned up to 100% pending the close of the sale and mortgage. Other activities
are still in a net reversal situation because of significant
corporate recoveries received in 2008. The method of
calculating the statistical provision is based on estimates
of recent security guarantees assigned a 10% stress factor (method used in 2007 and renewed).
• A net collective provision of -€122.5 million comprising:
- Real estate development: the deterioration in the parameters used for calculating the collective provision for
property developers led to an additional provision of
-€14.5 million.
- Investors and Structured Financings: the additional
provision for this activity was reflected in an additional
provision of -€21.1 million.
- RMBS/CMBS: the calculation of the provision was made
on the basis of the credit quality of the underlying transactions on the "Watch List" or "Migration List" (transactions for which there is a risk that the rating will be downgraded but for which no real risk of loss can be detected
at this stage). Overall, the provision was -€78.7 million.
- Unlet offices: provision of -€7.7 million related to five
transactions.
• An additional net risk charge of -€4.6 million has made
for variable-rate loans Individual sector), in line with
measures announced by the Crédit Foncier in January
2008, as an adjustment to the previous provision of
-€35 million made to cover loans that were most exposed to the risk of higher interest rates.
For collective provisions, existing methods of determining
provisions have been applied to 2008 outstandings but
based on the likelihood that difficulties in the real estate
market will lead to greater losses of value.
The collective provision for the portfolio of residential and
corporate mortgage backed securities is based on the
results of stress scenarios combining extreme assumptions for the activity. These scenarios were used to verify
the high quality of the portfolio and to classify entities
according to the robustness of their rating; the provision
was calculated on the basis of the least robust entities,
namely securitised trade receivables rated BBB and certain recent securitised residential claims mainly rated
AAA. All other securitised loans have AAA ratings. Given
this context, the provision of -€78.7 million is mainly justified by the only transaction classified in the Watch List
corresponding to two lines secured on an office building
(CMBS carried on the balance sheet of Crédit Foncier).
6
Risk management
4.2.4 - Exposure to counterparty risk
Credit risk arises both in lending activities and in market
operations, investment or payment transactions whenever
the bank has potential exposure to counterparty default
risk. Counterparty risk corresponds to bilateral risk on a
third-party with which one or more transactions have
been entered into. Counterparty risk is therefore the risk
that the counterparty to a transaction might default prior
to final settlement of all cash payments, whether the
transaction is classified in the banking or trading portfolio. Its amount varies over time with changes in market
parameters affecting the potential future value of the
underlying transactions.
Total value exposed to counterparty risk
Values exposed to counterparty risk amounted to €4,887
million at December 31, 2008. This corresponds in part to
derivative instruments acquired by the Crédit Foncier
group to hedge its exposure to market risk, for example
interest rate risk and currency risk. Value at risk includes
the cost of replacement and add-ons. Note 5.2 in the notes
to the consolidated financial statements provides details
on hedging derivatives.
4.3 - Diversification of risks
and concentration risk
Portfolio concentration indicator
The table below represents the weight of the leading counterparties in a specific category, respectively the 10, 20,
50 or 100 most important. It should be looked at in the
light of their relative weight in terms of amounts.
For securitisation, which represents a significant proportion of the portfolio of large counterparties, over 83% of
risks are concentrated among the first 50 exposures. This
concentration can be explained by Crédit Foncier's strategy to acquire transactions of significant size in the primary market following an in-depth analysis. In terms of credit risk, this concentration is only apparent, since the
underlying assets are mainly housing loans to individuals
and therefore have a high degree of granularity.
Large companies and the FLA-Social housing sector and to
a lesser extent the Specialised financing sector have a much
lower concentration, a reflection of the risk diversification
policy.
Direct exposure to sovereign risk is relatively concentrated
(less than 10 counterparties) as it involves only a few
European states.
The International Public sector portfolio is more diversified
(the top 20 represent 84% of total exposures). The
concentration of risk in this portfolio should continue to
decline given the policy of business development and
diversification in this sector. Exposures concern European,
Japanese or North American local authorities.
5 - Human and
6 - Risk management
Summary of major counterparty concentration
In millions of euros and as a percentage at 31 December 2008
Exposures* by Basel category
top10
top20
top50
top100
Total
Securitisation
7,798
[33%]
12,158
[52%]
19,391
[83%]
23,327
[100%]
23,426
and Social housing **
4,056
[18%]
6,052
[27%]
9,441
[42%]
12,188
[54%]
22,404
Large companies
1,395
[26%]
2,138
[40%]
3,277
[62%]
4,111
[77%]
5,326
IPF
5,429
[64%]
7,109
[84%]
8,445
[100%]
8,445
[100%]
8,445
6,153
[100%]
6,170
[100%]
6,170
[100%]
6,170
[100%]
6,170
1,035
[47%]
1,505
[69%]
2,031
[93%]
2,189
[100%]
2,190
Sovereign states
*
Source: Management data. Balance-sheet commitments at 31/12/2008 (excluding off-balance sheet commitments and liabilities),
gross figures (performing and doubtful).
** The "FLA and Social housing" grouping is as defined for the Crédit Foncier, i.e. it includes general public administration (751A).
Summary of concentrations of large counterparties
100%
100%
100%
100%
100%
93%
100%
83%
77%
84%
80%
69%
64%
60%
62%
54%
52%
47%
40%
40%
42%
33%
27%
26%
20%
18%
0%
TOP 10
TOP 20
TOP 50
TOP 100
Sovereign states
Large companies
IPF
Securitisation
and Social housing
6
Risk management
4.4 - Comments on commitments at December 31, 2008
4.4.1 - Comments on the Individual market
Outstanding loans
Outstanding loans for the Individual sector in France increased significantly (9%), especially for new homeowners, despite the overall market contraction (-23% in the number of
transactions in the private residential market). More than
70% of the loans are to new home owners, one third of
which are state-subsidised (PAS/PTZ). Overall volumes were
mainly affected by the slowdown in the rental market.
Crédit Foncier's market share rose from 5.4% to 6.5%.
The rate of doubtful loans for this market fell significantly
compared to 2007 and now stands at 1.9% (1.7% excluding subsidised loans). However, this decline is mainly due
to rule changes for recognising defaults on home purchases
at 180 days compared to 90 days previously. Without this
change, the rate of doubtful loans would have been practically stable.
Variable-rate loans make up 64% of all outstanding loans
and 59% of new home owner loans; however, more than
half of the loans in this segment have capped rates.
Nearly all loans are covered by mortgages and over 40% of
outstanding loans have various additional guarantees (see
section 5.3 – Effect of credit risk mitigation techniques).
The risk assessment carried out using a Basel II advanced
approach confirmed the quality of Crédit Foncier's portfolio.
In addition, a stress-test based on extremely negative
assumptions (sudden drop of 30% in real estate prices,
decrease in income for 5% of homebuyers) was run on outstanding loans in late 2008 and revealed very limited risks
(around €30 million not covered by collective provisions).
Annual Individual loan production for 2008
Despite the difficult economic environment, the quality of
Individual production in 2008 is virtually comparable to
that of 2007 and even better in some markets.
In terms of home purchases, which represented 71% of
Individual production, more than 55% of origination
scores were "favourable" and nearly 98% were "favourable"
or "acceptable".
As for the rental market, 64% of origination scores were
favourable and 98.30% were either "favourable" or
"acceptable", compared to 95.20% in 2007.
Debt-to-income ratios remain below 33% for most of the
production (78%), whereas the average loan-to-value ratio
was stable at around 60%.
Individual loan production fell by 13.6% in 2008, from
€9,357 million in 2007 to €8,084 million in 2008.
The breakdown of production by market shows how significant home ownership financing is: 46% for existing properties and 27% for new construction.
Rental investment is broken down into investment in new
construction (13%) and existing properties (3%), while
the other 11% of production concerns miscellaneous transactions.
Crédit Foncier's brick and mortar networks (independent
agents, agency walk-ins or Entenial agents) originated up
to €6,206 million, whereas its partner networks, including
the CFCAL and Banco Primus subsidiaries, originated up
to €1,877 million.
Overall, the decline in Crédit Foncier’s loan origination is
without a doubt below the market average thanks to firsttime homebuyers acquiring existing properties.
In terms of state-subsidised loans (PAS), Crédit Foncier
remains the market leader with 32% of the market share.
Out-of-court recovery, insolvency and litigation involving
Individual customers
The rate of loans in out-of-court recovery fell slightly at the
end of 2008 (1.5% instead of 1.6% in 2007).
5 - Human and
6 - Risk management
The percentage of insolvent borrowers remained stable at
0.3%. There was a slight increase in outstanding loans in
litigation (0.9% compared to 0.8%) after several years of
decline.
The rental sector remained stable at a low level (0.8%),
although conditions may worsen for this sector in the
months ahead.
Rate of loans in arrears by level of arrears
€40 145 M
€43 707 M
2,7%
2,7%
0.8%
0.9%
2.5%
2.0%
0.3%
from 1.7% of outstanding loans in June 2008 to 2.1% at
the end of December 2008. Among these loans, capped
variable-rate loans to homeowners 3 months in arrears fell
marginally from 2.5% in June 2008 to 2.4% at the end
of December 2008.
A comparison with 2007 figures reveals the following:
• The increase of the rate index in July 2007 to September
2008 did not cause arrears to increase, implying that the
crisis was merely financial at the time.
• However, since June 2008, the crisis has started to spread
throughout the wider economy as shown by an increase in
arrears despite lower index rates. Nevertheless, the
upward pressure on the percentage of variable-rate
homeowner loans 3 months in arrears between June and
December 2008 needs to be put in perspective, as these
percentages did not deteriorate significantly compared to
June or December 2007: 2% of loans were in arrears in
June 2007 and 1.9% in December 2007.
Total outstanding
3.0%
0.3%
1.5%
Litigation
1.0%
1.6%
1.5%
0.5%
Insolvent
Out-of-court
recovery
Variable-rate loans to Individual customers
Loan production in 2008 characterised by controlled
rates and payment terms
0.0%
2007
2008
Source: management data
Loss analysis – arrears
After improving in the first half of the year, portfolio losses
increased slightlyduring the last two quarters for the subsidised homebuyer segment (loans 3 months in arrears
rose from 2.5% to 2.7%). This increase was at a more
moderate level for regulated loans (from 1.6% to 1.8%)
but higher for private sector loans (from 1.4% to 1.8%)
over the same period.
Developments related to variable-rate loans are consistent
with the rest of the portfolio. The rate of variable-rate
loans to homeowners 3 months in arrears rose steadily
In order to maintain attractive and secure variable-rate
loan options to a range of clients with different profiles,
Crédit Foncier implemented all of the clauses of the
Chatel Act – which entered into force on October 1, 2008
– and will implement all of the banking industry commitments listed in the report by French legislator Frédéric
Lefèvre.
Since March 12, 2008, Crédit Foncier offers loans with
lifetime interest rate caps of 3% above the start rate (reduced to 2% for state-subsidised loans Prêt à l'Accession
Sociale [PAS] for the first 10 years).
A limit on the variation of monthly payments, linked to the
rate of inflation, is still offered to homebuyers taking out
regulated loans.
6
Risk management
In addition, three new types of loans were introduced on
June 10, 2008:
• Periodimo Loan: Periodimo Loan: This loan has an initial 6, 8 or 10 year-period at a fixed rate so that complementary home loans taken out by the customer can
be added to the main loan. The rate during the second
period is adjusted yearly and is capped.
• Justeo Loan: This variable-rate loan is capped at the
start rate and can only fall in line with the annual
adjustment of the rate index (EURIBOR 12 months).
• Tendance J: This is one of Crédit Foncier's traditional loans
and has been renewed. It has an initial fixed-rate period
that lasts 3 or 5 years. The rate during the second period
is adjusted every 3 or 5 years and always has a rate cap.
Finally, for customers that prefer a fixed-rate solution,
Crédit Foncier also offers Possiblimo loans. These are
fixed-rate loans whose payments increase gradually by no
more than 1% per year, consistent with the rule for regulated loans.
The evolution of customer demand has changed the
breakdown of fixed and variable-rate loans: fixed-rate
loans made up 57% of production in 2008 compared to
27% in 2007. For variable-rate loans, nearly 70% of the
homebuyer production in 2008 had interest rate caps
and/or limited monthly payment and term increases,
which offers customers more security.
Analysis of outstanding variable-rate loans
At the end of 2008, almost two-thirds (64%) of total outstanding loans to Individual customers (€43.7 billion) had
variable-rates. However, almost half (46%) of this amount
has some form of a "cap" that either limits rate increases
on regulated, variable-rate loans to the rate of inflation or
caps the interest rate when the loan is originated or has
been added to the loan contract to provide additional
security. The percentage of controlled or capped variablerate loans to homebuyers was 57% as opposed to 27% for
rental investments.
Of the €15 billion in uncapped loans, a majority are to
homebuyers and include mechanisms for "smoothing" the
payment schedule via the "omega engine" (see below) or
the "Adaptable 2000" loans inherited from the former
range of Entenial loans.
Most of the remaining uncapped loans (€5 billion) have
been made to rental investors who can offset all or part of
the increase in monthly payments by raising rents.
Details of initial provisions to give additional security to
variable-rate loans
Several contractual measures have been designed to protect borrowers from the consequences of a rising rate index
and help them remain solvent. These measures include:
• Capped variable-rate loans.
• Extended loan terms, limited to 20% of the initial term.
• For regulated loans, scheduled payments are capped at
the rate of inflation if interest rates rise and any part of
the loan that has not been repaid by the end of its term
is written off in the client’s favour (levelling-out of the
"balloon" effect).
• The Omega engine mechanism that spreads out the
required increase in monthly payments over the remaining term of the loan if the scheduled repayments are
no longer sufficient enough to amortise the loan before
the end of an extended term, so that the customer does
not have to deal with a sudden, burdensome increase in
monthly payments.
Risks that may result from a rise in Benchmark indices are
limited by:
• Strict loan approval procedures, with rules for calculating
debt ratios based on a rigorous assessment of income and
expenses.
• Financing formulas that make it possible to smooth out
payments throughout the entire term of a loan, especially
when combined with a regulated loan such as an interestfree loan (Prêt à taux Zéro, or PTZ).
5 - Human and
6 - Risk management
Extraordinary and additional safeguards for customers most
exposed to rate hikes
From August 2007 until the end of the summer 2008, in
light of the financial crisis, the sharp rise in interest rates for
a period of several months led to concern among borrowers
who had taken out an uncapped variable-rate loan from their
bank to finance the purchase of their home.
Faced with this particularly difficult and sudden spike,
which affected financial markets everywhere, the Crédit
Foncier group set up a project-managed action plan designed to offer a range of solutions adapted to the needs of different customer segments. By late 2007, this plan offered
personalised support to clients in the most precarious situations by renegotiating the loan at a fixed rate. Then, in
December 2007, several extraordinary measures were proposed to customers who had contracted an variable-rate loan to
finance the purchase of a home. These measures were
announced on January 18, 2008 and added safety nets to
existing contracts (see above) targeting loans that were most
affected by the rate hikes.
Plan A
This measure caps the interest rate and amends all affected loans by (i) limiting increases in monthly payments to
that of inflation and (ii) writing off deferred interest on the
loans that have matured.
Plan B
Since April 2008, Crédit Foncier has offered to transform
the variable-rate loans of its most vulnerable customers
into fixed-rate loans with the possibility of progressive payments if necessary.
The annual adjustment of monthly payments, limited to
between 0.25% and 1%, results in a smaller monthly payment than the client would have had to pay when the rate
was adjusted. The rate of the new loan is lower than the
adjusted rate so that the customer remains solvent. The
customer keeps the original repayment schedule with its
progressive increases.
Plan C
This measure is identical to that of Plan B, except that
monthly payments do not increase. This involves a fixed
rate with fixed payments.
Implementation
These measures were offered to customers via amendments to their contract and implemented after the customer had accepted them in writing. This process was actively engaged throughout 2008 with the help of external
service providers and a call centre to guarantee logistics
back-up and automate processing as far as possible.
In the end, once the amendments returned had been processed, 71% of homebuyers accepted the proposal in 2008.
The implementation of these measures helped secure the
risks associated with this market, notably by keeping customers solvent. It should be noted that no properties associated with these loans have been repossessed to this day
and that the rate of arrears has not changed significantly.
Outlook for the first half of 2009
The European Central Bank lowered its discount rate six
times between October 2008 and April 2009 from 4.25%
to 1.25%, its lowest level ever. Its aim was to stimulate the
economy by lowering the cost of credit, a strategy that is
helping support demand for housing loans and promoting
variable-rate financing solutions with rate caps.
6
Risk management
Real estate bridging loans to Individual customers
Securitisation – Mortgage loan acquisitions
Crédit Foncier made a commitment to extend bridging loans
maturing within three months at a preferential rate (current
legal rate) for a period of six months. In addition, it offered
all bridging loan customers a free appraisal of the underlying
real estate, provided by its subsidiary Serexim.
The business involving the securitisation/acquisition of
mortgage loans is discussed in a another section of this
report, pursuant to financial transparency guidelines set
forth in Pillar 3 of Basel II (cf. Chapter 6 – Securitisation).
At September 30, 2008, approximately 2,300 loans amounting to €140 million had been identified and qualify for this
measure. In this context, the number of bridging loans downgraded to doubtful has increased significantly. Provisions are
set aside on a prudent basis of 100% until mortgages are
finalised and the collateral is eventually sold.
Loan restructuring
CFCAL
The loan restructuring business is the subsidiary CFCAL's
main activity and has slowed considerably (-34%) ever
since variable-rate loan production virtually ceased and
origination conditions tightened.
Outstanding loans at December 31, 2008 were stable at
€952 million and the rate of doubtful loans (6.75%) is
gradually returning to normal levels, commensurate with
the risk profile of this activity, after reaching an exceptionally low level before the financial turbulence.
4.4.2 - Comments on the French and international
public sectors
French Local Authorities
The Crédit Foncier group is Groupe Caisse d’Epargne's
short and long-term financing arm for French local authorities and institutions. The Crédit Foncier group must play
a key role within GCE.
The sector experienced a slowdown due to the French
election season and the financial crisis.
Outstanding loans in the sector grew more moderately in
2008, after increasing considerably in 2007 due to the
sale of Natixis activities (for €4.8 billion) and a €1 billion
financing deal for the Ile de France region.
Outstanding loans with structured rates to French local
authorities remained stable at €2 billion. These loans are
monitored and controlled by both GCE and Crédit Foncier
and are not on a watch list.
The cost of risk remains moderate at -€0.6 million.
Social housing
Banco Primus
This subsidiary was consolidated in the second half of
2008 and mainly deals with loan restructuring in
Portugal and Spain. Approximately 90% of its outstanding loans (€285 million) are tied to restructured mortgages with average loan-to-value ratios that are satisfactory (approximately 60%). At 31/12/2008, the rates of
arrears and litigation for this business, however, were
higher than targeted rates. This is the subject of careful
scrutiny by the parent company.
This business line originates regulated or unregulated
loans for the social housing sector in collaboration with
the Caisses d’Epargne.
Regulated loans (prêt locatif social, or PLS and prêt locatif intermédiaire, or PLI: loans with tax incentives for
investment in social housing for rental) are backed by
public guarantees or mortgages.
New loans for this segment increased significantly in
2008 (up 13.6%). Outstanding loans rose slightly more
than 4% despite the financial crisis.
5 - Human and
6 - Risk management
This business includes a very small percentage of outstanding structured loans (monitored).
Only one outstanding receivable of €40 million out of the
entire portfolio consists of leveraged products with fragile
counterparties. No transaction has been placed on a
watch list.
International Public Sector – IPF
The Crédit Foncier group is GCE's pilot IPF arm. It is responsible for front-office sales as well as servicing loans
that are generally acquired by Compagnie de Financement
Foncier. The IPF business unit finances international local
authorities via loans or bond acquisitions. The credit rating
of these counterparties is usually very good and closely linked to the rating of the countries they are located in.
The Crédit Foncier group conducts almost all of its IPF
business in low risk countries: the Euro zone, Switzerland,
Japan, Canada and the United States.
When assessing the credit quality, the Crédit Foncier
group uses its own internal rating model that is based on
migration patterns and probabilities of default ratings
published by the rating agencies. These ratings are reviewed annually. Each new transaction is approved by an
IPF-specific process within a framework delegating decision-making authority, established in collaboration with
CNCE. IPF activities are also regulated by a system of
country quotas validated by CNCE.
Exchange or interest rate swaps are used as micro-hedging
instruments against foreign exchange risk on assets denominated in foreign currencies.
The 2008 production was concentrated with counterparties rated in the Step 1 category (AA-a to AAA) located in
Japan, Switzerland and North America (United States but
also in Canada).
4.4.3 - Comments on the private sector
Real estate development
Both residential and commercial real estate markets experienced a sharp slowdown in sales (-30%), which impacted the business of property developers.
Production slowed down significantly (-15%) and outstanding loans decreased by -28%. It should be noted that
outstanding loans for real estate development represents
less than 1% of Crédit Foncier's total outstanding loans
and that the latter has tightened its loan origination conditions for this segment (capital requirements, rate of preconstruction sales).
This trend should continue due to GCE and Crédit Foncier's
decision to reduce or freeze counterparty limits.
Most of this year's new watch list and litigation entries
come from the real estate development business. It constitutes a significant share (almost €38 million) of this year's
cost of risk.
Investors
This business has also been affected by the crisis with
net production falling 35%; however, outstanding loans
remained stable.
A review of the portfolio did not reveal a decline in occupancy rates or value of rental properties.
A significant increase of defaults in this sector has not
been recorded either. In these circumstances, the standalone cost of risk remained stable but, as a prudential precaution, the collective provision has been increased in
expectation of unfavourable appraisals (see below).
An examination of available loan-to-value ratios (LTV) for
this portfolio shows that risks are well-covered.
6
Risk management
Financing of office space without pre-booking
Crédit Foncier has set a maximum limit of €200 million
on financing (senior loans and renovation loans) for speculative office space acquired by investors or developed
by real estate developers without a minimum booking rate.
This limit was frozen in the second half of 2008.
The commitments relate to 11 deals but the progress of
work in the portfolio is not sufficient to provide a meaningful analysis of future rental prospects. As a result, as
a prudential measure, a collective provision of up to €7.7
million was set aside for this portfolio.
Companies
For Crédit Foncier, this sector mainly consists of real-estate leasing transactions (REL) by its subsidiaries Cicobail,
Cinergie and Locindus. Production slowed down at the
end of the year (-19%) and outstanding loans have stabilised.
Losses in this sector did not increase. Furthermore, REL
financing where the lender owns the building constitutes
a solid guarantee and makes it easier to put the property
back on the market for rent.
International
This business was recently developed via the acquisition
of commercial mortgage-backed securities (CMBS). Crédit
Foncier's "at risk" CMBS position comprises two mezzanine tranches of the same debt. These tranches are publicly
rated BB/B and BB- by Fitch and S&P respectively after
being downgraded during the second half of 2008. A safeguard procedure was initiated for the borrower in
November 2008. The underlying asset is a CMBS heavily
weighted by one office building. Based on an appraisal in
October 2008, the loan-to-value ratio for the tranches
held by Crédit Foncier stood at 94.8% and 98.6%. This
transaction has been on Crédit Foncier's watch list since
30/06/2008 and is eligible for collective provisioning.
Public-Private Partnerships
2008 marks the first year that production grew significantly (€600 million) and assignments were recognised
on the balance sheet.
The risk in this segment is essentially tied to construction
phases as builders may be weakened by current economic
conditions. Once operational, a local authority or the
government is generally exposed to most of the risk.
Stress testing the commercial portfolio
The quality of loans and guarantees is reflected in the
results of stress tests applied to all production. The valuation model for collective provisions, broken down by business segment on the basis of assumptions made by real
estate experts, determines a provisioning rate for each sector and type of financing. The average provisioning rate for
the private sector market is 1.58%.
Furthermore, after applying an internal worst case scenario
stress test that downgrades the previous assumptions for
markets, investors, specialised financing and REL by a further 50% and downgrades assumptions for sales turnover
and prices for real estate development projects, the resulting increase in the theoretical risk of loss is limited to €62
million. This loss could be sustained by the group thanks to
the volume of its outstanding loans and financial capacity.
This information is used to verify that hedges against real
estate market risk as well as provisions based on normal
downturn assumptions have been properly assessed.
5 - Human and
6 - Risk management
5 - Risk mitigation techniques
5.1 Valuation and management
of collateral instruments
Automatic revaluation is differentiated by region and
metropolitan area for all residential loans to individual
customers.
Crédit Foncier's combined loan portfolio (individual, social
housing, corporate) is mostly covered by real estate mortgages and guarantees from mortgage insurance companies
An automatic revaluation is also carried out on collateral
for residential loans to professionals if the transaction cost
is less than €450,000 or the outstanding principal is less
than €360,000.
When loans are originated, underlying assets are subject
to an evaluation and, if the following conditions are met,
an appraisal:
• Financing for residential housing whose total cost is
equal to or greater than €450,000 and only if the outstanding principal on the loan is greater than or equal to
€360,000.
• Financing for commercial property.
Crédit Foncier periodically updates the values of its mortgage collateral (building collateral regardless of the type:
mortgage guarantee, lender's lien, authentic instrument,
commitment to transfer mortgage, mortgage bond) using
real estate indices that track annual changes in the real
estate market.
This revaluation is either automatic or carried out by an
appraiser depending on the type and/or amount of the collateral:
• Automatic revaluation using yearly price indices compiled
by the Real Estate Studies and Research Department.
• Revaluation via an annual or triennial appraisal of the
real estate by Foncier Expertise, which has obtained the
first certification of services issued by Bureau Veritas
Certification.
Mortgages for residential loans to professionals (e.g. lowincome housing) that exceed €450,000 and whose outstanding principal exceeds €360,000 (in compliance with
laws governing sociétés de crédit foncier) are revalued
using the INSEE consumer price index.
Finally, non-residential loans or loans whose principal
exceeds the predetermined thresholds are revalued by
Foncier Expertise.
When calculating capital requirements, only first-rank
mortgages, lender's liens and eligible securities as defined
by the group's Risk Management Department are taken
into account for credit risk mitigation.
The table below shows the breakdown of collateral for
Individual customers and other segments at December 31,
2008. It should be noted that collateral values have been
limited to outstanding loan principals. Moreover, this table
only lists "pure" first-rank mortgages, meaning mortgages
that do no have any other guarantee from a mortgage insurance company or local authority, which is in fact the main
guarantee for the social housing market.
6
Risk management
Table of first-rank mortgages
(in millions of euros )
Business entities
Crédit
Foncier
Cie Financement
Foncier (SCF)
Environnement
Subsidiaries
TOTAL
Titrisation
(CFCAL, Banco Primus)
Individual
12,409
5,078
5,852
972
24,311
Other Segments
2,397
2,492
-
-
4,889
Total collateral
14,806
7,570
5,852
972
29,200
Source: Corep 31-12-2008
5.2 - Insurers
Part of Crédit Foncier's loan portfolio is guaranteed by credit institutions, local authorities (notably for public-private partnership loans) and mortgage insurance companies.
The main suppliers of personal guarantees on mortgage
loans to Individual customers are the FGAS, mortgage
insurance companies (e.g. SACCEF) as well as other credit institutions (mainly Crédit Logement and intra-group
bank guarantees):
• The Fonds de Garantie à l'Accession Sociale à la propriété
(FGAS) provides a guarantee by the French state for home
ownership loans governed by regulated loan agreements
and guaranteed by first-rank collateral (mortgage or lender's lien). For this reason, it benefits from the French
state's external ratings, and allows a 0% weighting for
loans for which FGAS coverage was signed prior to
December 31, 2006. Due to a change in the FGAS coverage methods, protections granted thereafter have a 15%
weighting for the loans in question.
• Crédit Logement is a financial institution, subsidiary of
most large French banking networks, whose long-term
rating is Aa2 at Moody's and AA at Standard & Poor's.
Both agencies assign it a stable outlook. Loans covered by
Crédit Logement receive a 20% weighting with the standardised approach, related to the regulatory weighting
applicable to credit institutions and deducted from the
credit ratings of the country where the underlying collateral is located (France in this instance).
• SACCEF (recently renamed Compagnie Européenne de
Garanties et Cautions - CEGC) is a company that specialises in bank loan surety and is held by Natixis Garanties.
Standard & Poor's downgraded its rating in the last quarter of 2008 from AA- to A+ causing a change in the
weighting of covered outstanding loans: weighting at 35%
or 75% for residential mortgages and 50% for other types
of individual loans. The Banking Commission authorised
loans in the real estate loan portfolio guaranteed by SACCEF to be classified using the standardised approach in
order to apply a single weighting of 35% at December 31,
2008 and at subsequent reporting dates, until the advanced approach (IRB) is adopted.
• Miscellaneous mortgage insurance companies (MG PTT,
Mutuelle du Trésor, Mutaris Caution, etc.).
• AAA-rated public entities (KFW via Provide transactions);
Provide transactions (MLF2004 and MLF2007), carried
out in 2004 and 2007, allow the Crédit Foncier group
to optimise equity. The Provide platform is a partially
financed synthetic structure in which the risk associated
with the mortgage loan portfolio, above the first loss
threshold that is sustained by Crédit Foncier, is almost
entirely transferred to KFW via a CDS. Kreditanstalt Für
Wiederaufbau (KFW) is a public institution that has an
explicit guarantee from the German government (sovereign segment) and has a 0% weighting as a credit derivative counterparty. KFW is publicly rated Aaa and AAA
by Moody’s and S&P, respectively.
• NHG is a guarantee provided by the Dutch government
on mortgages acquired by Crédit Foncier in late 2007.
This loan portfolio amounts to €87 million.
5 - Human and
6 - Risk management
5.3 - Effect of credit risk
mitigation techniques
• Intra-group guarantees (the insurers being mainly the
various Caisses d'Epargne and CNCE or Crédit Foncier de
France) whose applicability methods vary according to
whether regulatory calculations are performed on a standalone company basis or on a consolidated basis at the
Groupe Caisse d'Epargne level. A financial guarantee of
€5.1 billion euros has been provided by Caisse Nationale
des Caisses d'Epargne in connection with the acquisition
of Ixis CIB's French local authorities business.
At December 31, 2008, the Group’s exposure to credit
risk was reduced by €34,628 million after taking into
account the collateral it received in connection with its
lending activities (guarantees and sureties) as well as
insurance.
The table below (source: COREP December 31, 2008;
limited to the Crédit Foncier group) summarises personal
guarantees, broken down according to Basel asset classes,
that are eligible for capital requirement reductions:
Excluding loans to Individual customers, the main insurers are the principal credit institutions and, in the case
of the French Public Sector, local authorities themselves.
Personal guarantees
LOAN INSURER
National
governments or
central banks
Institutions
Insurance
companies/
entities
Companies/
Other insurers
Other companies
Total
National governments
and central banks
Institutions
4,590
5,172
Companies
6
4,926
3
10,262
4,585
588
9
4,486
19,931
14,858
14,684
591
9
4,486
34,628
Individual clientele
9,763
4,935
Shares
Securitisation positions
TOTAL
Source Corep 31-12-2008
6
Risk management
The Figure below shows the breakdown as a percentage of guarantees by surety provider at December 31, 2008:
Coface 0.5%
Sovereign 17.0%
FGAS 25.9%
Provide (*) 13.0%
€34 628 M
SACCEF 2.9%
Local Authorities
12.3%
Other 6.8%
Caisse d'Epargne
18.3%
CRESERFI 3.6%
* Credit derivative eligible under Basel II
Source: Corep 31/12/2008
Information on Individual loan guarantees
Almost all outstanding Individual loans have mortgages
whose value has continuously increased over the past few
years, given the rise in real estate prices up to 2008.
More than 90% of outstanding loans are covered either by
first-rank mortgages or by Basel II-eligible personal guarantees
(mortgage insurance companies, bank guarantees, etc.).
The table below shows the COREP report breakdown of the
various protections for the individual portfolio.
5 - Human and
6 - Risk management
Summary of guarantee amounts for Individual clientele (mortgage loans)
Guarantees
(1) Regulated guarantees
(2) Mortgage insurance companies
31-12-2006
31-12-2007
FGAS (100% - State guarantee)
7,662
8,343
8,965
Subsidised sector (State guarantee)
1,825
1,361
1,210
CREDIT LOGEMENT (**)
1,668
2,041
2,348
618
836
1,425
CRESERFI (****)
(****)
(****)
1,242
PROVIDE (MLF2004)
(guarantee KFW)
2,276
1,957
SACCEF (***)
(3) International financial
organisations
PROVIDE 2 (MLF2007)
(guarantee KFW (*****)
2,565
MISCELLANEOUS (GMAC,…)
TOTAL
31-12-2008
4,486
255
14,050
17,103
19,931
First-rank mortgages
24,311
Total guarantees (Basel II-eligible)
44,242
Outstanding Individual loans total (******)
48,404
Percentage of guarantees compared
to total outstanding loans
(*)
(**)
(***)
(****)
(*****)
(******)
91%
Source: Corep 31-12-2008
Crédit Logement: Aa2/AA-rated institution by Moody's and AA by Standard & Poor's.
Compagnie Européenne de Garanties et de Cautions (ex-SACCEF before merger with CEGI) rated A+ by Standard & Poor's.
CRESERFI: mortgage insurance institution for civil servants.
Provide 2: Excluding the tranche held by Crédit Foncier, which amounts to €939 Million
Individual clientele: source COREP 31-12-2008, including commitments granted (deferred payments)
5.4 - Balance sheet and off-balance
sheet netting
The group assesses exposures tied to off-balance sheet
derivatives by applying an add-on (BIS weightings) to current exposures. Groupe Caisse d'Epargne has a policy of
systematically signing master netting agreements with its
banking counterparties. The vast majority of the time,
these are collateralisation agreements with margin call
triggers that reduce the actual exposure. In the special
case of Compagnie de Financement Foncier, these agreements are asymmetrical, meaning that only the counterparties provide collateral if need be.
6
Risk management
6 - Securisations
6.1 - Objectives, activities
and level of involvement
6.1.1 – Objectives
The Crédit Foncier group purchases into securitisation
transactions sponsored by third parties, mainly European
financial institutions, transferring mortgage loan portfolios
through RMBS deals.
As an originator, the Group also securitises loans for internal purposes but merely to identify those mortgage loans
that are subject to specific internal financing arrangements. Securities issued as a result of these 100%-internal transactions are kept on the Group's balance sheet
and are not transferred outside the Group. Since all of
these securities are carried on the balance sheet, the
Group remains fully exposed to the risk of arrears and
losses on the underlying mortgage loans it originated. In
this context, securitisation is used for intra-group liquidity (between Crédit Foncier stand-alone and Compagnie de
Financement Foncier; it does not expose Crédit Foncier to
any additional risk, either in terms of final loss or of security valuation.
In terms of asset-backed securities (ABS), Crédit Foncier’s
main objective is to create and manage a diversified portfolio of excellent quality mortgage loans originated outside France. Mortgage loans are Crédit Foncier’s core business, its natural area of expertise, an asset class in which
it has developed a strong and substantial track-record.
RMBS are therefore a natural extension of Crédit Foncier’s
core competence. In the form of securitisations, these
positions are particularly secure due to the structuring of
the transactions and the seniority of the lines held.
Extreme risk simulations confirm that these lines are
appreciably less exposed to underlying asset market movements than directly-held exposures.
6.1.2 - The Crédit Foncier group's business
The Crédit Foncier group's securitisation transactions
consist of acquiring mortgage loan portfolios in the form of
notes that have received the best possible agency rating
(AAA). These are structured to provide maximum protection against credit, interest rate and exchange rate risks
and to eliminate all legal (transfer of ownership, compliance) and fiscal risks (withholding tax, etc.).
These assets are mainly financed via issues of obligations
foncières (French covered bonds) that are carried on
Compagnie de Financement Foncier's balance sheet. They
must meet regulatory requirements that apply to sociétés
de crédit foncier. These most senior securities and their
underlying assets are backed either by a mortgage or a
public sector guarantee. All of these transactions have
inherent protections (subordination of junior tranches,
reserve funds, credit spread, and protection against
exchange and interest rate risks).
In terms of the credit quality assessment, each new investment proposal is cross-checked, analyzed and vetted by
the Risk Department, which has developed substantial
internal expertise to perform those tasks including extensive stress modelling capabilites. Approval process for each
new transaction follows a specific delegation-of-decision
grid, established in collaboration with CNCE. This business
is also regulated by sector limits to ensure the credit portfolio's geographic diversity and quality.
Crédit Foncier targets underlying assets with a particularly limited risk profile:
• Publicly rated senior securities.
• Residential and, very marginally, commercial mortgage
debt.
• Public sector debt backed by a sovereign state (FFELP
student loans in the United States, NHG debt in the
Netherlands) or local authority debt (healthcare securitisations in Italy).
5 - Human and
6 - Risk management
6.2 - Approaches and external
credit ratings
6.2.1 - Approaches used
At December 31, 2008, weighted exposures on securitisation positions were calculated using a standardised
approach for all of Groupe Caisse d'Epargne's institutions
(except Natixis), including Crédit Foncier, whether as
investor in securitisation notes, as sponsor of a securitisation conduit or as originator.
6.2.2 - External ratings
At December 31, 2008, weightings on securitisation positions were based on external ratings assigned by the three
major rating agencies: Moody's, Standard & Poor's, and
Fitch. If a note is not rated by an eligible external credit
rating institution, a risk weighting of 1250% applies.
6.2.3 - Summary of accounting standards used
in connection with securitisations
Crédit Foncier's securitisation portfolio is held to maturity
and is carried on the balance sheet as "Loans and receivables due from customers". All of Crédit Foncier's positions
were tested for impairments at the end of 2008. No assets
have been subjected to fair value write downs in 2008.
6.3 - Crédit Foncier group's
exposures to securitisation
transactions
Financement Foncier through issuance of obligations foncières - French covered bonds). Securities issued in
connection with these internal transactions are carried on
the Group's balance sheet and are not transferred outside
the Group.
In terms of external securitisations, the Group's portfolio,
carried on-balance sheet, amounted to €23,426 million
at the end of 2008. It consists of cash transactions whereby ownership of the underlying assets is effectively
transferred. The Group does not enter into any synthetic
transactions except for those covering its own Individual
portfolio as part of its Individual customer activities (see
comments on Provide [MLF 2004 and MLF 2007] in sections 5.2 and 5.3).
In February 2009, a RMBS transaction in Great Britain,
worth approximately €1,182 million, recognised on
Crédit Foncier's stand-alone balance sheet as availablefor-sale (AFS), was sold off, resulting in a small realised
gain. The total value of the Group’s portfolio now stands
at €22.2 billion.
Securitisation positions acquired by the Crédit Foncier
group are broken down in the table below by exposure
category and rating:
• 96% of securitisations are rated AAA. The positions in
category AA and A are limited and monitored closely by
the group. The AA position is a German RMBS operation
that has public ratings from two rating agencies. The A
position is securitised healthcare debt in Italy, its singleA rating being a direct reflection of the local authority’s
credit rating.
• The speculative-grade positions (BB- and B) are related
to two assets (€99 million), officially on Watch List since
mid-2008 and classified as "at risk" by Crédit Foncier.
6.3.1- Securitisation exposures
Crédit Foncier group does not securitise impaired assets or
exposures that are in arrears.
The group securitises loans for internal purposes but only
to identify those mortgage loans subject to specific internal financing (portfolios financed by Compagnie de
6
Risk management
Crédit Foncier group exposures* to "classic" securitisation positions at 31/12/2008:
Type
Underlying guarantees
MIX
First-rank mortgage
on mixed assets
(Individual/commercial)
RMBS
AAA
AA+
AA
AA-
A+
A
A-
BBB+ BB-
B
247
First-rank mortgage
on Individual assets
14,976
First-rank mortgage
+ NHS guarantee
(Dutch government)
4,122
Total
438
FFELP (US federal
government guarantee)
CMBS
First-rank mortgage
on commercial assets
17
17
51
432
Public
Sector
7,584
Other
180
483
2,962
2,962
38
7
10
17
3
22,397
15,662
4,122
Corporate &
Aircraft collateral
Institutional
TOTAL
Individual
15,414
Italian government
FFELP
Student
Loans
Total
247
Public
Sector
Local authorities
Final risk
438
7
17
3
60
39
6
10
432
23
171
9
60
39
23,426
MIX : Residential and commercial mortgage-backed securities (mostly residential)
RMBS: Residential mortgage-backed securities
Public Sector: Public sector securitised debt
FFELP Student Loans: Securitisations of U.S. student loans, at least 97% of the principal is guaranteed by the US federal
government
CMBS: Commercial mortgage-backed securities (office buildings, malls, logistics and storage assets, etc.)
Corporate & Institutional: Securitisations in the aeronautical sector
(*) Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to credit risk under IFRS consolidated gross figures (performing and doubtful).
5 - Human and
6 - Risk management
Graphic presentation of securitisation positions* by ratings
AA+ A2% 2%
€23 426 M
AAA
96%
AA ; AA- ; A+ ; A ;
BBB+ ; BB- ; B ;
p.m.
(*) Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments
and liabilities) representing overall exposure to credit risk under IFRS consolidated gross figures (performing and
doubtful).
Graphic presentation of securitisation positions* by type
Corp. & Instit.
p.m.
MIX
Student Loans
1%
FFELP
CMBS
13%
1%
Public Sector
2%
€23 426 M
RMBS
83%
(*) Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments
doubtful).
6
Risk management
The Crédit Foncier group's securitisation portfolio comprises 84% of senior AAA-rated securities backed by
prime residential mortgages located in the 15 original EU
countries (including 18% that are backed by an additional
public entity guarantee); loans to students in the USA
backed by a federal guarantee (12%); public sector securities (Healthcare), for the most part Italian (2%); and
commercial mortgage-backed securities (less than 1%).
The Group's exposure to CMBS is negligible (less than 1%
of the total securitisation portfolio) and is tied to performing assets located in Europe, with the majority of them
in France. Two assets (€99 million) publicly rated in the
speculative category and located in France have been on
Crédit Foncier’s watch list since mid-2008. The decision
to put those assets on watch list followed a downward
revaluation of the underlying property, an increase in
vacancy rate, non-renewal risk for certain leases, and the
start of safeguarding procedures affecting the borrowing
company party to the transaction. Both of these assets
(€99 million) are the only two positions classified "at risk"
by Crédit Foncier. They are held on Crédit Foncier's standalone balance sheet.
The Crédit Foncier group's entire RMBS and CMBS portfolio has shown remarkable resilience when stress tested for
worst case scenarios involving massive defaults, rising prepayment rates and a crash in real estate prices (see below).
Impaired assets - Securitisations
No arrears or losses were recognised in 2008 on Crédit
Foncier group's securitisation portfolio.
Crédit Foncier's procedures for monitoring securitisation
transactions involve a detailed analysis of arrears, foreclosures and net losses recorded on the loan portfolios for
each transaction.
No assets have been subjected to fair value write downs by
the end of 2008.
6.3.2 - Retained or acquired securitisation
positions
Securitisation positions that meet the criteria set by the
Financial Stability Forum are explained in detail in
Chapter 7 (G7 reporting).
Outstanding debt is analysed below in terms of the nature
of securitised assets, geographical distribution and quality (breakdown by weight):
• Securitisation positions acquired by the Crédit Foncier
group are broken down in the table hereafter by exposure category and rating.
• 96% of securitisations are rated AAA. The amounts of
positions in category AA and A are limited and monitored closely by the company. The AA position is a German
RMBS that has public ratings from two rating agencies.
The A position is securitised healthcare debt in Italy, its
single-A rating being a direct reflection of the local
authority’s credit rating.
• The speculative grade positions (BB- and B) are related
to those two assets identified above (€99 million), officially on watch since mid-2008 and classified as "at
risk" by Crédit Foncier.
Breakdown by type of securitised assets
(exposure class)
Only three transactions, for a total of €500 million, were
covered by monoline financial guarantees. To date and
following the massive downgrade of most of these monolines' credit ratings, only one security (€51 million) is
still enhanced to the AAA level. This is a public sector
securitisation backed by a local authority with a public A
rating. If the monoline insurer’s rating were reduced, the
security rating would be downgraded to category A. To
date, this transition has already been observed on two
other historically enhanced securities (totalling €449
million). They are now rated A- and BBB+ respectively
based solely on their intrinsic credit quality.
5 - Human and
6 - Risk management
Securitisation portfolio (**) – Breakdown by COUNTRY and asset class
Type
Underlying guarantees
MIX
First-rank mortgage
on mixed assets
(Individual/commercial)
First-rank mortgage
RMBS
GerEurope
NetherSpain
France Greece Italy
Port.
many
(*)
lands
UK
USA
247
745 7,208
13 4,123
First-rank mortgage
+ NHS guarantee
(Dutch government)
Final risk
Total
Individual
15,662
Public
Sector
7,584
Other
180
247
973 1,171 1,182
15,414
4,122
Italian government
Total
4,122
17
17
Public
Sector
Local authorities
FFELP
Student
Loans
FFELP (US federal
government guarantee)
CMBS
First-rank mortgage
on commercial assets
Corporate &
Aircraft collateral
Institutional
TOTAL
433
483
2,962
7
27
117
17
2
3
752 7,211
171
6
27
117
2,962
9
13 4,888 5,095 1,171 1,184 2,967 23,426
MIX : Residential and commercial mortgage-backed securities (mostly residential)
RMBS: Residential mortgage-backed securities
Public Sector: Public sector securitised debt
FFELP Student Loans: Securitisations of U.S. student loans, at least 97% of the principal is guaranteed by the US federal
government
CMBS: Commercial mortgage-backed securities (office buildings, malls, logistics and storage assets, etc.)
Corporate & Institutional: Securitisations in the aeronautical sector
(*) Category "Europe" corresponds to a diversified portfolio of holdings located in several of the 15 original European Union member countries.
(**) Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to
6
Risk management
Graphic presentation of the geographical distribution of securitisation positions
United Kingdom
Germany 3%
5%
Portugal 5%
Spain
31%
Netherlands
22%
€23 426 M
Italy 21%
USA 13%
Eurozone (other), Greece, France
p.m.
(*) Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to credit risk under IFRS consolidated gross figures (performing and doubtful).
In February 2009, a RMBS position in Great Britain worth
€1,182 million was sold off resulting in a small realised
gain. This reduced the value of Crédit Foncier’s RMBS
portfolio from €15,414 million to €14,232 million.
Except for one German position, all of the Group's RMBS
positions in Europe have retained their AAA rating and are
particularly resilient to stress test scenarios combining an
explosion of default rates, falling real estate prices, and a
drastic reduction in the prepayment rate.
Only the most damaging scenarios generate ultimate
cashflow deficits on the RMBS positions held by the
Crédit Foncier group. These scenarios assume a combination of events of a magnitude such that they appear highly unlikely: an explosion of default rates in various
European markets starting in 2009 at 5% per year (translating into a cumulative default rate in excess of 13% over
the lifetime of these transactions), a significant and brutal drop in real estate prices of at least 50% (35% in
Germany), and a drastic reduction in prepayment rates.
For instance, a simulation was run for the Spanish RMBS
pool using the following assumptions:
• A sudden drop in real estate prices of -60%.
• An explosion of default rates (13% to 15% of the underlying loans being modelled to default and to result in
foreclosure on the underlying properties, while the current level of over 90-day arrears averages 2% for the
Spanish market).
• A reduction in prepayments of around 5% (versus 10%
currently).
In such a catastrophic scenario, an ultimate cashflow deficit may occur upon the transactions' maturity date, representing 1.52% of the outstanding principal (€110 million
compared to a €7.2 billion Spanish RMBS portfolio as
indicated in the table above). On a discounted basis, the
loss of revenue would represent 0.55% of today’s outstanding principal on Crédit Foncier’s Spanish RMBS portfolio,
equivalent to a 0.15% drop in the portfolio's return. Even
in this catastrophic scenario, the overall return on Crédit
Foncier’s Spanish RMBS portfolio remains above the
EURIBOR rate and in excess of its financing costs.
5 - Human and
6 - Risk management
Breakdown by weighting
The high percentage of quality securities, rated AAA in the securitisation portfolio, puts 97.6% of the portfolio in a 20%
weighting category (under the standardised approach):
Basel II weighting
using the standardised approach
Outstanding loans at
December 31, 2008
% of portfolio
20%
22,859
97.6%
50%
444
1.9%
100%
23
0.1%
350%
60
0.3%
1,250%
39
0.2%
23,426
100.0%
TOTAL
Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to credit
risk under IFRS consolidated gross figures (performing and doubtful).
It should be noted that a collective provision for the securitisation portfolio covers part of the positions weighted 350% and
1250%. In line with Basel II rules, this provision is deducted from the exposures detailed above.
Breakdown by weighting - securitisation positions
Value exposed to risks
100%
98%
80%
60%
40%
20%
0%
20%
2%
0%
0%
0%
50%
100%
350%
1250%
Basel II weighting under the standardised approach
6
Risk management
6.3.3 - Revolving securitised exposures,
distinguishing between originator
and investor interest
The Group securitises loans for internal purposes, but only
to identify those mortgage loans subject to specific financing, especially by Compagnie de Financement Foncier or
VMG. Securities issued in connection with these internal
transactions are carried on the Group’s balance sheet and
are not transferred outside the Group. These intra-group
transactions therefore do not result in any outside payments to investors that are not part of Crédit Foncier.
These transactions do not expose Crédit Foncier to additional risks vis-à-vis external parties and do not in any way
diminish the risk the institution is exposed to based on its
own portfolio of Individual loans.
6.3.4 - Summary of securitisation
activities in 2008
The activity involving acquisitions of external securitisation notes slowed significantly in 2008, and staff were
assigned to monitoring and managing the existing portfolio. Nevertheless, a few acquisitions were made in the
secondary market, corresponding to additional purchases
of securities already part of Crédit Foncier’s portfolio,
monitored and known to perform well. The amount of
these acquisitions was limited (less than €110 million in
2008 for the Crédit Foncier group).
Early in the year, Crédit Foncier also unwound a credit
default swap (CDS) on some of its RMBS portfolio concluded with a banking counterparty in 2007 to manage regulatory capital requirements in anticipation of Basel II capital weighting requirements. This transaction resulted in a
one-off gain of €175 million before tax.
5 - Human and
6 - Risk management
7 - G7 Reporting
In its report of April 7, 2008, the Financial Stability Forum
(FSF or G7) issued a series of recommendations in response
to the financial crisis, particularly in terms of financial transparency, valuation, risk management and rating agencies.
7.1 - CDO and exposures to monoline
insurers and other credit
enhancers
In the conclusions of the Senior Supervisors Group report,
the FSF called for improved financial communication in the
following five areas:
7.1.1 Collateralised debt obligations (CDO)
The Crédit Foncier group has no exposure to CDO.
• CDO and exposures to monoline insurers and other credit enhancers,
• exposures to CMBS (commercial mortgage-backed securities),
• other subprime and Alt-A exposures (RMBS, loans,
etc.),
• special purpose entities,
• leveraged buyouts.
These disclosure requirements were discussed in a working group involving the FBF, the SGCB and the AMF in
order adapt the FSF recommendations for France. The
financial information tables presented below have been
drawn up to meet these requirements.
7.1.2 Monoline insurers
The book value of credit-enhanced assets in the table
below does not correspond to direct exposures to monoline insurers. It represents secondary guarantees extended
by monoline companies to Crédit Foncier over some of its
assets. In all cases, Crédit Foncier holds an initial claim
against a primary counterparty other than the monoline.
All of these guarantees cover public sector financings
(loans or securities) extended directly to a sovereign state
or to a local authority or public institution.
These commitments are legally structured as financial
guarantees (and not CDS) and constitute an additional
security for the underlying security. These guarantees are
neither valued nor recognised on Crédit Foncier's balance
sheet (only the enhancement premium is recognised as an
expense when the guarantee is extended outside of the
underlying security or loan).
The breakdown of this monoline-insured portfolio is based
on IFRS net book values at 31/12/2008.
6
Risk management
Gross
notional
amount of
enhancements
in millions of euros
31/12/2008
Gross
notional
amount of
hedged
instruments
Fair value
Fair value of adjusted for
Residual
Fair
value
of
Fair value enhancements Fair value enhancements monoline
exposure to
of hedged
of hedges net of hedges credit risk
counterparty
before
instruments adjustments
purchased
and before (recognised on
risk from
adjustments the enhancemonolines
ment)
Enhancements acquired from monolines Protections acquises auprès de monolines
On CDO
(U.S. residential market)
with subprime underliers
-
-
-
-
-
-
-
-
On CDO
(U.S. residential market)
with non-subprime
underliers
-
-
-
-
-
-
-
-
Counterparty risk
on other transactions
5,103
5,103
5,857
-
-
-
-
-
Total exposure
to counterparty risk
from monolines
5,103
5,103
5,857
-
-
-
-
-
Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments and liabilities) representing overall exposure to credit risk under IFRS consolidated gross figures (performing and doubtful).
The breakdown by rating of underlying assets is shown below.
Gross exposures (IFRS net book value)
Intrinsic rating (before enhancement)
Monoline
Monoline rating
AMBAC
BBB+
CIFG
B-
FGIC
AA+ à AA-
A+ à A-
BBB+ à BBB-
Not Available
Total
%
18
664
17
0
699
11.9%
1,144
1,237
250
74
2,705
46.2%
CCC
0
0
0
123
123
2.1%
FSA
AAA
893
768
304
51
2,016
34.4%
MBIA
BBB+
108
0
0
205
313
5.3%
TOTAL
2,162
2,669
571
454
5,857
100%
36.9%
45.6%
9.8%
7.8%
100%
%
5 - Human and
6 - Risk management
The monoline rating is the worse of the two best ratings
from S&P, Moody's and Fitch at December 31, 2008. The
intrinsic rating of the underlying asset is its Basel II
rating before enhancement at the same date. Since the
end of 2008, CIFG’s rating has been upgraded from B- to
BB- following the implementation of an extensive commutation plan.
The enhanced securities have good intrinsic quality: prior
to any monoline enhancement, 36.9% of this portfolio is
rated step 1 (>=AA-) and 82.5% is rated step 2 (>=A-).
Exposures in the BBB category correspond to commitments in favour of the Polish and Hungarian governments
for €535 million, an Italian commercial mortgage-backed
security for €17 million and French public sector exposure for €19 million.
Exposures identified as intrinsically unrated (before enhancement) largely correspond to commitments with international public sector entities (up to €403 million) that have
not been rated publicly (based on internal scoring, Crédit
Foncier considers them to be investment grade exposures).
The remaining €51 million of exposures corresponds to
international public sector ABS in the healthcare sector
(the final risk resides with an Italian region).
The 7.8% of exposures falling in the "not available" category have not been rated publicly but are subject to internal scoring by Crédit Foncier that puts them easily in the
investment grade category (>= BBB-). On Crédit foncier’s
internal scale, an Ecolocale 6 rating is comparable to a
BBB rating.
7.2 - Exposures to commercial
mortgage-backed securities
(CMBS)
Crédit Foncier's "at risk" CMBS position comprises two
mezzanine tranches of the same transaction. These
tranches are publicly rated BB/B and BB- by Fitch and
S&P respectively after their downgrade from investment
grade in the second half of 2008. A safeguard judiciary
procedure was initiated against the borrower in November
2008. The underlying asset is just one office building located in France. Based on an appraisal as of October 2008,
the loan-to-value ratios for the tranches held by Crédit
Foncier stand at 98.6% and 94.8% respectively. The transaction has been on Crédit Foncier's watch list since
30/06/2008 and is eligible for collective provisioning.
6
Risk management
Table of at-risk CMBS exposures
Portfolio type
Gross exposure* (gross value
on the balance sheet before
losses/impairments) (a)
U.S. Market
Residual balance sheet value at 31/12/2008
Accumulated losses and
impairments recognised
Haircuts recognised through profit or loss
through profit or loss at
31/12/08 (since settlement) (b)
Other markets
at risk
-
99
-
-
-
-
losses and impairments for this year only
Accumulated changes in value
Haircuts recognised in equity (OCI)
recognised in equity at
31/12/08 (since settlement) (c)
changes in value for 2008 only
% of total CMBS haircuts at
31/12/08 (b+c)/a
(accumulated losses and impairments recognised through
P&L in 2007 and 2008 / gross exposure at 31/12/08)
-
-
Fair value of hedges (d)
External hedges not included in the loss
and impairments calculation
-
-
-
99
Net exposure (net of losses and impairments) (a - b - c - d)
5 - Human and
6 - Risk management
Breakdown of CMBS by sector
The two tranches considered "at risk" represent almost
two-thirds of the total CMBS portfolio which in itself
remains marginal compared to Crédit Foncier's total securitisation portfolio. The total securitisation portfolio main-
ly comprises residential mortgage and public sector positions, with CMBS positions representing approximately
0.7% of the portfolio.
Not at risk
42%
€171 M
"At risk"
(on Watch List basis)
58%
Source: management accounting data. Balance-sheet commitments (excluding off-balance sheet commitments
doubtful).
Breakdown of CMBS by location
Two-thirds of the holdings in the CMBS portfolio are located in France. The remaining third are located in the rest
of Europe. Crédit Foncier has no CMBS exposure related
to assets located in the United States or in Asia.
United Kingdom
1%
Germany 4%
Italy 10%
Europe * 16%
USA, Asia
p.m.
€171 M
France
69%
* 15 European Union countries.
doubtful).
6
Risk management
Breakdown of CMBS by rating
100% of the portfolio is rated by one or more rating
agencies. Securities rated in speculative category corres-
pond to the "at risk" exposures mentioned above.
AAA
22%
B
23%
AA
4%
€171 M
A
6%
BB35%
BBB+
10%
doubtful).
7.3 - Other subprime and Alt-A
exposures (RMBS, loans, etc.)
The Crédit Foncier group has no direct or indirect exposure to subprime or Alt-A assets. Crédit Foncier has no exposure to the U.S. mortgage market in general.
Besides the at-risk assets mentioned in section 7.2, the
Crédit Foncier group has no other exposures to securitisations considered at risk (based on watch lists).
Mortgage exposures (RMBS or loans) are only located in
the European Economic Area and countries with step 1
ratings, other than the USA.
Crédit Foncier's RMBS portfolio does not contain at-risk
instruments according to the criteria of the G7 recommendations. Outstanding assets amounting to €2.5 billion are
under closer scrutiny and serve as a basis for calculating
a collective provision on this portfolio. This outstanding
amount is not on a watch list and was not classified "at
risk" at December 31, 2008. More than 80% of these
€2.5 billion worth of assets in the portfolio are rated AAA
(18% in category AA+ and the remainder in category A).
7.4 - Special purpose entities (SPE)
General information related to exposures to SPE
At December 31, 2008, Crédit Foncier group did not have
any exposure to SPE (ABCP or other) other than those mentioned below, relating to the SIRP conduit consolidated
into the Crédit Foncier group since the second half 2008.
Sponsored conduits
Since 25/09/2008, Crédit Foncier has held 100% of the
€457 million in commercial paper issued by the publicly
rated conduit SIRP (A-1 by S&P and P-1 by Moody’s).
SIRP's asset portfolio consists of a perpetual subordinated
note issued by a wholly-owned subsidiary of Crédit Foncier
and an AIG zero coupon. Due to the depreciation of the
perpetual subordinated note and the capitalisation of the
zero coupon, the underlying repayment risk at maturity of
the programme in 2012 corresponds to a final exposure to
AIG. Rating agencies have aligned SIRP's ratings with
those of AIG.
5 - Human and
6 - Risk management
Moody and S&P's public ratings for the SIRP programme
were both placed on negative watch lists in September
and October 2008. They were then confirmed and removed from the watch list in early March 2009 after the US
government stepped in to support AIG.
The notion of sponsor refers to the administrator, rather
than an originating institution, which arranges and
manages an asset-backed commercial paper programme
or any other securitisation transactions that are used to
purchase exposures from third parties.
At 31 décembre 2008
SPONSORED CONDUITS - (SIRP, consolidated conduit)
€ millions
Amounts of assets financed
457
Facilities granted
457
Asset maturities (weighted average) - (as a %)
0-6 months
100%
6-12 months
More than 12 months
Breakdown of assets by location (%)
United States
United Kingdom
France
100%
Other (specified if significant)
6
Risk management
SPONSORED CONDUITS - (SIRP, consolidated conduit)
Breakdown of assets by external ratings (as a %)
31/12/2008
Breakdown
of assets
(%)
Car loans
-
Commercial loans
-
Commercial real estate loans
-
Residential real estate loans U.S. subprime only
-
Consumer credit
-
Personal loans
-
Residential mortgage-backed securities
- USA
-
Residential mortgage-backed securities
- non-USA
-
Commercial mortgage-backed securities
-
Collateralised debt obligations
-
CLO and CBO (1)
-
Other (Securities issued or guaranteed
by entities with ratings in the A category)
100%
(1) Collateralised loan obligations and collateralised bond obligations
AAA
AA
A
BBB
Non
Investment
Grade
-
-
100%
-
-
5 - Human and
6 - Risk management
7.5 - Leveraged buyouts (LBO)
Exposures to leveraged buyouts
At 31/12/2008, the Crédit Foncier group identified 14 leveraged buyout deals amounting to €266 million.
December 31, 2008
Final shares
Number of deals
14
Commitments
266
Shares for sale *
Number of deals
Commitments
Total
266
* Including shares to syndicate and residuals for sale in the secondary market
Source : management data
Definition of an LBO:
• Structured credit transaction, with a leverage effect, i.e.
bank borrowings, set up for the buyer of a target company, with or without the participation of the target's mana-
gement. A holding company is created whose capital is
wholly or partly owned by one or more financial sponsors.
The presence of a financial sponsor and a holding company is what qualifies this type of transaction as an LBO.
Exposures to leveraged buyouts
LBO
Exposures net of loss/
impairments at 31/12/08
LBO exposures
Final shares
266
Shares for sale
Total
266
No new transactions and no repayments occurred in 2008.
6
Risk management
Breakdown of LBO final shares by sector* at 31/12/2008
Distribution
13%
Other
(real estate)
47%
€266 M
Services
40%
(*) Breakdown of target companies by sector
The percentage is calculated on the commitment.
Breakdown of LBO final shares by geographic location* at 31/12/2008
Other European
Countries
9%
€266 M
France 91%
(*) Location of target companies
The percentage is calculated on the commitment.
5 - Human and
6 - Risk management
7.6 - Other major risk exposures
(Lehman Brothers, Madoff) )
7.7 - Securitisation glossary
Securitisation
Madoff
Crédit Foncier has no direct or indirect exposure to the
Madoff group. To this date and within the limits of publicly
disclosed information, none of the securitisation transactions or local authorities Crédit Foncier are exposed to, or are
affected by this default.
Lehman
The Crédit Foncier group's exposure to Lehman Brothers
consisted solely of hedging derivatives, principally interest
rate hedges. The Group had no loans or short-term lending
transactions with Lehman Brothers when the latter declared bankruptcy on September 15, 2008.
The derivatives were tied to a collateralisation agreement
that included netting clauses and margin calls that helped
to significantly limit the impact of the bankruptcy.
When Lehman Brothers declared bankruptcy, Crédit
Foncier's exposure only consisted of a net mark-to-market
positon (MTM) related to derivative transactions contracted with the British arm of the group, Lehman Brothers
UK. Lehman Brothers UK was sent an official notice to
terminate all of these contracts the day after Lehman filed
for bankruptcy.
The net termination payment liability in favour of Crédit
Foncier stood at €50.9 million. Under this collateralisation agreement, Crédit Foncier could deduct the margin
that had already been called and was at the time held by
Crédit Foncier, resulting in an outstanding receivable of
€36.7 million.
This €36.7 million receivable has been provisioned up to
90%, resulting in a net residual exposure for Crédit
Foncier of €3.7 million.
A transaction or instrument whose credit risk is associated
with an exposure or pool of exposures and is divided into
tranches with the following characteristics:
• Payments in connection with the transaction or instrument depend on cash flows collected from the exposure
or pool of exposures.
• The subordination of tranches determines how losses
are allocated over the duration of the transaction or
instrument.
Securitisation position
An exposure to a securitisation transaction or instrument.
Securitisation positions include exposures to securities
arising from interest rate or exchange rate derivatives.
Other terms
CMBS: Commercial mortgage-backed securities on assets
of a commercial nature (office buildings, malls, logistics
and storage assets, etc.).
RMBS: Residential mortgage-backed securities.
FFELP Student Loans: Securitisations of U.S. student loans;
at least 97% of the principal is guaranteed by the US
federal government.
Ratings: Assessment of a transaction or counterparty's creditworthiness. It measures the probability of default of the
underlying assets and eventually the severity of the resulting loss. There are both external (rating agencies) and
internal ratings (internal rating models).
Step 1 rating: On the rating agencies' scale, these ratings
are better than or equal to AA-.
Step 2 ratings: On the rating agencies' scale, these ratings
are better than or equal to A-.
Investment grade ratings: On the rating agencies' scale,
these ratings are better than or equal to BBB-.
Speculative or non-investment grade ratings: On the
rating agencies' scale, these ratings are worse than or
equal to BB+.
Monolines: Insurance companies that provide financial guarantees for some of the Crédit Foncier group's transactions.
6
Risk management
8 - Market risk
Crédit Foncier's financial activities and asset and liability
management are governed by a charter that came into
effect in 2008 and which is based on the CNCE charter.
This charter sets out the missions and responsibilities of
anyone involved in ALM and financial activities. It also
defines the main risk indicators and related limitations for
management purposes.
Consistent with CNCE's organisation, Crédit Foncier's
financial activities are currently segmented into two portfolios, enabling the institution to manage the market risks
it is exposed to:
• The banking portfolio, through which are managed risks
inherent in ALM operations (interest rate, liquidity and
exchange rate risks), developed in part 9 below.
• The trading portfolio, which is particularly exposed to
price risk.
Crédit Foncier is currently updating its financial charter to
reflect the new version released by CNCE during the
second half of 2008. The main innovation is that management compartments have been broadened compared to
those stipulated in the CNCE charter, allowing Crédit
Foncier to better anticipate and manage new activities it
may be called upon to take up. Each compartment has its
own governance structure in the form of a committee, risk
indicators, specific limitations and means to measure the
results of its activities.
8.1 - Capital requirements
for market risk
Crédit Foncier does not have any capital requirements for
market risk.
The following table lists market risk thresholds for trading
portfolios:
Market risk thresholds
for trading portfolios
Maximum
values
Average percentage of the trading portfolio book value
divided by total balance sheet and off-balance sheet assets
5.0%
Maximum percentage of the trading portfolio book value
divided by total balance sheet and off-balance sheet assets
6.0%
Average total amount of positions in the trading portfolio
€15 millions
Maximum total amount of positions in the trading portfolio
€20 millions
5 - Human and
6 - Risk management
Foreign exchange risk must be covered by capital when the
overall net position in foreign currencies exceeds 2% of
total equity. The overall net position of Crédit Foncier
amounted to €460,000 and therefore is not subject to
capital requirements for this type of risk.
8.2 - Interest rate, liquidity and
foreign exchange risk measurement systems and limits
The policy on limits defined for 2009 was approved by
Crédit Foncier's ALM Committee during its deliberations
on gaps observed at 31/12/2008.
It is based on three types of limits:
• Regulatory limits: regarding interest rate risk, the sensitivity of the economic value of equity; regarding liquidity, the liquidity ratio at one month.
• The same limitations for Groupe Caisse d’Epargne and
Crédit Foncier: for interest rate risk, the sensitivity of
the GOI; for liquidity risk, the coverage ratio of liabilites
by assets.
• Internal Crédit Foncier limits, especially for monitoring
interest rate risk, a maximum rate gap limit set at one
year and alert thresholds by rate bracket.
This system is reviewed annually, and compliance with
these limits is monitored quarterly by the ALM
Committee.
8.3 - Specific case of the trading
portfolio
This portfolio includes all transactions carried out for
short-term gains on price movements. Although the Crédit
Foncier group does not manage real positions in this area,
some marginal operations may be included in this portfolio due to restrictions governing other portfolios and are
therefore exposed to market price risks.
This activity could only be developed after prior, explicit
approval has been granted by Crédit Foncier's executive
board and Board of Directors, approval which would have
to be renewed each year.
Crédit Foncier uses Scénarisk software to monitor the
portfolio's position. This Groupe Caisse d’Epargne tool
assesses the potential losses that speculative activity may
cause, by calculating a synthetic value-at-risk (VAR) measurement, with a confidence level and holding period of
99% and one day respectively. The results are consolidated at the CNCE level.
The Risk Department calculates the portfolio's VaR daily.
This is limited to €250,000 for the entire Crédit Foncier
group. The sensitivity and volatility measures used by the
Scénarisk tool are selected on a rolling 12-month basis.
These measures significantly increased throughout the
year 2008 which resulted in this limit of €250,000 being
occasionally and temporarily exceeded. Corrective measures (sales of lines) were systematically applied to return
to the particularly low limit set by the group. Compagnie de
Financement Foncier, which does not conduct proprietary
trading activities, is not concerned by these measures.
6
Risk management
Movements in Crédit Foncier VaR in 2008 (CPR)
VaR changes (own account)
(in thousands of euros)
400
300
200
100
0
CPR Crédit Foncier
Crédit Foncier limit
5 - Human and
6 - Risk management
9 - Asset & Liability Management risk
Introduction
In its role as a central entity, CNCE manages and monitors
ALM risks at the group level. The national monitoring
approach relies on the Group ALM Committee and a
"Commercial Bank" ALM Committee that both meet at
least once every quarter.
This latter Committee is responsible for managing interest
rate and liquidity risks for all consolidated commercial
banking entities, including Crédit Foncier.
9.1 - Organisation of ALM risk
monitoring
Interest rate, liquidity and foreign exchange risks are
monitored and managed in connection with the Group's
banking portfolio transactions. These transactions are
meant to preserve the regularity of the interest margin in
connection with overall corporate risk management policy.
Banking portfolio transactions are divided into two compartments:
• The "ALM" compartment that centralises all customer
transactions, including those related to securities, interbank transactions and hedging derivatives, purchases of
securities and international public sector loans and purchases of debt securitisation notes. This makes it possible to manage financial risks and ensure that sales networks are compensated via internal transfer rates (ITR).
• The medium/long-term compartment (MLT) is reserved for
other securities transactions and their associated hedging
derivatives. These transactions, conducted in line with the
overall ALM policy, support the bank’s ALM compartment
transactions. They have the same goal of maintaining a
constant interest rate margin while isolating specific risk
factors.
In line with regulations concerning the separation of functions, this portfolio has its own decision-making chain
made up of three committees:
• The ALM Committee is the main decision-making body
governing ALM activity and is responsible for managing
the banking portfolio, within the limits determined by
senior executive management after consulting with the
Risk Committee and in compliance with Groupe Caisse
d’Epargne's rules. It meets on a quarterly basis and is
chaired by the Deputy CEO. Its members include the
Chief Risk Officer and other important executives.
• The Finance Committee meets monthly and is chaired by
the Deputy CEO. It ensures that ALM Committee decisions related to group refinancing methods and international sector monitoring are translated into operational
applications.
• The Rate Committee meets at least once a month and is
placed under the authority of the Chief Financial
Officer. Its role is to translate the rate hedging strategy
defined by the ALM Committee into capital market transactions and execute them. In 2008, given the financial
crisis, this latter committee saw its role increase and
met on an almost weekly basis in order to ensure that
risks were covered by the best possible solutions.
Operational monitoring of the various risks related to asset
and liability management is performed by the ALM
Department, a stand-alone department that does not
depend on the Financial Operations Department. This
independence ensures a strict separation between the
reporting function and the order execution function, which
is under the sole responsibility of the Financial Operations
Department.
ALM uses a dedicated software package called Bancware,
which interfaces with most of the Group's management
data. The yield curve forecasts used in Bancware's predictive modelling scenarios are based on the rate and index
scenarios submitted quarterly by the CNCE.
6
Risk management
9.2 - Methodology used by Crédit
Foncier for assessing liquidity,
interest rate and exchange
rate risks
Interest rate, liquidity, and exchange rate risks are measured using different, complementary methods according to
the analysis horizon:
• A static approach that covers on- and off-balance sheet
transactions existing at the closing date. Static processing takes account of the stock of transactions and all
flows from contracted commitments.
• A dynamic approach taking into account business forecasts for the current and next three years. Dynamic processing takes into account likely events resulting from
the firm or optional underwriting of commitments and
uncertain events resulting from future activities.
The key assumptions for both of these approaches concern
the customers’ tendency to:
• Repay their loans before the end of their term (prepayment rate).
• Renegotiate the conditions of their loans (renegotiation
rate).
The models used by Crédit Foncier assign specific prepayment or renegotiation rates for each type of loan, based on:
• The sectors in question (subsidised or private), the type
of financing (direct loans or via debt securitisation
funds), the type of customer (Individual, Corporate,
Institutional) and the type of rate (fixed, adjustable or
variable-rate).
• Distinct principles for each type of customer for the
behaviour to be modelled.
For example, ALM considers that the difference observed,
at each future date, between the average customer rate
and a rate representative of the market trend over the
medium term (e.g. OAT 5 years) has an impact on the prepayment rate for fixed-rate Individual loans.
The prepayment and renegotiation rates thus modelled are
reconciled at each closing date with the actual rates in
order to assess the pertinence of the models chosen.
Most of the data that comes from Crédit Foncier group's key
management data and that is processed by the ALM information system includes factors that can be modelled over
time. ALM then reconstructs payment flows from these data.
Balance sheet items without a contractual due date, such as
items at the top of the balance sheet (shareholders’ equity,
reserves) or sight deposits, are subject to specific maturity
rules proposed by the ALM Department and approved by the
ALM Committee. Asset & Liability Management has also set
up back-testing procedures for a posteriori verification of the
actual flows to validate the adopted conventions.
9.3 - Liquidity risk monitoring
Organisation of the Crédit Foncier
group's refinancing
Crédit Foncier's main source of financing comes from the
medium and long-term issues of its subsidiary, a AAArated société de crédit foncier which issues real estate
covered bonds (obligations foncières), and from a programme of certificates of deposit that Crédit Foncier
invests short-term with banking sector counterparties.
Throughout the first three quarters of 2008, Compagnie
de Financement Foncier continued to issue obligations
foncières backed by eligible assets composed of first-rank
mortgage loans, loans to public entities or fully guaranteed by such entities and debt securities issued by debt
securitisation funds (Article L. 5151-13 et seq. of the
French Monetary and Financial Code). It raised nearly
€8.5 billion via these issues.
In addition, outstanding certificates of deposit at
December 31, 2008 stood at €7.2 billion (excluding
intra-group transactions).
There are two other types of funding it has access to:
• Due to its social housing and public sector financing
activities, Crédit Foncier benefits from regulated funding
at discounted rates (€237.5 million from the European
Investment Bank).
5 - Human and
6 - Risk management
• A large portfolio (valued at approximately €32.6 billion) of
securities and receivables that can be immediately used
to raise funds via repurchase agreements with the ECB or
the interbank market. During the 4th quarter of 2008,
Crédit Foncier carried out three long-term repo transactions worth €1.1 billion and assigned €6.9 billion of securities with the ECB.
In 2008, Crédit Foncier strengthened its liquidity reserves
at the group level (see below), raising total liquid reserves
to €62.1 billion at December 31, 2008.
Moreover, the cashflow of all subsidiaries is centralised
by Crédit Foncier with the exception of subsidiaries that
can justify a traditional presence on capital markets,
such as CFCAL.
Monitoring liquidity risk
Liquidity risk is the risk that the company is not able to
pay its short-term liabilities due to a shortfall, on a given
date, between the amount of its redemptions and its refinancing needs.
Crédit Foncier's liquidity needs are analysed using the dual
static and dynamic approach mentioned above and are
managed by a system of internal limits.
With the static approach, the aim is to ensure that medium-term liquidity management does not concentrate liquidity needs too highly over certain periods. The main
indicator used is the static liquidity gap that takes into
account the Crédit Foncier group's capacity to raise liquidity over the next 20 years. ALM also provides a report that
explains changes to static liquidity gaps from one quarter
to the next.
This indicator is complemented by the annual coverage
ratio (assets/liabilities ratio), which must always exceed
60% over a 10-year horizon.
With the dynamic approach, the goal is to manage the
Group’s refinancing needs using financing/investment forecasts for the planning horizon. The two indicators used, or
that are in a final development stage, are:
• The long-term financing table, which provides a quarterly summary of all future static and dynamic liquidity
needs of the Crédit Foncier group for the next three
years. The drops in static liquidity needs are used to
evaluate liquidity gaps. Dynamic needs are modelled by
Bancware based on new production and short and
medium-term financing assumptions. These assumptions are provided quarterly by Group budget forecasts
or the business plan.
• The dynamic liquidity gap, after taking into account the
share of new production which cannot be narrowed
without undermining the activity and the associated
medium/long-term financing programme. This gap is
restricted by a limit based on the amount of liquid
assets held by the Crédit Foncier group.
Liquidity Crisis Committee
Faced with rising tensions, Crédit Foncier strengthened is
liquidity monitoring efforts as of September 2008. These
efforts are based on forecasting short-term liquidity needs
(horizon of 3 to 6 months), including refinancing needs
for commercial activity. The results are submitted to the
executives in charge of financial operations and control.
The Liquidity Crisis Committee follows standard procedures for these monitoring efforts.
Compliance with the limits
Crédit Foncier’s liquidity ratio (on a stand-alone basis) was
119% at December 31, 2008, in line with regulations.
The internal limit of 110% was maintained at the end of
each month throughout 2008, except during the month of
November (when the ratio was 100%).
These two elements are subject to quarterly review by the
ALM Committee.
6
Risk management
Liquidity ratio at 1 month
(Crédit Foncier on a stand-alone basis)
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
Ratio at month end
00
8
Es
tim
12 a
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00 n
8
/2
11
8
8
00
/2
10
00
/2
8
/2
08
09
00
8
00
/2
Regular limit 100%
Throughout 2008 and over a horizon of the next nine
years, Crédit Foncier was and will be in compliance with
the Group's coverage ratio (assets/liabilities ratio). Since
the third quarter of 2008, this ratio will be exceed limits
07
/2
00
8
8
06
00
/2
05
04
/2
/2
00
00
8
8
8
03
00
/2
02
01
/2
00
7
0%
Threshold 110%
in 10 years. This was validated by CNCE, which has tentatively agreed to lower the Group limit at that time to take
into account the current state of the primary market.
5 - Human and
6 - Risk management
Assets/Liabilites ratio at the end of December 2008
120%
100%
80%
60%
40%
20%
Minimal liquidity limit
Highlights of 2008
Crédit Foncier decided to adopt the same cash flow
conventions as GCE for "working capital".
• Presentation for the first time of a semi-dynamic gap
analysis, broken down by month, one year out from
31/12/2007, at the ALM Committee meeting in
February 2008.
• Introduction, at the request of the ALM Committee, at
30/09/2008 of a static liquidity gap based on respective asset and liability flows.
• The tool used to model maturities of debt securitisation
notes in terms of liquidity has been changed: the new
software will better reflect forecast changes in prepayments on debt securitisation portfolios.
7
c.
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1
6
5
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De
Ratio Inflows/Outflows
c.
1
4
c.
1
3
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1
2
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1
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1
1
0
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0
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9
8
0%
Limit with derogation
• Preparation, as of November 30, 2008, of a monthly
static and dynamic liquidity report as requested by the
French Banking Commission.
• Implementation of a new indicator for monitoring liquidity reserves at the group level. Besides the outstanding
securities and receivables that can be refinanced via
repurchase agreements with the ECB, amounting to
€32.6 billion, the Group also identified short-term
liquid assets (less than three months) that can be refinanced to increase reserves to €25.8 billion and a pool
of securities in foreign currencies or issued by foreign
entities for an additional €3.7 billion. Together, these
three elements increased total outstanding liquidity
reserves to €62.1 billion at December 31, 2008.
6
Risk management
• Subsidiaries who measure their own liquidity gap
(Socfim and CFCAL) now transfer their results to Crédit
Foncier using a standardised common model.
• These subsidiaries also implemented a system in 2008
which allows them to monitor the above mentioned static gap indicators and related limits for their entity on a
stand-alone basis.
• CFCAL submitted its 5-year dynamic financing table to
the ALM Department. CFCAL is the only subsidiary that
refinances part of its operations outside the Crédit
Foncier group.
• Automated monthly liquidity reports sent to the French
Banking Commission.
• Study of the adaptation of Crédit Foncier's liquidity
monitoring system to come into line with the Banking
Commission draft order relating to identifying, measuring, managing and controlling liquidity risk.
• Optimisation of the Crédit Foncier group's static and
dynamic liquidity gap production deadlines for monthly
monitoring by the ALM Committee.
9.4 - Overall interest-rate
risk oversight
dependent on customer decisions in various loan categories (including prepayments).
Customised "fair value hedges" are also contracted to systematically convert funds, raised with fixed rates or rates
indexed to a complex model, to variable or revisable rates,
to hedge Compagnie de Financement Foncier's asset
acquisitions and to secure transactions with customers.
Macro-hedging strategies are determined by the ALM
Committee, implemented by the ALM Department and
executed by the Financial Operations Department's treasury, which is Crédit Foncier's sole point of entry onto the
market. Between two ALM Committee meetings, the Rate
Committees translate these hedging strategies into operations and decide how to implement them to achieve targeted margins for estimated Individual sector production
over the coming months.
Monitoring interest rate risk
Following the adoption of the liquidity monitoring approach,
the Crédit Foncier group has also adopted a dual approach
to assess asset-liability risks and the sensitivity of income
and asset values to interest-rate movements:
• A static approach for existing operations on the analysis
date (base balance sheet).
• A dynamic approach, with business forecasts spanning
several years.
Management methods
The two main indicators are the gaps in rates fixed globally and by bracket, with risks being limited on average to
one year rate gaps.
Interest rate risk represents the potential risk of instability in the company's income or asset values caused by
unfavourable on- and off-balance sheet exposures to interest rate movements.
The fixed interest rate gap is calculated from total outstanding loans both on and off the balance sheet at the
closing date while taking into account assumptions and
rules for asset and liability flows mentioned above.
The Crédit Foncier group manages interest-rate risk for all
group entities, and therefore hedging transactions are
generally recognised as "fair value portfolio hedges".
Within this general framework, Crédit Foncier fine tunes
its ring-fencing according to various hedging strategies
(repricing and new production hedges or hedges to narrow
balance sheet gaps), particularly taking optional risks into
account (including interest-rate cap guarantees), or risks
Depending on the type of rate, transactions are recognised
in the gap in different ways:
• For fixed rates, they are recognised until maturity.
• For variable-rates, they are recognised until the next
index adjustment date.
• For variable rates (EONIA et al.), they are not recognised beyond the closing date.
5 - Human and
6 - Risk management
To better reflect the totality of risks taken at each cut-off
date, the ALM Department adds estimates of "remaining to
originate" and related hedges to the transformation position.
The gap by rate bracket breaks down by index the maturity
profiles, in contractual maturity dates, of the net asset/liability positions on and off-balance sheet of the Crédit
Foncier group. This indicator is used to monitor and manage "basic" risk exposure that arises when the gap is too wide
between the two indices, one of which recognises long positions (liabilities surplus) and the other short positions
(assets surplus).
These measures are supplemented by the standard Basel
II indicator, showing the sensitivity of the economic value
of equity to a 200 bp parallel shift in the spot curve. The
sensitivity limit is set at 20% of consolidated regulatory
capital with an alert threshold of 15%.
Under the dynamic approach, Caisse Nationale des
Caisses d’Epargne has imposed gross operating income
(GOI) sensitivity limits on its subsidiary to measure the
impact of interest rate movements on the intermediation
margin. The ALM Department estimates GOI figures for
each quarter (including the effect of new production)
three years out using a rate table provided by CNCE. The
Department then recalculates these GOI under four different interest rate scenarios: two parallel shift scenarios (±
100 bp) and two tilt scenarios (± 50 bp around rates one
year out). The sensitivity limit is based on the least favourable impact on income.
All of these indicators are monitored quarterly by the ALM
Committee.
Compliance with limits
At December 31, 2008, consumption of regulatory capital (including working capital) due to a 200 bp shift in the
spot curve (standard Basel II indicator) stood at 0.53%.
This very low level reflects the absence of risk exposure.
Worst-case scenario GOI sensitivities were as follows:
2009
GOI sensitivity limits
Worst-case scenario sensitivity
Sensitivities in 2010 and 2011 are marginal, reflecting
the low level of fixed-rate gaps. The sensitivity observed in
2009, linked to an increase in E3M-indexed outflows and
gains with the prospect of interest rate cuts, will gradually be attenuated as new obligations foncières are issued.
Highlights in 2008
During 2008, Crédit Foncier strengthened its approach to
monitoring its short-term position. After ring-fencing
contractual maturities into interest rate brackets, the ALM
Department put in place daily maturity profiles for assets
& liabilities whose rates reset (for the two major rate brackets Euribor 3 and 6 months).
2010
2011
(8%)
(12%)
(15%)
(7.8%)
(0.4%)
(3.2%)
At the end of March 2008, risk indicators for the shortterm position on the EONIA index, Euribor 3 and 6 months
and Euribor 12 were defined and validated during an extraordinary meeting of the ALM Committee. As an experiment, a decision was made to associate alert thresholds
(and not limits) with these indicators. Members of the ALM
Committee must be notified via Cashflow Committee meeting minutes each time a threshold is exceeded. Positions
are then corrected or not corrected, depending on an
opportunity analysis.
The ALM Department also developed specific, proactive
follow-up for the exceptional measures proposed on
January 18, 2008 by Crédit Foncier to customers that had
taken out variable-rate mortgages ("ARM measures").
6
Risk management
This follow-up was designed to:
• Anticipate exposure to rising interest rates arising from
the rate caps granted to customers and from certain
customers' decision to switch to fixed-rate loans.
• Monitor the Group's ongoing compliance with its interest rate risk limits.
To do this, Crédit Foncier has sought to gradually cover the
loans in question, depending on market conditions and
the expected rate of return of signed amendment forms
sent to customers.
At December 31, 2008, €1.1 billion of fixed-rate inflows
and €4.7 billion of caps have been put in place which
almost entirely hedge the portfolios of fixed-rate loans and
variable-rate loans (3 and 6 months). This coverage lessens the portfolio's sensitivity to interest rate movements.
Portfolios indexed on 3 and 5 year rates are monitored
weekly in order to hedge if necessary.
Variable-rate loans have been integrated into overall ALM
risk monitoring: the ALM Committee is in charge of managing rate positions arising from these transactions. It has
delegated operational monitoring of its hedging decisions
to the Rate Committee; the latter committee executes the
decisions based on specific reports drawn up almost every
week and depending on market conditions.
At the request of GCE, the method for calculating the
regulatory indicator, used to measure the sensitivity of the
Crédit Foncier group’s net position to a 200 bp parallel
shift of the spot curve, has been changed. The ALM
Department no longer deducts net capital from the gross
rate gap (base for calculating the NPV of equity).
In connection with the standardisation across the Crédit
Foncier group of interest-rate risk monitoring (incorporating data from Crédit Foncier’s major subsidiaries), the
interest-rate scenarios (defined by CNCE) are now used for
subsidiaries' reporting. The integration of spot curves are
currently validated by the ALM Department.
Subsidiaries who measure their own interest-rate gap
(Socfim and CFCAL) now transfer their results to Crédit
Foncier using a standardised, common model.
Pour les filiales mesurant par elles mêmes leur impasse de
taux (Socfim et CFCAL), la transmission au Crédit Foncier
des résultats se fait désormais de façon normalisée
(maquette commune).
These subsidiaries also implemented a system in 2008
which enables them to monitor the abovementioned gap
indicators and related limits for their entity on a standalone basis.
• Finalise the work currently underway on net interest
margin (NIM) forecasts and automate this work in collaboration with the Management Control Department.
• Adapt the limit system of the Crédit Foncier group in
light of new provisions in the CNCE charter released in
the summer of 2008 (including the preparation of an
actuarial balance sheet).
• Finalise the implementation of the multidimensional
database, which should make it easier to automate
reporting related to interest-rate risk.
9.5 - Foreign exchange risk
monitoring
Foreign exchange risk arises from exchange rate movements in currencies that Crédit Foncier's assets and liabilities are denominated in, which negatively affect the
value of assets or commitments denominated in foreign
currencies.
The Group policy remains unchanged and consists of not
assuming any foreign exchange risk. This means that all
assets and liabilities denominated in currencies other
than the Euro are systematically swapped as soon as they
are recognised on the balance sheet. Exchange rate
swaps, term loans or currency swaps are used to do this.
Residual spreads from the adjustment of balance sheet
positions, particularly those created by margins, are hedged monthly.
They are monitored by the middle office of the Financial
Operations Department, which centralises foreign exchange positions at the end of the month, by currency and by
total amounts of foreign exchange.
The maximum exposure limit has been set at €5 million
for any combination of different currencies and €3 million
for any single currency for the entire Group.
Based on data provided by the middle office, quarterly
information is sent to the ALM Committee indicating compliance with these position limits.
At December 31, 2008, these limits were respected.
5 - Human and
6 - Risk management
Foreign exchange position at the end of each month by currency (Crédit Foncier group*)
Dec. 08
Nov. 08
Oct. 08
Sept. 08
Aug. 08
July. 08
June 08
May 08
April 08
March 08
Feb. 08
Jan. 08
Dec. 07
Nov. 07
Oct. 07
Sept. 07
Aug. 07
July. 07
June 07
May 07
April 07
March 07
Feb. 07
Jan. 07
5
4
3
2
1
0
-1
-2
-3
-4
-5
Total Position*
CHF
USD
Limit for all currencies
GBP
Limit per currency
* Crédit Foncier + Compagnie de Financement Foncier
Finally, there are no rate gaps denominated in foreign currencies.
9.6 - Medium/long-term portfolio
management (MLT)
Although this portfolio is not subject to a market limit, the
Risk Department monitors its value-at-risk daily, using
Groupe Caisse d’Epargne's Scénarisk software.
This portfolio is restricted by volume, rotation rate and
holding sensitivity limits; it is also taken into account by
the ALM compartment’s GOI sensitivity limits. Only
Compagnie de Financement Foncier’s assets are not included in the portfolio's limits, because of that subsidiary's
special status and control methods.
At December 31, 2008, this portfolio was almost entirely
composed of French and Italian bonds with fixed-for-floating swaps. They were acquired in 2007 for one billion
euros and comply with all limits.
6
Risk management
10 - Share risk
10.1 - Investment approaches and
procedures
Investment by GCE entities (excluding Natixis) is regulated by a list of authorised financial products and an
approval procedure for new financial products. These operational safeguards ensure that financial products are
used appropriately and comply with regulations and Group
risk standards. The use of financial products by GCE entities in connection with their financial activities must first
be validated by the New Products Committee.
The use of authorised products must comply with risk
limits (market, credit, etc.) and the constraints set forth in
the Financial Management Charter for each compartment
(justification of the hedging strategy for ALM products,
daily liquidity of proprietary trading assets, etc.).
In addition, specific measures for processing investment
requests have been established by the Group for the following financial products:
• Funds of listed shares.
• Funds of unlisted shares (private equity/infrastructure/
real estate).
• Securitisation conduits.
• Structured products whose structure and pay off have
been validated by the New Products Committee.
The methods for processing investment requests submitted by group entities are defined in a Group circular that
describes the procedure (or schemas for attributing decision-making authority) to follow for investment in approved financial products. The Investment Risk Committee is
responsible for validating investments in these products.
When the entity wants to invest in a financial product, the
entity's Risk Department must first ensure that it complies
with all entity or Group risk limits and that it verifies the
conditions specific to each compartment. In general, any
new investment in a financial product is subject to approval by the entity's Finance Committee. Financial management puts together a file containing all the information
necessary to understand the product together with the
front office analysis. . Furthermore, a cross-check is performed by the local Risk Department. Once validated by
the Finance Committee, the institution forwards the
investment request to the group level for validation. To
monitor these investments, the entity's Risk Department
conducts ongoing controls to ensure compliance with risk
limits and conditions specific to each compartment. It
prepares routine reports on these controls and submits
them to the entity's executive board.
For Crédit Foncier and its subsidiaries, new investments
are first studied and analysed by all departments that sit
on the Investment Committee. Each department then submits an argued opinion to the Investment Committee,
which takes a decision that it submits to the Executive
Committee or the Strategy Committee, depending on the
amount. In accordance with Group rules and in connection with established thresholds, new investments are sent
to CNCE.
The investment rules for real estate funds (including SIIC)
follow the same schema. It should be noted that the
investment policy for these funds is reviewed quarterly in
order to take account of economic developments.
10.2 - Objectives
In 2007, the Crédit Foncier group established an investment policy for real estate investment vehicles (SIIC, OPCI
and closed funds), with a total budget of €100 million, to
5 - Human and
6 - Risk management
develop growth drivers for Crédit Foncier's financing and
related activities. At December 31, 2008, €30.5 million of
this budget had been used.
Foncier acquired 82,618 Locindus shares and 47,473
CFCAL shares, raising its respective stake in each company to 68.81% and 68.38%.
Investment rules are adapted at least once every six months,
after approval by the Equity Investment Committee, to
reflect new developments in the economy. Any new investment is subjected to the process mentioned above.
The section "Part 2 – Crédit Foncier development" of this
annual report also discusses capital transactions in 2008.
In addition, Crédit Foncier is in the process of selling off
a certain number holdings that it no longer considers compatible with its growth strategy (approximately 3% of the
total, excluding intra-GCE reclassifications).
CFCAL, a subsidiary of Crédit Foncier, owns a diversified
portfolio of listed European shares that are held to preserve liquidity, as well as some mutual funds (SICAV). This
portfolio amounted to less than €7 million at the end of
2008 and is exposed to market risk. It is fully consolidated by Crédit Foncier in its daily value-at-risk calculations
(cf. Part 8.3 - Special case of the trading portfolio).
Finally, the Crédit Foncier group may decide to make
investments, depending on opportunities and to support
development or business reorientation needs, in which
case it follows the process described above.
In early January 2009, Crédit Foncier mandated Natixis
Securities to purchase a limited number of shares in
CFAL-Banque and Locindus over a specific period of time.
These acquisitions were reported to the AMF and are not
intended to push it past regulatory thresholds as it already owns two-thirds of these two companies' share capital.
From January 21, 2009 to March 30, 2009, Crédit
10.3 - Accounting techniques
and valuation method
Exposures to the shares in the banking portfolio are recognised on the balance sheet in accordance with IAS 39
accounting standards:
• Financial assets at fair value through profit or loss (fair
value option).
• Available-for-sale financial assets.
• Held-to-maturity financial assets.
The accounting techniques and valuation methods used
are disclosed in the accounting rules and principles for
determining fair value (cf. sections on determining fair
value in the notes to the consolidated financial statements:
Note 4 – Information on accounting rules and principles).
10.4 - Entity exposure
At December 31, 2008, the Crédit Foncier group's exposure to share risk amounted to €306 million and is broken
down as follows:
6
Risk management
Financial assets and liabilities at fair value
through profit or loss (fair value option)
Cost or
historic
value
Fair value
or adjusted
value
Unrealised
capital gains
or losses
Gross
unrealised
gains
Gross
unrealised
losses
0
0
0
0
0
Available-for-sale financial assets
298
306
7
8
0
Total
298
306
7
8
0
Source : Corep 31/12/2008
At December 31, 2008, total unrealised gains or losses on
share exposures in the banking portfolio amounted to €7
million, broken down into:
• In 2008, capital gains or losses recognised on sales or
liquidation of shares from the banking portfolio amounted to €5.9 million.
• €7.3 million recognised as unrealised or deferred gains
and losses.
The fair value of listed shares held in the banking portfolio is the same as the market price.
• €0 million included in core or complementary capital.
5 - Human and
6 - Risk management
11 - Operational risk
Groupe Caisse d’Epargne defines operational risk as the
risk of loss resulting from inadequate or faulty procedures,
personnel, information systems or external events. This
definition includes, in particular, accounting, legal, regulatory and tax risks, as well as risks related to the safety
of persons and property and of information systems.
Reporting on operational risk is threefold:
Operational risks are inherent in all of the Crédit Foncier
group's businesses. They are analysed, managed and measured using a comprehensive mechanism, based on the
identification and appraisal of risks (and the creation of
action plans to control them), the active management of
acknowledged incidents and the monitoring of risk-predicting indicators.
• The GCE Risk Department: quarterly review.
GCE's approach to operational risk is defined in guidelines
and rules of governance for operational risk management
(October 2005). It is supported by an operational risk unit
with appointed operational risk managers and a network of
agents for each line of business. The approach is supervised at the GCE level by the Operational Risk Committee,
which meets quarterly to examine the effectiveness of
measures used within GCE and to analyse the main current and potential risks identified within GCE entities.
Management network
Within the Crédit Foncier group, guidelines and rules of
governance have been set forth as follows:
Members of these local networks are trained by the Risk
Department; 20 new people were trained during the
second half of 2008.
General approach
At December 31, 2008, overall operational risk monitoring and management involved 282 people.
The Crédit Foncier group's approach to operational risk is
managed by its Risk Department and is based on guidelines, methods and tools from the GCE Risk Department, so
that the across-the-board approach remains standardised.
• The Risk Department's quarterly Risk Committee, which
reports to the Executive Board and the Audit Committee.
• The Internal Control Committee for major incidents,
developments and organisational improvements.
The Risk Department is responsible for managing operational risk and coordinating its activities with the Compliance
and Ongoing Control Department.
Management environment
Operational risk monitoring and control is delegated to
managers of the different business lines or subsidiaries
who assume responsibility vis-à-vis the Executive Board
and the Risk Department.
Each manager puts in place and relies on a network of
agents supervised by a manager, in close contact with the
Risk Department.
Twice a year, each manager conducts a formal evaluation
of his or her approach. The results and changes identified
by this survey are integrated into the above-mentioned
reporting.
Governance
Methods and tools
Operational risk management is part of the Crédit Foncier
group's risk structure. It is managed by a specialised unit
independent of operating activities and attached to the Risk
Department.
In terms of methodology and tools, the Crédit Foncier
group now uses the GCE ORiS (Operational Risk System)
tool to apply the methodologies communicated by the
GCE Risk Department and gather the information required
to manage operational risks efficiently.
6
Risk management
The method relies on three key elements that are part of
a routine interactive approach:
A map of operational risk events: each business line identifies and assesses the main operational risks it is vulnerable to, as well as the preventive and corrective measures
that exist or need to be put in place to manage and reduce the impact of these risks. The map is updated at least
once a year or whenever a change is made to the procedures and the organisational structure.
Risk-related incidents are logged in a specialised riskrelated incident database, updated by the management
network as risks occur and develop, which monitors corrective action plans and analyses risk exposures and the
resulting losses over time.
Setting up Key Risk Indicators (KRI) in the main risk zones
that warn of the imminence of entry into a critical phase.
Related data is stored in a shared database that is accessible across the entire Crédit Foncier group.
This approach to operational risk is supplemented by a
periodic comparison of insurance coverage with maps and
incident logs.
The Crédit Foncier group also uses the Groupe Caisse
d'Epargne system "ORiS" for reporting purposes and to
obtain a quarterly operational risk log based on the data
collected. The QCB Questionnaire module allows each
entity to evaluate the quality of its operational risk management every six months, and compare it to other GCE
entities. It may, where appropriate, take action on specific aspects of the system that need to be improved.
In 2008, the scope of operational risk management was
considerably reinforced and different operating units
became more aware of the objective of acheiving standardised practices in the different business lines. Nearly
4,500 events were logged throughout the year, amounting
to an as yet unfinalised (some events are still being processed) €53 million of potential risk.
Finally, when calculating capital requirements, Groupe
Caisse d'Epargne currently applies the Basel II standardised
approach and the first regulatory Corep reports have been
prepared. At December 31, 2008, capital requirements
allocated to cover operational risk stood at €131 million.
5 - Human and
6 - Risk management
12 - Intermediation risk
Trading on behalf of third parties
Crédit Foncier conducts virtually no trades for Individual
sector customers. These orders are usually sent to CNCE,
which receives technical assistance from Gestitres to clear
TCC and RTO trades . CNCE has selected three brokers
including NATIXIS Securities to execute trades in the market. Intermediation risk is managed at the CNCE/Gestitres
level by monitoring unsettled positions or positions being
unwound.
The RCSI for this business line ensures compliance with
standards and regulations.
Proprietary trading (according to the definition
of investment services by the AMF, the French
securities regulator)
The Crédit Foncier group operates on the markets for
balance sheet operations (security issues, security purchases, lending/borrowing cash, etc.) and to hedge all of
its assets and liabilities against interest-rate risk.
Market transactions are cleared through a specialised
department working within the framework of a Financial
Charter that defines its missions, structure and control
procedures for ALM and financial activities.
Authorised counterparties and intermediaries are validated by a specific committee (COMEFI) that consults the
relevant CNCE departments.
TCC: Teneur de Compte-Conservateur (portfolio custodian); RTO: Récepteur-Transmetteur d’Ordres (broker)
RCSI: Responsable de la Conformité pour les Services d'Investissement (Head of Compliance for Investment Services)
6
Risk management
13 - Settlement risk
Most cash transactions are conducted in connection with
ALM activities. Transactions are centralised and processed by the Treasury back office.
The Treasury back office is responsible for:
• Managing cash flows:
- Large-value cash inflows and outflows (above
€700,000). These cash flows are routed through the
Paris Net Settlement (PNS) or TBF Target (gross settlement) systems.
- Foreign currency inflows and outflows via CNCE's foreign agents.
- Small-value cash inflows and outflows. These systems
are only used when current value cash flows are required. With Individual sector systems (small amounts),
settlement clears in two days.
• Cash flow forecasting 24 hours out for Crédit Foncier and
Compagnie de Financement Foncier.
A manager in charge of an independent unit oversees cash
account management and auditing, in line with the company’s policy to respect separation of functions within a
department.
The Crédit Foncier group accesses large-value settlement
systems as follows:
• Credit Foncier uses accounts open at CNCE since 2001
for TBF and PNS.
• Compagnie de Financement Foncier accesses TBF
directly via the CNCE's technical platform and accesses
PNS the same way as Crédit Foncier. These large-value
fund transfer systems are linked to Target 1. As the TBF
and PNS systems are no longer in use, the Treasury back
office prepared for a transition to Target 2 and 3G,
which it has been using since February 18, 2008.
Although TBF has been replaced by PM (Payment Module)
and PNS by EBA (Euro Banking Association), Crédit
Foncier and Compagnie de Financement Foncier will
retain their respective roles, in other words Crédit Foncier
remains CNCE's sub-participant in the Target 2 system,
while Compagnie de Financement Foncier continues to be
a direct participant in the European system.
Daily procedures for settlement risk monitoring include:
• Preparing, at the end of the day, at D-1 for the Euro and
D-2 for foreign currencies, the forecast schedule of outflows and inflows taking place at D. This schedule is produced using data from the capital market transactions
management software, in addition to data from a schedule updated manually for disbursement orders and
announcements of miscellaneous income. This forecast
data for cash flows at D are adjusted by the front office.
• At D, the performance of the day’s scheduled disbursements and placements on the fly, after recognition by
the Market back office. For income, cash inflows are
monitored in real time on dedicated workstations (recognition of cash inflows, possible reminder sent to paying
counterparties according to usual practice and trading
hours and additional searches depending on the system
being used).
If a settlement counterparty permanently defaults, which is
extremely rare for capital market transactions (and is currently limited to technical difficulties rather than actual
defaults), and if the Banque de France cash flow position
becomes negative as a result:
• For Euro operations: it is preferable to seek a hedge on
the market. Failing this, Compagnie de Financement
Foncier will call on the end-of-day loan facility provided
by the Central Bank and compensation will be requested
from the defaulting party in line with the loss suffered.
• For foreign currency operations: an agreement has been
negotiated with CNCE allowing issuances even in the
absence of foreign currencies in the account opened
with CNCE.
The group regularly contribute to the Settlement System
Contingency Plans (Plans de Secours de Place - PSP)
organised by the French Central Bank (BDF) and the
Banking Settlements Agency (Centrale des Reglements
Interbancaires - CRI). Crédit Foncier is also contributing
to, with CNCE's backing, a new mechanism in connection
with Target 2.
The ECB is piloting the development of contingency
plans, into which the group will be integrated via CNCE's
platform tools.
5 - Human and
6 - Risk management
14 - Non-compliance risk
Non-compliance risks are monitored by the Compliance
and Ongoing Control Department, which is divided into
four separate units: compliance, financial security, mediation and ongoing control.
Non-compliance risk monitoring
and measurement
Non-compliance risk monitoring and control is based on the
approach put in place by the central entity of Groupe Caisse
d’Epargne (SIDECO project: Système d’Information
Déontologie et Conformité). It covers the majority of Crédit
Foncier's business lines. It is supplemented by the risk
management system that covers all business lines and the
major risks they are exposed to. The Compliance and
Ongoing Control Department is heading a software project
for the risk management system which should come on line
as a GCE tool in 2009.
Investment service compliance
Crédit Foncier’s investment service business line is marginal, with a relatively small volume of operations. Controls
mainly involve the analysis of atypical orders, pursuant to
Market Abuse regulations.
Malfunction monitoring
Specific action plans from operational units are drawn up
to address malfunctions identified during controls, or operational risk incidents that are repeatedly logged in ORiS.
The operational units’ compliance agents monitor these
action plans. Reports on malfunctions and the resulting
action plans are monitored by the Compliance and
Ongoing Control Department. The reports are then sent to
the Internal Control Committee.
Training
Non-compliance risk identification
and monitoring
Non-compliance risks are identified using a dual approach:
• Results from first level controls are analysed for noncompliance issues listed in GCE compliance standards
or resulting from thematic approaches.
The Compliance and Ongoing Control Department continued to raise the awareness of new recruits and train them
in 2008. Training is one of the compliance unit’s essential roles and is provided by the Compliance and Ongoing
Control Department. Training performance reports are discussed at Compliance Committee meetings.
• Operational risk logs created using the GCE ORiS tool,
which relies on a map of these risks. With this tool, risks
are identified according to their type (compliance or
otherwise) and their exposure is assessed by type of risk
event.
Approval of new products or services
Non-compliance risk control
The purpose of this process is to roll out new products or
services within the required timeframe for sales teams
while ensuring that all impacts have been analysed and
accounted for by the business lines. The other aim is to
ensure that the approval committee has all the background information necessary to decide on whether or not
to market the new product or service.
Non-compliance risk controls carried out in 2008 mainly
looked at compliance with provisions of the Consumer
Code with respect to real estate financing in the Individual
sector and customer knowledge in the Corporate market.
The procedures involved in studying, creating and validating a new product or service or modifying an existing product were reviewed in 2008. This applies to the Individual
and the Corporate market.
6
Risk management
The process for authorising the use of new financial products, new financial indices and the launch of new financial activities was also reviewed in 2008.
Staff awareness and vigilance is ensured by procedures
and training. A systematic training programme for all
employees via e-Learning modules complements these
measures and is designed to keep staff on constant alert.
Ethics – Market abuse – Conflicts of interest
Screening for potential terrorists is routine. Fully automated, it allows the user to refuse to do business with the
customer if there is even the slightest doubt about his or
her identity. The supervision of banking activities, divested in late 2008, was based on the bedrock of regulatory
controls and an analysis of the most atypical situations
(dormant account activation, cash transactions and foreign exchange abroad).
The Financial Ethical Standards approach was updated in
2008, with the particular aim of incorporating the Market
Abuse Directive regulations.
Prevention of money laundering
and terrorist financing
The prevention of money laundering and terrorist financing
is carried out via group-wide control measures at every
level of the banking and lending process. These measures
meet commitment security and customer relationship quality objectives. Coordination is assured by the Financial
Security division of the Compliance and Ongoing Control
Department, which implements the policies, standards and
IT tools adopted by Groupe Caisse d’Epargne.
Oversight of lending activities, the bulk of the Group's
business, is carried out at every stage in the life of a loan,
from origination to amortisation. In doing so, anti-money
laundering efforts rely on a multi-criteria analysis to identify at-risk situations and adapt both commercial procedures and a posteriori controls.
5 - Human and
6 - Risk management
15 - Other risks
Insurance
Crédit Foncier is insured against employer liability risks. It
has also taken out several types of policies covering thirdparty liability and property damage that may be caused by
its employees in the course of their work.
It is covered against the risks of theft, malicious acts and
fraud. "Banking activity protection" coverage supplements
this, although the company’s computer data is backed up
and its management units are split between several sites.
Crédit Foncier also took out a comprehensive professional
liability policy covering all its activities, including those
carried out by its subsidiaries as of July 1, 2008. In effect
since 2008, this policy supplements other existing guarantees on certain activities, that were taken out previously and that are still active, either in respect of regulatory
provisions (insurance broking and real estate management
and transactions), or because of risks specific to these
business activities (real estate valuations, estate agency
activities, real estate leasing, etc.).
The main policies have the following features:
Insurance
"Comprehensive Business"
property, plant
and equipment insurance policy
Computer all-risk insurance
Blanket bank coverage
Guarantees and amounts
- Multi-risk guarantee: damage, fire, theft, water damage
- Consequences of damage to property
- Financial consequences of company liability
Maximum coverage is set at €16,000,000 for large property claims.
All computer, office and telephone hardware is insured at its
replacement value as declared in the hardware inventory.
Coverage for financial losses suffered by the company, or its customers in the case of deposited
property, due to theft, damage or destruction.
Maximum coverage ranges from €500,000 to €4,600,000, depending on the type of risk.
Banking activity protection
Cover and compensation for financial prejudice (loss of banking activity, additional operating
expenses, data recovery expenses, data backup expenses, etc.) suffered by Crédit Foncier due
to proximate causes, such as: supplier and service provider default, closing or inaccessibility
of a covered establishment and loss due to human error or a technical fault or disruption.
Maximum coverage is set at €10,000,000 for the largest losses resulting from a supplier default.
6
Risk management
Insurance
Fraud and malicious acts
Guarantees and amounts
Coverage of financial losses suffered by the Company and its customers due to fraud or malicious
acts, including computer fraud as defined by the French Criminal Code.
Maximum coverage is €10,000,000 per claim and per year.
Employee social
security insurance
Collective coverage of death, work incapacity and disability risks through a supplementary
collective social security scheme, participation in which is mandatory for all company employees.
Coverage amount (capital or annuity) is set as a percentage of gross annual salary.
Operating liability
Coverage for the financial consequences of civil liability claims against the company or its
staff for bodily injury, property damage and consequential losses caused to third parties.
Maximum coverage is €8,000,000.
Professional liability
Coverage for the financial consequences resulting from any claim made by a third party against the
company and its civil liability for genuine or assumed professional misconduct committed in the performance of activities. This guarantee covers the following risks in particular:
- activities involving real estate loans (Individual and Corporate an Institutional) and financial solicitation
- financial transactions - international activities except for North American operations
- insurance presentation operations and other regulated activities and services or real estate advisory
services already insured
- management for third parties.
A 1st line sets the maximum coverage at €25,000,000 per claim and per year, with one-time
provision for reinstatement, to which is added €5,000,000 in excess.
Directors and
Company Officer Liability
Coverage for the financial consequences of professional misconduct by one or several of the insured
during the performance of their duties, incurring personal liability or joint liability with the company
that they represent.
Maximum coverage is limited to €20,000,000 per claim and per coverage period.
5 - Human and
6 - Risk management
Outsourced operations
An inventory of essential outsourced services as defined by
Article 37 of CRBF Regulation No. 97-02 was updated in
2008. Some essential outsourced services were taken off
the list because of the sale of most of the banking business.
For other services, contracts are still being actively updated.
IT Risks
The highlight of 2008 was the completion of the software
migration. This is a first significant step in streamlining
information systems both technically and financially.
Loan servicing applications from Entenial that were designed back in the late 1970s have finally been retired. In
addition, a modern and unique new accounting solution
was rolled out in early 2009, which will speed up the preparation of regulatory reports and financial statements.
Significant investments were also made to bring banking
risk management up to standard in terms of Basel II requirements. This work was directly coordinated with the GCE
approach. Actions to improve the reliability and harmonisation of customer data were also carried out to further
this aim.
In 2008, IT functions were reorganised with the creation
of an IT Department which consolidated project management and project contractors into a single department.
This had a direct impact on the procedures followed to
draw up and monitor the annual IT plan: it helped streamline communication between participants and clarify responsibilities.
The new organisation has made governance of information
systems security more transparent, specifying responsibilities for security and thereby improving the overall management of information systems security. For instance,
security measures have been put in place as a safeguard
when updating the information systems security policy.
Active and routine awareness campaigns about risks and
best security practices are conducted within different operational departments.
Finally, Crédit Foncier has put in place reporting procedures that cover the inherent risks of information systems.
Organisation of business continuity plans (BCP)
A review of business continuity plans was initiated in
2006 to expand the scope of maintained activities, optimise the capacity of secondary work sites and improve
their technical infrastructure. This review was completed
in 2008.
The Crédit Foncier group reviewed and redefined its BCP
in response to different types of risks identified by the
French Club for Information Security (Clusif). It has listed
all known company risks and identified cases in which
BCP would provide an appropriate operational response.
The main efforts during the year focused on operational
testing to validate the plans:
• Technical tests run at two secondary sites in May.
• Crisis management scenario in connection with the
Banque de France’s market-wide test in June.
• Comprehensive exercise carried out in late July, involving almost all maintained activities in order to validate
the proposed plan.
• Organisation of an "adjustment" test in December 2008,
on the basis of corrective actions identified in July, to
validate recovery time objective (RTO) requirements for
IT applications used by the Market Transactions
Department.
The Crédit Foncier group promoted these various phases
of testing by releasing a specific circular to inform and
raise awareness among all company stakeholders. This
resulted in the complete overhaul of the Crédit Foncier
group's BCP intranet, the distribution of a pamphlet with
simplified descriptions of the BCP and the publication of
a new standard crisis manual for all company managers.
Work on adapting the BCP for subsidiaries and service providers began in the second quarter, based on the GCE
6
Risk management
methodology. It picked up speed at year-end, encompassing all of the Crédit Foncier group's financial subsidiaries.
The migration from the project phase to uptime assurance occurred on October 1st with a proliferation of system
controls in each business line to closely monitor logistics
and technical and human resources. The uptime assurance strategy was validated at the end of September by 14
BCP agents.
Work in 2009 will focus on reducing technical procedures
at the head office to improve methods used to trigger business continuity plans.
Technical and human tests will be run to assess new
improvements in addition to the market test that is already planned for October.
At the same time, Crédit Foncier will launch a campaign
to raise awareness among directors and managers of support functions of the risks of a pandemic flu outbreak.
Legal risks
In relation to the legal risks inherent in its activities, Crédit
Foncier is governed by applicable laws and regulations in
its capacity as a credit institution and investment service
provider. Most of these laws and regulations are to be
found in the French Monetary and Financial Code (provisions related to banking activities, and more specifically, to
credit activities, provisions related to investment services
and French Financial Markets Authority regulations).
Crédit Foncier strictly complies with regulations protecting
the rights of individuals (related to professional secrecy
and the protection of personal information, databases and
freedom) and governing the conditions related to its product distribution (banking and financial solicitation and
provisions relating to insurance brokerage).
The legal division is part of the General Secretary Department and is responsible for helping manage the legal risks
that Crédit Foncier is exposed to via its different businesses.
Exceptional events and litigation
Since 1999, Crédit Foncier has originated several loans at
variable-rates that are indexed to Euribor or BTAN interbank
rates (Immo plus, Génération i, Objectif i, Tendance j,
Passeport j, Adaptable) and is now coming under fire for
these transactions. Loan repayment terms are based on four
factors:
• Changes in the rate index are spread out over the term
of the loan to ensure that monthly instalments remain
stable if rates rise. The loan term can be extended by up
to 20% of the initial term.
• If, due to significant rate hikes, the loan term reaches the
extension limit of 20%, a limited increase in monthly payments, stipulated from the outset in the loan contract, is
applied. The new repayment schedule is based on the
maximum duration of the loan and on the smaller of the
two following rates: the interest rate after the adjustment
or the technical interest rate used to calculate monthly
payments (Payment Calculator Maximum Rate, "PCMR").
Moreover, in the case of regulated loans, monthly payments increases are capped at the rate of inflation.
• When the new monthly payment is less than the calculated monthly payment, amounts not covered by the
monthly payment that is actually paid are deferred, with
the stipulation that the interest on the loan is repaid
before the principal.
• Finally, when the loan reaches the end of its term, monthly payments during the last year, if necessary, are calculated so that the loan is repaid in full at the end of its term,
except in the case of regulated loans. Pursuant to regulations, deferred interest on regulated loans is forgiven.
The exceptional increase in interest rates which occurred
between July 2007 and November 2008 had a significant
impact on certain loans, so much so that some borrowers
experienced an increase in their monthly payments.
Faced with this situation, on January 18, 2008, Crédit
Foncier announced measures (i) to cap the loan rate, (ii)
to limit the increase of monthly payments to inflation and
5 - Human and
6 - Risk management
(iii) to forgive any deferred interest due at the end of the
loan's term. These measures were implemented in 2008
for 150,000 customers.
• The joining of the lender's liability to that of the assignee of the debt is contrary to the express terms of the
assignment contract.
A small minority of customers (35 summons), acting
either individually or within Collective Action, have initiated legal proceedings against Crédit Foncier in order to
have their loan conditions renegotiated. They are accusing
Crédit Foncier of having wrongly presented the loans in
question with an interest rate cap and thus having been
misled into signing loans based on false pretences and
obscure or incomplete language in the contracts.
In addition, and due to the fact that it is tied to a defeasance transaction, the dispute was submitted to AGF
under the terms of the liability guarantee.
On March 10, 2009, the Tribunal de Grande Instance of
Paris ruled in favour of one of the plaintiffs. Crédit Foncier
contests the decision and decided to file an appeal.
An investigation was opened by the French governmental
agency for consumer protection, fraud control and competition watchdog (DGCCRF) and its departmental offices,
on the grounds of fraud and misleading advertising. The
findings of the investigation were submitted to the public
prosecutor of Créteil.
Finally, the consumer protection association UFC - Que
Choisir lodged a complaint, on January 18, 2008 with the
government prosecutor in Paris, for fraud, according to the
association's press releases. An additional complaint was
lodged during the summer of 2008 reiterating the grievances raised by some clients. Reception of the complaint
has since been confirmed by the public prosecutors office.
Crédit Foncier acquired Entenial from AGF on February 4,
2004. This acquisition was accompanied by a guarantee
to assume its liabilities.
Crédit Foncier, subrogated to Entenial, was sentenced by the
Tribunal de Commerce de Cannes on March 27, 2007 for a
breach in its duty to advise its client when it originated a
loan to finance the acquisition and installation of a hotel and
thalasso-therapy complex at the Port Fréjus and was held
liable to Experts Immobiliers Associés which purchased the
debt in connection with a defeasance transaction.
Crédit Foncier has appealed this ruling on the grounds that:
• This decision does not comply with the definition of a lender's duty to advise (in this case, the borrowers can not be
considered as counterparties who are not knowledgeable
of the subject and were fully aware of the risks involved in
the transaction).
Compagnie de Financement Foncier, Crédit Foncier's
wholly-owned subsidiary, was a counterparty to swaps with
Lehman Brothers UK, entered into for hedging purposes.
These were terminated pursuant to agreement provisions
by September 15, 2008.
In the current context, and in line with the aim of Crédit
Foncier to limit potential future impacts on the balance
sheet of its subsidiary, Compagnie de Financement
Foncier has sold its claim on LB-UK to Crédit Foncier at a
75% discount (intermediate rate between the provisions
announced by certain institutions and the recent auction
price of Lehman Brothers CDS). The sale took place on
September 30, 2008, effectively transferring all rights to
Crédit Foncier to recover additional fees and expenses.
To the best of the company’s knowledge, there have been
no other exceptional events, litigation or arbitration proceedings that have recently had, or are likely to have, a
material impact on the financial position, business activity, revenue and assets of Crédit Foncier and its group.
Significant contracts
Crédit Foncier is not bound by any contracts that may
confer a right or an obligation on a member of the group
likely to significantly affect its ability to meet its obligations, relating to securities issued, towards the owners of
such securities.
Caisse de Retraite (pension fund) of Crédit
Foncier for employees who entered employment
before March 1, 2000
Article 116 of Law No 2003-775 of August 21, 2003 on
pension reform and the law of social security funding for
2009 allow Supplementary Retirement Institutions (French
IRS), which were not in the process of being liquidated
when the law was enacted, the possibility to choose one of
the following three options before December 31, 2009:
• Request government approval to transform itself into a
Provident Insurance Institution (or merge with such an
institution).
6
Risk management
• Transform itself into a supplementary pension management institution (French IGRS), a purely administrative
body that can not directly carry pension liabilities on its
balance sheet. The pension liabilities would either be
transferred to the companies themselves, or to insurance
companies, and the IGRS would only administer benefits.
• Liquidate the IRS.
The Caisse de Retraite du Crédit Foncier (CRCFF) that
covers employees that entered into the fund before March
1, 2000 obtained approval from the Autorité de Contrôle
des Assurances et des Mutuelles (ACAM) in March 2009 to
transform itself into supplementary pension management
institution (French IGRS). This approval authorises it to
transfer its reserves and provisions to select insurers, namely AXA, CARDIF and SOGECAP. This will be done before
March 31, 2009. As a result, Crédit Foncier's pension liabilities are now fully outsourced (3,200 retired employees
and 1,800 employees before 2000).
5 - Human and
6 - Risk management
7 Financial statements
246
Statutory Auditors’ report
319
322
379
Statutory Auditors’ report prepared in connection with
381
382
7 Consolidated financial statements
December 2008
Consolidated
Consolidated
Consolidated
Consolidated
Consolidated
balance sheet - Assets
balance sheet - Equity and liabilities
income statement
statement of changes in equity
cash flow statement
Note 1 - Legal and financial framework - Significant events
of the year and post balance sheet events
1.1
1.2
1.3
1.4
Legal framework
Groupe Caisse d'Epargne guarantee system
Significant events of the year
Post balance sheet events
248
249
250
251
252
254
254
254
254
258
Note 2 - Regulatory framework
258
Note 3 - Basis of preparation of the consolidated financial statements
259
3.1
3.2
3.3
3.4
3.5
Scope of consolidation
Consolidation methods
Presentation of financial statements and balance sheet date
Consolidation principles
Business combinations
Note 4 - Accounting principles
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
Foreign currency transactions
Financial assets and liabilities
Non-current assets
Leases
Assets held for sale and related liabilities
Provisions recognised in liabilities
Distinction between debt and equity
Employee benefits
Deferred taxes
Measurement of fair value in the notes
Use of estimates in the preparation of the financial statements
Note 5 - Notes to the consolidated balance sheet
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
Financial assets and liabilities at fair value through profit or loss
Derivatives used for hedging purposes
Loans and receivables
Due to credit institutions and customers
Held-to-maturity financial assets
Reclassification of financial assets
Financial assets pledged as guarantees
259
260
260
260
261
262
262
262
269
270
270
270
271
271
272
272
273
274
274
277
278
278
280
281
281
282
5 - Human and
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
6 - Risk management
7 - Consolidated
financial statements
Financial assets received as guarantees and usable by the entity
Current and deferred taxes
Debt securities and subordinated debt
Accrual accounts and miscellaneous assets and liabilities
Investments in associates
Non-current assets
Goodwill
Provisions
Share capital
Note 6 & 7 - Notes to the consolidated income statement
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
7
7.1
7.2
7.3
283
283
284
286
287
288
290
291
291
292
Interest and similar income and expense
Commission income and expense
Net gains/(losses) on financial instruments at fair value through profit or loss
Net gains/(losses) on available-for-sale financial assets
Income and expense on other activities
Operating expenses
Depreciation, amortisation and impairment of non-current assets
Credit risk
Gains or losses on disposals of other assets
Income tax
Employee benefits
Personnel costs
Average number of employees
Employee benefit obligations
292
293
293
294
295
296
296
297
301
302
303
303
303
303
Note 8 - Segment information
306
Note 9 - Financing and guarantee commitments
308
Note 10 - Other information
309
10.1
10.2
10.3
10.4
10.5
Fair value of financial assets and liabilities
Source and use of funds by maturity
Balance sheet breakdown by currency
Finance leases
Related parties
Note 11 - Scope of Consolidation
11.1
11.2
11.3
Changes in the scope of consolidation during the year
Scope of consolidation at 31 December 2008
Securitisation transactions
Statutory Auditors’ report on the consolidated financial statements
309
311
313
313
314
316
316
317
318
319
December 2008
Consolidated balance sheet - Assets
At 31 December
NOTES
Cash and amounts due from central banks and post office banks
Financial assets at fair value through profit or loss
2008
2007
22
2
2,262
5.1.1
2,987
5.2
5,246
1,930
5.3
2,450
15,197
Loans and receivables due from credit institutions
5.4.1
7,405
8,235
Loans and receivables due from customers
5.4.2
108,693
92,600
1,767
83
Revaluation adjustment on interest rate risk hedged portfolios
Current tax assets
Deferred tax assets
Accrued income and other assets
5.6
566
0
5.10
185
115
5.10
217
196
5.12.1
3,107
2,201
5.13
70
35
Investment property
5.14
117
160
Property, plant and equipment
5.14
141
139
Intangible assets
5.14
26
34
Goodwill
5.15
30
48
133,029
123,237
Total assets
5 - Human and
6 - Risk management
7 - Consolidated
Consolidated balance sheet - Equity and liabilities
At 31 December
NOTES
2008
2007
-
-
5.1.2
6,751
6,923
5.2
5,972
3,128
5.5.1
18,817
14,535
Cash and amounts due to central banks and post office banks
Financial liabilities at fair value through profit or loss
Due to credit institutions
Due to customers
Debt securities
5.5.2
487
2,712
5.11.1
93,062
87,981
284
459
Revaluation adjustment on interest rate risk hedged portfolios
Current tax liabilities
5.10
3
31
Deferred tax liabilities
5.10
149
231
5.12.2
3,879
3,568
5.16
211
195
Accrued expenses and other liabilities
Provisions
Subordinated debt
855
834
Equity
2,559
2,640
Attributable to equity holders of the parent
2,322
2,388
Share capital and reserves
1,082
932
Consolidated reserves
1,265
1,255
Net income for the year
5.11.2
220
211
Sub-total
2,567
2,398
Unrealised or deferred gains and losses
(245)
(10)
237
252
133,029
123,237
MINORITY INTERESTS
Total equity and liabilities
December 2008
Consolidated income statement
NOTES
2008
2007
Interest and similar income
6.1
12,323
9,619
Interest and similar expense
6.1
(11,601)
(8,778)
Commission income
6.2
206
197
Commission expense
6.2
(28)
(26)
Net gains/(losses) on financial instruments
at fair value through profit or loss
6.3
117
(205)
Net gains/(losses) on available-for-sale financial assets
6.4
10
66
Income from other activities
6.5
193
181
Expense on other activities
6.5
(183)
(115)
Net banking income
1,037
939
Operating expenses
6.6
(594)
(624)
Depreciation, amortisation and impairment
of property, equipment and intangible assets
6.7
(30)
(26)
413
289
6.8.3
(166)
9
247
298
Cost of risk
Operating income
Share in net income of associates
Net gains and losses on other assets
Change in value of goodwill
5.13
1
0
6.9
93
2
5.15
(46)
0
295
300
Ordinary income before tax
Income tax
6.10
(49)
(67)
Deferred taxes
6.10
(27)
(8)
Net income
Minority interests
NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
219
225
1
(14)
220
211
Subtotal
Equity under IFRS at 31 December 2008
Other changes
- 2008 net income
- Other changes
Unrealised or deferred gains or losses
- Change in fair value of financial instruments and
non-current assets dealt with through equity
- Change in fair value of financial instruments and
non-current assets dealt with through profit or loss
- Share of changes in equity of associates
- Change in translation adjustments
Subtotal
Movements from transactions with shareholders
- Capital increase
- Capital reduction
- Reclassification
- Impact of acquisitions and disposals on minority interests
- Dividends paid out in 2008
Subtotal
Equity under IFRS at 1 January 2008
Appropriation of 2007 net income
682
44
44
638
-
638
-
Impact of acquisitions and disposals on minority interests
Changes in accounting principles
Share of changes in equity of associates
Other changes
Equity under IFRS at 31 December 2007
-
-
399
106
106
293
-
293
(11)
-
102
102
(75)
277
-
111
111
-
527
Additional
paid-in
capital
Change in fair value of financial instruments and
non-current assets dealt with through equity
Change in fair value of financial instruments and
non-current assets dealt with through profit or loss
2007 net income
Subtotal
Capital increase
Equity component of hybrid instruments
Equity component of share-based payment plans
Dividends paid out in 2007 on 2006 net income
Total movements from transactions with shareholders
Appropriation of 2006 net income
Equity under IFRS at 1 January 2007
Share
capital
106
-
106
32
74
10
11
-
-
-
-
53
Other
reserves
SHARE CAPITAL AND
ADDITIONAL PAID-IN CAPITAL
Consolidated statement of changes in equity
1,160
(1)
(199)
(200)
1,360
179
1,181
(10)
(6)
-
-
(350)
(350)
425
1,122
-
-
-
-
-
-
-
-
-
-
translation
adjustments
Consolidated
Cumulative
reserves
-
-
-
-
-
-
-
-
-
-
Rev.
reserves
-
-
-
-
(3)
(3)
(232)
(242)
(3)
-
-
-
-
-
--
Hedging
derivatives
(232)
-
(10)
-
(10)
-
(49)
(104)
(55)
-
-
94
AFS assets
Change in val.
of fin. instruments
UNREALISED OR DEFERRED GAINS OR LOSSES
220
220
220
-
-
(211)
211
-
211
211
-
-
(350)
350
Net
attributable
income
2,322
220
(235)
150
(1)
(199)
2,387
-
2,387
(6)
(49)
211
(55)
213
(350)
-
2,422
Equity
attributable
to the
parent
237
(1)
(1)
(3)
(3)
2
(13)
(11)
252
-
252
106
2
14
14
-
(17)
(17)
-
147
Minority
interests
2,559
219
219
(238)
(238)
150
1
(212)
(61)
2,639
-
2,639
106
(4)
(49)
225
121
(55)
213
(367)
(154)
-
2,569
Consolidated
equity
December 2008
Consolidated cash flow statement
The statement of cash flows is presented in accordance
with the indirect method.
Investing activities represent cash flows arising from the
acquisition and sale of interests in consolidated companies, held-to-maturity financial assets, property, plant and
equipment and intangible assets.
Financing activities include financial transactions involving equity, subordinated debt and bonds.
Operating activities include activities that do not fall into
the other two categories, and mainly comprise strategic
equity investments recognized under "Available-for-sale
financial assets".
The cash and cash equivalents line item comprises cash
on hand, amounts due from and to central banks, and
demand accounts and deposits with credit institutions.
5 - Human and
7 - Consolidated
6 - Risk management
2008
2007
Income before tax (*)
294
300
30
46
150
(1)
(74)
43
(739)
(545)
33
0
(72)
0
(72)
47
899
835
8,350
(135)
(3,102)
(1,426)
5,194
(21,126)
16,414
(1,027)
5
(53)
= Net increase (decrease) in assets and liabilities from operating activities
3,692
(598)
Net increase (decrease) in cash and cash equivalents from operating activities (A)
3,441
537
+/- Net increase (decrease) in cash and cash equivalents from financial assets and equity interests
(2,317)
+/- Net increase (decrease) in cash and cash equivalents from investment properties
82
(18)
+/- Net increase (decrease) in cash and cash equivalents from property, plant and equipment and intangible assets
(75)
35
(17)
Net increase (decrease) in cash and cash equivalents from investing activities (B)
(2,253)
(57)
+/- Net increase (decrease) in cash and cash equivalents from transactions with shareholders
+/- Other increases (decreases) in cash and cash equivalents from financing activities
(50)
(45)
(145)
(68)
Net increase (decrease) in cash and cash equivalents from financing activities (C)
(95)
(213)
1,093
267
Cash and cash equivalents at 1 January
(45)
(313)
Cash on hand and net balances with central banks
Net demand deposits with credit institutions
2
(48)
Cash and cash equivalents at 31 December
Cash on hand and net balances with central banks
Net demand deposits with credit institutions
1,049
22
1,027
(45)
2
(47)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1,094
268
+/- Net depreciation and amortisation of property, plant and equipment and intangible assets
+/- Impairment of goodwill and other property, plant and equipment and intangible assets
+/- Net movements in provisions
+/- Share in income/loss of associates
+/- Net loss/gain on investing activities
+/- Income/expense from financing activities
+/- Other movements
= Total non-monetary items included in net income before tax and other adjustments
+/+/+/+/-
Net
Net
Net
Net
increase
increase
increase
increase
(decrease)
(decrease)
(decrease)
(decrease)
in
in
in
in
cash
cash
cash
cash
and
and
and
and
cash
cash
cash
cash
equivalents
equivalents
equivalents
equivalents
from
from
from
from
transactions with credit institutions
customer transactions
financial asset and liability transactions
non-financial asset and liability transactions
- Taxes paid
Effects of changes in exchange rates on cash and cash equivalents (D)
Net increase (decrease) in cash and cash equivalents ( A+B+C+D)
(*) including minority interests in income before tax
December 2008
Note 1 - Legal and financial framework - Significant events of the year
and post balance sheet events (1/5)
1.1 Legal framework
Crédit Foncier, a subsidiary of Groupe Caisse d’Epargne
(GCE), specialises in real estate and public sector financing.
It operates in both the individual (real estate financing, in
the form of direct loans, or by acquisition of securitised
mortage debts, together with a comprehensive range of
services including surveys and valuations) and corporate,
institutional and public sectors (private sector, French public
sector and international public sector).
1.2 Groupe Caisse d’Epargne guarantee system
Pursuant to Articles L. 511-31 and L. 512-96 of the French
Monetary and Financial Code, CNCE, as the central institution, has set up a guarantee system within Groupe Caisse
d’Epargne to guarantee the liquidity and solvency of each of
its members. This guarantee system covers not only the
individual Caisse d’Epargne banks which are legally affiliated to CNCE in accordance with Article L. 512-95 of the
French Monetary and Financial Code, but also credit institutions operating under French law which are affiliated to
CNCE based on a decision made by the entity in conformity
with Articles R. 512-57 and R. 512-58 of the French
Monetary and Financial Code. More generally, the system
covers all Group entities based on the principle of shareholder responsibility.
Crédit Foncier is affiliated to CNCE.
In the context of its international business development strategy, as of October 2005 Crédit Foncier held a 37.4% stake
in Banco Primus, a Portuguese bank specialising in mortgage lending and debt restructuring for individual customers.
On 20 November, its stake in Banco Primus was increased
to 85%, and the entity is therefore now fully consolidated.
1.3.2 Transactions within Groupe Caisse d'Epargne
Crédit Foncier acquired a 15% stake in Crédit Financier
Lillois, a financial entity that is also 85%-owned by Nexity
Logement.
This transaction was completed on 4 January 2008 for
€1 million.
As part of Groupe Caisse d'Epargne's diversification of its
medium and long-term funding sources, GCE Covered
Bonds was created in early 2008 to refinance the real estate
lending activities of GCE entities by issuing covered bonds.
Crédit Foncier paid €3 million for a 4.99% stake.
In 2007, GCE created GCE SEM, a wholly-owned subsidiary
of CNCE, to consolidate the Group's strategy and become
the leading private financial institution partnering semipublic companies (SEMs).
To further the Group's strategy in this market, Crédit Foncier
and its subsidiaries sold their minority holdings in 31 semipublic companies to GCE SEM on 21 October 2008, generating a €2 million capital gain.
1.3.1 Acquisitions
On 6 October 2008, Crédit Foncier sold its remaining 13.5%
holding in La Cie 1818 – Banquiers Privés to Natixis, generating a €3 million capital gain.
As part of Groupe Caisse d'Epargne's real estate development strategy, Crédit Foncier took a stake in MFC PI, the
controlling holding company of the Maisons France Confort
group.
Seeking to refocus on its real estate financing business for
individuals and professionals, Crédit Foncier decided to
transfer its banking business to Banque Palatine, a whollyowned CNCE subsidiary.
This transaction was carried out through GCE Foncier
Coinvest, a subsidiary 49%-owned by Crédit Foncier and
51%-owned by CNCE. On 31 March 2008, GCE Foncier
Coinvest acquired a 49% stake in MFC PI for €90 million.
On 10 June 2008, the two parties signed a partial contribution of assets agreement concerning Crédit Foncier’s banking products and services for individuals and professionals,
valued at €95 million. The transfer took place on
22 November 2008. The value of the customer accounts
transferred was €2,345 million and as consideration for the
transfer, Crédit Foncier took an 8.33% stake in Banque
Palatine.
1.3 Significant events in the year
On 8 July, having reinvested its dividend in shares, Crédit
Foncier increased its interest in CFCAL Banque and notified the AMF that its holding exceeded the two-thirds
threshold. At 31 December 2008, Crédit Foncier held a
67.02% stake in CFCAL Banque.
5 - Human and
6 - Risk management
7 - Consolidated
1.3.3 Restructuring and internal transactions
1.3.4 Capital increase
On 24 June 2008, Crédit Foncier subscribed to all of the
shares issued in a capital increase carried out by
Compagnie de Financement Foncier, a subsidiary in which
Credit Foncier already had a 99.99% holding. The investment amounted to €770 million, and was paid in part by offsetting the amount against €800 million of principal debt
owed to Crédit Foncier in the form of redeemable subordinated notes. The share issue increased Compagnie de
Financement Foncier's share capital from €154 million to
€924 million at 30 June 2008. The transaction had no
impact on the consolidated financial statements
Following CNCE's decision to exercise its option to receive
dividends in the form of shares, the share capital of Crédit
Foncier was increased to €682 million.
In December 2008, Crédit Foncier wound up Socrelog, a
credit institution and wholly-owned subsidiary which had
been dormant for several years. The transaction was completed by a transfer of all assets and liabilities (transmission
universelle de patrimoine), leading to a merger premium of
€2 million.
As part of the restructuring of the "Real estate leasing" division begun in 2006 to bring together the leasing activities of
GCE subsidiaries, Picardie Bail was merged into Cicobail on
17 December 2008. This transaction had no impact on the
consolidated financial statements.
Following this merger, and as consideration for Crédit
Foncier's contribution of 100% of Picardie Bail, Crédit
Foncier’s stake in Cicobail was increased from 60.7% to
65.85%.
Three consolidated securitisation funds (fonds communs de
créances – FCC) were liquidated prior to maturity during the
year, the seller (CFF) exercising its preferential right to
acquire all of the securities included in the funds' assets in
a single transaction.
This transaction was carried out in accordance with the
funds' regulations, which allow for this possibility if the principal outstanding on amounts payable by the funds represents less than 10% of the initial amount of the issue.
The funds concerned are:
- Partimmo 11/98,
- Partimmo 03/99,
At 31 December 2008, CNCE held a 76.6% stake in Crédit
Foncier (compared to 75% previously), with Nexity holding
the remaining 23.4%.
1.3.5 Adjustable-rate loans
In December 2007 Crédit Foncier decided to propose
exceptional measures to customers that had taken out certain categories of adjustable-rate loans (interest rate caps
and/or extension of protection mechanisms for regulated
PAS/PC loans to unregulated loans), and in 2007 accounted
for the cost of these measures estimated as at that date. In
2008, implementation of these measures and further analysis of the files led to the recognition of additional costs.
Accordingly:
- the provision covering potential losses resulting from the
restructuring measures (conversion to fixed-rate loans)
was increased to €37 million at 30 June 2008. €10 million
of this provision was reversed during the second half, of
which €8 million corresponded to actual discounts following receipt of signed contract amendments. All of the
related income and expense from this transaction was
posted to "Cost of risk". The impact of reversing these discounts through net banking income was not material at 31
December 2008. Crédit Foncier has hedged these transactions by taking out interest rate swaps;
- after sending out the first contract amendments, the
impact of the measures on the effective interest rate of the
identified loans was fixed based on actual market interest
rates during this period. The cumulative difference
between interest at the effective interest rate and the interest actually charged to customers (shown under "Loans
and receivables due from customers" in the balance sheet)
has narrowed. An additional expense of €95 million was
recognised for this purpose in 2008 on top of the €13 million expense in 2007. The interest rate risk on these balances has been hedged by taking out caps.
- Partimmo 11/99
In November 2008, Crédit Foncier carried out a debt securitisation transaction in an amount of €3,180 million, resulting in the creation of the Zèbre 2008.1 Securitisation Fund.
Since this fund is fully consolidated, this transaction had no
impact on the consolidated financial statements.
1.3.6 Sale of investment property
Crédit Foncier sold two investment properties with a net carrying amount of €28.9 million during the first quarter of 2008.
These sales generated a capital gain of €54 million
December 2008
1.3.7 Real estate lease
Following commercialisation of a previously rented building
as a lease property, an €18 million capital gain was posted to
"Net interest income", representing net attributable income
of €7 million.
1.3.8 Unwinding of hedging positions
Due to the slump in the credit markets and the impact on
credit default swap (CDS) prices, in April 2008 Crédit Foncier
decided to unwind its CDS positions entered into in 2007 to
bolster its European capital adequacy ratio.
The resulting positive cash adjustment of €175 million was
recognised in "Net gains/(losses) on financial instruments at
fair value through profit or loss".
1.3.9 Tax consolidation
As of 1 January 2008, Crédit Foncier set up a tax consolidation group comprising Crédit Foncier, several non-consolidated companies and the following consolidated companies:
Cofimab, Compagnie de Financement Foncier, Compagnie
Foncière de Crédit, Comptoir Financier de garantie,
Financière Desvieux, Foncier Expertise, Foncier Participations, Quatrinvest, Serexim, Sipari, Société Foncière
d'Evreux, Vendôme Investissement, Vauban Mobilisations
Garanties, and Socfim.
Companies in this tax group calculate their tax expense
based on their own taxable income as if there were no tax
consolidation. As head of the tax group, Crédit Foncier recognises tax consolidation income corresponding to the income
tax due by each of the subsidiaries included in the tax group.
Deferred tax assets or liabilities relating to the members of
the tax consolidation group are calculated at the level of the
head company in the tax group.
1.3.10 Optimisation of Parisian real estate assets
During the year, Crédit Foncier decided to restructure and
refurbish its central services premises under a multi-step
program spread over 2008 and 2009.
At 31 December 2008, a provision was set aside for the related
costs of €29 million (penalties for breach of the lease contract,
rehabilitation costs, net carrying amount of fittings, etc.).
1.3.11 Increased amortisation of software
Changes in the Group's computer systems led to a €5 million
increase in software amortisation.
1.3.12 Consequences of the financial crisis
The financial crisis that emerged in 2007 became far more
serious in 2008, a consequence of declining property prices
in the United States and rising interest rates.
During the first half of 2008, the slump in US housing
deepened. In second-half 2008, the financial crisis intensified, prompted by severe economic and financial turmoil,
including the collapse of Lehman Brothers and Washington
Mutual in September, virtual paralysis in the interbank
credit markets for several weeks and the bailout of major
banks through mergers, the purchase of delinquent loans
and State intervention.
During the last quarter of 2008, the banking crisis gradually
gave way to a credit crisis, with the contraction in bank lending to the "real" economy coming on top of a normal cyclical
slowdown following the boom of the preceding years
These upheavals prompted governments in most developed
countries to take far-reaching steps to restore confidence
and implement plans to secure the flow of capital into the
economy (see paragraph 7 of the risk management report).
Urged on by political leaders across the world (US Congress,
G8 summit), international accounting standard-setters (the
FASB and the IASB) attempted to provide an answer to the
debate surrounding fair value, which was considered to have
been a factor in the deepening financial crisis. The standardsetters subsequently published a series of guidelines on how
to apply fair value in a crisis and, more specifically, how to
assess the degree to which a given market is inactive. The
IASB also abolished differences between IAS 39 and US
GAAP regarding the reclassification of financial instruments
(see note 4.2.2 to the consolidated financial statements).
5 - Human and
6 - Risk management
7 - Consolidated
In response to the financial crisis, the Financial Stability
Forum also put forward recommendations regarding transparency in its 7 April 2008 report. These were designed to
improve disclosure regarding certain types of risk exposure.
These recommendations are based on the work of the Senior
Supervisors' Group, which identified best disclosure practices
based on financial information issued by international banks.
The risk management report in note 7 provides a discussion
of risks in accordance with these recommendations.
The main impacts of the financial crisis on the Crédit Foncier
group's financial statements are as follows:
Securitised at-risk receivables, which are eligible for the collective provision, amount to €99 million.
Lehman’s bankruptcy prompted the Group to cancel swaps
it had signed with Lehman Brothers covering securities
issues, and to sign new swaps on the market. The credit risk
totalling €10 million net of any recoveries was posted to
"Cost of risk". The remaining unhedged exposure is now just
€4 million.
Pursuant to amendments to IAS 39 and IFRS 7 dated
13 October 2008, Crédit Foncier reclassified certain available-for-sale securities as loans and receivables in two
phases:
1.3.13 Change in cost of risk
For the first time in 2008, Crédit Foncier has included its
portfolio of securitised receivables in the calculation of provisions for performing loans and receivables, resulting in a
€79 million expense.
This expense was calculated using stress tests applied to
the entire securitised portfolio. The tests enabled securities
to be classified on the basis of the robustness of their credit
rating. The provision was calculated based on the least
robust structures, namely commercial mortgage-backed
securities rated BBB and a number of residential mortgagebacked securities among those most recently rated AAA. All
other securitise outstandings are rated AAA.
An additional €40 million provision was recognised for performing loans and receivables, reflecting the deterioration in
real estate markets.
Provisions for bridging loans that have reached maturity
total €20 million.
1.3.14 Valuation of issuer spreads
The change in credit spreads on structured issues had a
€156 million positive impact on earnings.
- on 1 July 2008, reclassification of securitisation fund units
and most international public sector securities with the
exception of top-ranking sovereign debt securities;
The credit spread of these issues was valued on a prudent
basis.
- on 1 October 2008, reclassification of inflation-linked government bonds, Lehman’s September 2008 bankruptcy
having considerably worsened the liquidity crisis across all
asset categories.
1.3.15 Reclassification of available-for-sale securities as
held-to-maturity securities
The fair value at the reclassification date was deemed to be
equal to the net carrying amount at the previous balance
sheet date.
The nominal value of the reclassified securities is €11,467
million and the net carrying amount €11,397 million.
The €141 million discount, representing the related credit
risk at the reclassification date, will be amortised over the
term of the securities in parallel to the amortisation of the
unrealised loss shown in equity at the reclassification date.
Groupe Caisse d’Epargne has relaxed the conditions for
classifying investments as held to maturity, resulting in a
reclassification at 1 October 2008 of securities with a nominal value of €605 million.
The discount representing the related credit risk at the
reclassification date will be amortised over the term of the
securities in parallel to the amortisation of the unrealised
loss carried in equity at the reclassification date.
The corresponding accounting treatment is described in
note 4.2.2.
December 2008
1.3.16 Impairment of Cash-Generating Units (CGUs)
In 2008, impairment tests on CGUs revealed a loss in value
of services and real estate leasing CGUs that led to most of
the related goodwill being written off.
Losses in value of €5 million and €41 million respectively,
were recognised firstly against goodwill under the heading
"Changes in the fair value of goodwill". The remaining balance of €67 million, relating to leased property, was posted
to valuation adjustments on first-time consolidation and had
a direct impact on banking operating income.
or more payment delinquencies in the last six months or 180
days (compared to 3 months or 90 days previously).
This change in method resulted in a €297 million reduction
in non-performing receivables and a €7 million reversal of
individual impairment provisions through "Cost of risk".
1.4 Post balance sheet events
CNCE’s acquisition of Nexity's 23.4% stake in Crédit Foncier.
After deferred tax and minority interests, the impact on net
attributable income is €73 million.
Following an announcement in December 2008, Nexity and
Caisse Nationale des Caisses d’Epargne (CNCE) signed an
agreement on 29 January 2009 under which CNCE acquired
Nexity's 23.4% stake in Crédit Foncier de France.
1.3.17 Standardisation of period for reclassifying home
purchase loans as non-performing under prudential
standards
As a result, CNCE currently holds the entire share capital of
Crédit Foncier. This change in shareholding structure does
not call into question the tax consolidation group in 2009.
With effect from 30 September 2008, outstanding amounts
under home purchase loans are classified as non-performing
based on regulations, at the latest when there have been one
Note 2 - Regulatory framework (1/2)
Pursuant to EU regulation 1606/2002 of 19 July 2002 relating to the application of international accounting standards,
the Crédit Foncier group has prepared its financial statements for the year ended 31 December 2008 in accordance
with International Financial Reporting Standards (IFRS) as
adopted by the European Union at that date, excluding certain provisions of IAS 39 regarding hedge accounting (see
note 4.2.4)*.
The accounting standards and interpretations applied and
described in the financial statements for the year ended
31 December 2008 include the following new standards and
interpretations for which application became compulsory for
the first time in 2008:
• Amendments to IAS 39 and IFRS 7 "Reclassification of
Financial Assets":
On 13 October 2008, the IASB published amendments to IAS
39 "Financial Instruments: Recognition and Measurement"
and to IFRS 7 "Financial Instruments: Disclosures" permitting
the reclassification of certain financial instruments.
* IFRS can be viewed on the European Commission website at the following address:
http://ec.europa.eu/internal_market/accounting/ias_en.htm#adopted-commission
These amendments are designed to reduce differences
between IFRS and US GAAP and prevent European financial institutions from being at a disadvantage vis-à-vis their
international competitors in terms of accounting policies
and interpretations. The amendments apply with effect from
1 July 2008 and provide for the following reclassifications:
- reclassification of securities held for trading to "Availablefor-sale securities", "Held-to-maturity securities" or "Loans
and receivables";
- reclassification of "Available-for-sale securities" to "Loans
and receivables".
The impact of these reclassifications on the Crédit Foncier
group’s financial statements is disclosed in note 5.7.
5 - Human and
6 - Risk management
7 - Consolidated
Note 2 - Regulatory framework (2/2)
• IFRIC 11 “IFRS 2 – Group and Treasury Share
Transactions" and IFRIC 14 "IAS 19 – The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their
Interaction"
Application of these interpretations had no impact on the
Group’s consolidated financial statements.
The Crédit Foncier group has chosen not to early adopt the
following accounting standards, amendments and interpretations:
• Amendments to IFRS 2, IAS 23 and IFRIC 13 "Customer
Loyalty Programmes"
Management does not expect these amendments to have a
material impact on the Group’s 2009 consolidated financial
statements.
The following interpretations have not yet been adopted in
Europe:
• IFRIC 12 "Service Concession Arrangements";
• IFRS 8 "Operating Segments":
• IFRIC 15 "Agreements for the Construction of Real Estate";
IFRS 8 "Operating Segments", relating to segment disclosures, was adopted by the European Union on 22
November 2007 and applicable to financial periods beginning on or after 1 January 2009, the date as of which the
standard will be applied by the Group. Accordingly, segment
disclosures continue to be defined under IAS 14. Besides
affecting the presentation of information, IAS 14 may in certain circumstances have an impact on goodwill impairment,
which would be reallocated to newly defined segments.
• IFRIC 16 "Hedges of a Net Investment in a Foreign
Operation".
However, management does not expect the application of
IFRS 8 to have a material impact on the Group’s 2009 consolidated financial statements.
Management does not expect these interpretations to have
a material impact on the Group’s consolidated financial
statements.
Lastly, certain standards released by the IASB during 2008
will not be compulsory until 1 January or 1 July 2009 or until
they have been adopted by the European Union:
• IFRS 3 (revised) and IAS 27 (revised);
• Amendments to IAS 32 and IAS 1;
• Improvements to IFRS 2008;
• Amendments to IFRS 1 and IAS 27.
The Group has not applied these standards.
Note 3 - Basis of preparation of the consolidated financial statements (1/3)
3.1 - Scope of consolidation
The consolidated financial statements of Crédit Foncier
include the accounts of Crédit Foncier de France,
Compagnie de Financement Foncier, Vauban Mobilisations
Garanties and all other subsidiaries and entities controlled
by the Group or over which it has significant influence.
Definition of control
Exclusive control is the power to govern the financial and
operating policies of an entity and results from either the
direct or indirect ownership of the majority of voting rights,
the power to appoint a majority of the members of the board
of directors, or the right to exercise a dominant influence by
virtue of a management contract or under statute.
Joint control is the contractually agreed sharing of control
over an economic entity involving a limited number of associates or shareholders, such that the entity’s financial and
operating policies are determined by agreement between
those partners, and exists only when the strategic financial
and operating decisions require the unanimous consent of
the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of an entity, but is not
control or joint control over those policies. Significant influence may be exercised through representation on the board
of directors or equivalent governing body of the entity, participation in policy-making decisions, material transactions
between the Group and the entity, exchanges of management personnel or provision of essential technical information. Significant influence is presumed to exist when the
Group holds, directly or indirectly, 20% or more of the voting
rights of an entity.
December 2008
The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when
assessing whether control exists. These potential voting
rights may result, for example, from share call options
traded on the market, debt or equity instruments that are
convertible into ordinary shares, or equity warrants attached
to other financial instruments. However, potential voting
rights are not considered for the purpose of determining the
Group’s ownership interest.
Private equity businesses
Special purpose entities
The accounts of entities under exclusive control, including
entities with different accounting structures, are fully consolidated.
Separate legal entities, set up specifically to manage a transaction or a group of transactions with similar characteristics
(special purpose entities - SPE) are consolidated, when in
substance they are controlled by the Group – even if the
Group has no equity interest in the entity.
Control is established if, in substance:
The Group is not involved in any such activities.
3.2 - Consolidation methods
Consolidation methods are based on the type of control
exercised by the Group over the entity, irrespective of the
nature of that entity’s business activities.
The accounts of entities jointly controlled by the Group and a
co-investor are consolidated under the proportional method.
The accounts of entities over which the Group exercises significant influence are accounted for by the equity method.
• the activities of the SPE are being conducted exclusively
on behalf of the Group, such that the Group obtains benefits from those activities;
The scope of consolidation and any changes in consolidation are detailed in note 11 – Scope of consolidation.
• the Group has decision-making and management powers
over the ordinary activities or the assets of the SPE, or by
setting up an “autopilot” mechanism;
3.3 – Presentation of financial statements
and balance sheet date
• the Group has rights to obtain the majority of the benefits
of the SPE;
Presentation of consolidated financial statements
• the Group is exposed to a majority of the risks incident to
the activities of the SPE.
In view of the financial crisis, the Group has reviewed the
situation of certain non-consolidated entities with regard to
IAS 27 and SIC 12, as well as the effects of certain events
that have occurred or are likely to occur (drawings on
credit lines, reinstatement of assets, etc.). Special purpose
entities in which Crédit Foncier has an interest are set out
in note 11 – Scope of consolidation.
Entities operating in a fiduciary capacity on behalf of third
parties and in the interest of all parties involved are not consolidated.
In the absence of any model laid down by IFRS, the Group
has used the presentation proposed by Conseil National de
la Comptabilité (French National Accounting Board – CNC)
recommendation no. 2004 R 03 of 27 October 2004.
Balance sheet date
The consolidated financial statements are drawn up on the
basis of the accounts of entities included in consolidation at
31 December 2008. The Group's consolidated financial
statements were approved by Crédit Foncier’s Board of
Directors on 19 February 2009.
3.4 - Consolidation principles
These consolidated statements are prepared using uniform
accounting policies for reporting like transactions in similar
circumstances. Where material, adjustments are made to
ensure consistency of measurement methods of consolidated entities.
5 - Human and
6 - Risk management
7 - Consolidated
Elimination of inter-company items
The effect of inter-company items on the consolidated balance sheet and consolidated income statement has been
eliminated. Gains or losses on asset sales between consolidated companies have also been eliminated. Inter-company
impairment losses are maintained.
At the acquisition date, all identifiable assets, liabilities, contingent liabilities and off balance sheet items of the acquiree
are recognised at fair value. The provisional accounting for
a business combination may be revised within 12 months of
the acquisition date.
Crédit Foncier’s financial statements are presented in euros.
Any unallocated goodwill corresponding to the difference
between the acquisition cost and the Group’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities, is recognised in the acquirer’s balance sheet.
Negative goodwill is posted directly to profit or loss.
Balance sheet items of foreign subsidiaries and branches
whose functional currency is not the euro are translated at
the exchange rate at the balance sheet date. Income and
expense items are translated at the average exchange rate
for the period.
In the event of an increase in the stake held by the Group in
an entity it already controls, the transaction gives rise to the
recognition of additional unallocated goodwill, which is
determined by comparing the cost of the shares with the
Group’s interest in the net asset acquired.
Any translation adjustments are posted to equity under
“Translation adjustments” for the portion attributable to
equity holders of the parent, and under “Minority interests”
for the portion attributable to minority shareholders.
Goodwill is recorded in the functional currency of the
acquiree and is translated at the closing exchange rate.
Foreign currency translation
As permitted by IFRS 1, the Group has transferred to consolidated reserves any translation adjustments in respect of
foreign entities existing at 1 January 2005, the date of Crédit
Foncier’s transition to IFRS.
3.5 – Business combinations
In accordance with IFRS 1, the Group has chosen not to
restate business combinations that occurred prior to
1 January 2005, the date of Crédit Foncier’s transition to
IFRS. Any goodwill which existed at that date is no longer
amortised and but is tested for impairment.
However, assets acquired and liabilities assumed in connection
with business combinations that took place prior to 1 January
2005 must meet the general recognition criteria laid down by
IFRS in order to appear in the opening balance sheet.
Business combinations which took place prior to 1 January
2005 are accounted for using the purchase method, except
combinations involving mutual entities or entities under common control, since IFRS 3 explicitly excludes such entities
from its scope of application.
It is subject to impairment tests at least once a year, or more
frequently if there is objective evidence that it may be
impaired.
At the acquisition date, each item of goodwill is allocated to
one or more cash-generating units (CGUs) expected to benefit from the business combination. These CGUs have been
defined within the Group's main operating divisions and represent the lowest identifiable level which management uses
to monitor return on investment. Impairment tests consist in
comparing the carrying amount of each CGU (including any
allocated goodwill) with its recoverable amount, which is
defined as the higher of its market value and value in use.
Market value is defined as the best estimate of the amount,
less costs to sell, for which an asset could be exchanged or
a liability settled between knowledgeable, willing parties in an
arm’s length transaction, on the basis of available market
information and taking into account any special circumstances. Value in use is generally calculated using the estimated future cash flows method, unless another method is
deemed more appropriate.
When the recoverable amount is less than the carrying
amount, an impairment loss is recorded under income. Impairment losses taken against goodwill may not be reversed.
The cost of a business combination is the aggregate of the
fair values, at the date of exchange, of assets given, liabilities
incurred or assumed and equity instruments issued by the
acquirer, in exchange for control of the entity, plus any costs
directly attributable to the business combination.
December 2008
Note 4 - Accounting principles (1/12)
4.1 - Foreign currency transactions
Accounting principles for foreign currency transactions vary
depending on whether the asset or liability in question is
classified as a monetary or non-monetary item.
to the issue of the loan, which are treated as an adjustment
to the effective loan yield.
Restructured receivables
At the balance sheet date, monetary foreign currency assets
and liabilities are converted into euros, the Group's functional currency, at the closing rate. Any resulting translation
differences are recognised in income subject to the following two exceptions:
Restructured receivables are either non-performing or
impaired loans whose terms have been renegotiated. They
can arise either from an out-of-court agreement with the
institution, or from a court ruling or insolvency commission
decision.
• only the portion of the translation difference calculated
based on the amortised cost of available-for-sale financial
assets is recognised in income; any additional amount is
taken to equity;
When a loan is restructured, a discount is applied equivalent to the difference between the net present value of the
future cash flows initially expected under the agreement
and the net present value of the future cash flows discounted at the interest rate resulting from the restructuring.
This discount is posted to "Cost of risk" in the income statement and in the balance sheet as a deduction from the corresponding outstanding amount. It is released to income on
the interest line based on a yield-to-maturity approach over
the term of the loan.
• translation differences on monetary items designated as
cash flow hedges or as part of a net investment hedge are
posted to equity.
Non-monetary assets stated at historical cost are translated
using the exchange rate prevailing on the transaction date.
Non-monetary assets accounted for at fair value are stated at
the closing rate on the balance sheet date. Translation differences on non-monetary items are posted to income if the gain
or loss on the non-monetary item is also posted to income,
and in equity if the gain or loss is posted to equity.
4.2 - Financial assets and liabilities
4.2.1 - Loans and receivables
"Loans and receivables" includes loans and receivables due
from credit institutions and customers as well as certain
unlisted securities purchased on an active market if they are
not held for trading.
Loans and receivables are initially recorded at fair value,
plus costs directly related to their issue and less income
directly related to their issue, such as loan set-up costs. In
sub sequent periods, they are stated at amortised cost
based on the effective interest rate method.
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts to the initial fair
value of the loan. This rate includes any discounts recorded
when loans are granted at below-market rates, as well as
any transaction fees paid or received that are directly related
Impairment of loans and receivables
An impairment loss is recognised when, after inception of the
loan or receivable, objective evidence of impairment exists
whose impact on future cash flows can be measured reliably.
Impairment assessed on an individual basis
Assessment of risk is initially performed on an individual
basis. Loans are considered “at risk” when it is probable
that the Group will not collect all or part of the sums due
under the terms of the commitments made by the counterparty, notwithstanding any guarantees or collateral. Loans
and receivables are classified as impaired:
• when one or more instalments is at least three months
past due (six months for home purchase loans and real
estate leases and nine months for loans owed by local
authorities);
• when the financial position of the counterparty presents a
known risk, regardless of whether it has defaulted (e.g.
major financial difficulties, increase in the number of late
payments, strong probability of bankruptcy, etc.);
• in the event of legal proceedings.
5 - Human and
6 - Risk management
7 - Consolidated
The impairment amount is equal to the difference between
the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. Impairment is calculated taking into account the
impact of any intrinsic security in the contract and the value
of residential mortgages, adjusted by a 10% reduction of the
appraiser's value.
The impairment loss is posted to "Cost of risk" in the income
statement and the value of the financial asset is written
down via a separate impairment account. Any subsequent
reduction in the loss due to an event occurring after the
impairment has been recorded is also posted to "Cost of
risk" in the income statement.
Estimated losses on small loans with similar characteristics
may be estimated based on statistical methods or an automatic calculation on an individual basis.
Impairment assessed on a collective (portfolio) basis
Counterparties not impaired on an individual basis are
assessed on the basis of portfolios of loans and receivables
with similar characteristics. The existence of a known credit
risk on a group of similar loans and receivables gives rise to
an impairment loss, even though the risk cannot at this
stage be allocated to individual counterparties.
The approach adopted by the Group to identify at-risk portfolios draws on an analysis of payment delinquencies and
internal credit ratings based on historic data, combined with
a review of external credit ratings where applicable. An
analysis by sector or geographic region may also be performed, based on an advanced assessment taking account
of various economic factors intrinsic to the loans and receivables in question.
The collective provision calculated on a portfolio basis is
based on expected losses on an identified given population.
The probability of default is calculated up to maturity.
4.2.2 - Securities
Securities are classified based on the four following categories defined under IAS 39:
- financial assets at fair value through profit or loss;
- held-to-maturity financial assets;
- loans and receivables;
- available-for-sale financial assets.
This category includes the following:
• financial assets held for trading, i.e. securities acquired
principally for the purpose of selling or redeeming them in
the near term;
• financial assets that the Group has chosen to recognise at
fair value through profit or loss at inception, in accordance
with the fair value option available under IAS 39.
The conditions for applying this option are described in note
4.2.6 "Financial assets and liabilities accounted for at fair
value under the fair value option".
The fair value of securities classified under this category is
calculated by applying the bid price. At the balance sheet
date, these assets are remeasured to fair value, with changes
in fair value posted to "Net gains/(losses) on financial instruments at fair value through profit or loss".
This portfolio includes securities with fixed or determinable
payments and fixed maturity that the Group has the positive
intention and ability hold until maturity.
IAS 39 prohibits the sale or transfer of such securities prior
to maturity except in certain specific circumstances. In the
event that such securities are sold before maturity, the
Group must reclassify all of the portfolio and may not classify
any financial assets in this category for two years.
Hedges contracted to protect assets in this category against
interest rate risk do not qualify for hedge accounting.
Held-to-maturity securities are initially stated at fair value
including transaction costs. Subsequently, they are carried
at amortised cost calculated using the effective interest rate
method, including any premiums, discounts and purchase
costs if material.
TThe "Loans and receivables" portfolio comprises non-derivative financial assets with fixed or determinable payments that
are not quoted on an active market. These assets may not be
subject to the risk of material losses unrelated to credit risk.
Certain securities may be included in this category if they are
not quoted on an active market. These are initially stated at
fair value, which represents nominal value plus transaction
costs and minus discounts and transaction income, and
must then comply with the rules for recognition, measurement and impairment applicable to loans and receivables.
December 2008
A collective impairment provision has been calculated based
on stress tests applied to the entire securitised mortgage portfolio. These tests classify the securities depending on the
robustness of their credit rating. The provision was calculated
based on the least robust structures, namely commercial
mortgage-backed securities rated BBB and a number of residential mortgage-backed securities among those most recent
rated AAA. All other securitised outstandings are rated AAA.
This category covers securities not included in the portfolios
described above.
Available-for-sale financial assets are initially recorded at
cost including transaction costs. At the balance sheet date,
they are remeasured to fair value. The principles for calculating fair value are described in note 4.2.5.
Earned or accrued income on fixed-income securities is
posted to "Interest and similar income". Income from variable-income securities is posted to "Net gains/(losses) on
available-for-sale financial assets".
Reclassification of financial assets
The amendments to IAS 39 and IFRS 7 dated 13 October
2008 specify the procedures for reclassifying non-derivative
financial assets carried at fair value through profit or loss
(except assets accounted for under the fair value option) to
other categories.
• Reclassification of securities held for trading to "Available-forsale financial assets" or "Held-to-maturity financial assets"
Any non-derivative financial asset may be reclassified provided the Group can demonstrate the reclassification is
caused by "rare circumstances". The IASB considers the
financial crisis which emerged in the second half of 2008 as
an example of a rare circumstance.
Only securities with fixed or determinable payments that
have not been hedged against interest rate risk may be
reclassified under the "held-to-maturity" category. The Group
must also have the positive intention and ability to hold such
securities until maturity.
• Reclassification of securities held for trading or availablefor-sale securities to "Loans and receivables"
Any non-derivative financial asset meeting the definition of
"Loans and receivables" and, specifically, any security not
listed on an active market, may be reclassified provided the
Group changes its intention and decides to hold the securities for the foreseeable future or until maturity. The Group
also must have the ability to hold such securities over the
medium to long term.
The reclassifications are carried out at fair value at the
reclassification date. This amount is then taken as the new
amortised cost for instruments transferred to asset categories carried at amortised cost.
The effective interest rate is recalculated in order to bring
the amortised cost at the reclassification date into line with
the redemption value, which amounts to considering that
the security was reclassified at a discount.
In the case of securities previously included in available-forsale assets, the recognition of the revised discount over the
residual term of the security is partially offset by the amortisation of the unrealised loss included in unrealised or deferred
gains or losses at the reclassification date and written back to
income on a yield-to-maturity basis.
Impairment of securities
Securities other than those at fair value through profit or
loss are written down on a case-by-case basis if there is
objective evidence of impairment.
The policies governing impairment vary depending on
whether the securities are equity or debt instruments.
In the case of equity instruments, a long-term, significant
decline in value represents objective evidence of impairment. Amid severe volatility, impairment is deemed to exist
when listed securities lose more than 30% of their value
(previously 20%) over a period of six consecutive months.
This policy should not however prevent a line-by-line review
of objective evidence of impairment, particularly in the event
of a sharp fall in value during the period prior to the balance
sheet date. For unlisted equity instruments, a qualitative
analysis of long-term impairment is performed based on the
measurement methods described in note 4.2.5.
5 - Human and
6 - Risk management
7 - Consolidated
Impairment losses taken against equity instruments may not
be reversed and cannot be written back to income. These
losses are posted to "Net gains/(losses) on available-for-sale
assets". Any subsequent increase in value is carried in
equity until the related instrument is sold.
Debt instruments such as bonds or securitisation issues are
written down when there is a known counterparty risk.
Impairment indicators used for debt securities are the same
as those used for individually assessing impairment risk on
loans and receivables, regardless of the portfolio to which
the securities are ultimately designated.
Impairment of debt instruments may be written back to
income if the issuer's financial situation improves. These
movements are recognised in "Cost of risk".
4.2.4 - Derivatives and hedge accounting
All derivatives are posted to the balance sheet on the trade
date and measured at fair value at inception. They are remeasured to fair value at each balance sheet date, regardless of
whether they were acquired for trading or hedging purposes.
Changes in the fair value of derivatives are taken to income,
except for derivatives qualifying as cash flow hedges for
accounting purposes.
Derivative financial instruments are classified in two categories:
Derivatives held for trading
Securities are recorded in the balance sheet on the
settle/delivery date.
Derivatives held for trading are recognised in the balance
sheet under "Financial assets or liabilities at fair value through
profit or loss". Realised and unrealised gains and losses on
derivatives held for trading are posted to the income statement under "Net gains/(losses) on financial instruments at fair
value through profit or loss".
Policies applied in the event of partial disposals
In the event of a partial disposal of a line of securities, the
FIFO (first-in-first-out) method is applied.
A hedging relationship qualifies for hedge accounting if, at
the inception of the hedge, there is formal documentation of
the hedging relationship identifying the hedging strategy, the
type of risk hedged, the designation and characteristics of
the hedged item and the hedging instrument. The effectiveness of the hedge must also be demonstrated at inception
and subsequently verified.
Date of recognition
4.2.3 – Debt securities
Financial instruments issued are classified as debt instruments if the issuer has a contractual obligation to deliver cash
or another financial asset or to exchange the instrument under
conditions that are potentially unfavourable to the Group.
Issued debt securities (which are not classified as financial
liabilities at fair value though profit or loss) are initially recognised at issue price including transaction costs, and are
remeasured at amortised cost at each balance sheet date
using the effective interest method.
Details of the measurement of issues classified as financial
liabilities at fair value are provided in notes 4.2.6 and 5.1.2.
Derivatives contracted as part of a hedging relationship are
classified based on the objective pursued.
Fair value hedges
The objective of fair value hedges is to reduce exposure to
changes in the fair value of an asset, liability or firm commitment (in particular, the interest rate risk on fixed-rate assets
and liabilities).
Gains and losses on the remeasurement of derivatives are
recognised in income symmetrically with the gains or losses
on the hedged item attributable to the risk being hedged.
The ineffective portion of the hedge, if any, is therefore
directly reflected in income under "Net gains/(losses) on
financial instruments at fair value through profit or loss".
Accrued interest on the hedging instrument is posted to
income symmetrically with the accrued interest on the
hedged item.
December 2008
Where identified assets or liabilities are hedged, the remeasurement of the hedged component is recognised in accordance with the classification of the hedged item.
If the hedging classification no longer applies (because the
effectiveness criteria are no longer met or the hedged item
is sold prior to maturity), the hedging instrument is transferred to the trading book. The remeasurement adjustment
recognised in the balance sheet in respect of the hedged
item is amortised over the remaining term of the hedge.
pursued by European banks. The "carve-out" allows the
Group to hedge the interbank interest rate risk on customer
fixed-interest transactions (loans, savings accounts and
demand deposits). The Group uses the following macrohedges:
- plain vanilla interest rate swaps designated as fair value
hedges of fixed-interest loans at inception;
- purchases of caps to hedge capped interest rates.
Cash flow hedges
The accounting treatment for macro-hedges is based on the
same principles as those stated above for fair value hedges.
Cash flow hedges aim to reduce exposure to variability in the
cash flows associated with a financial instrument, in particular the interest rate risk on variable-rate assets and liabilities.
In the case of a macro-hedge, gains and losses on the remeasurement of the hedged item are recorded in "Revaluation differences on interest rate hedged portfolios".
The portion of the gain or loss on the hedging instrument
that is determined to be an effective hedge is recognised on
a separate line in equity to be recycled to the income statement, while the ineffective portion is taken to income.
The hedges are deemed to be effective if the hedge offsets
the interest rate risk on the underlying fixed-interest portfolio.
Accrued interest on the hedging instrument is taken to the
income statement on the interest line, symmetrically with
the accrued interest on the hedged item.
Hedged items continue to be accounted for using the treatment applicable to their specific asset category.
If the hedging classification no longer applies (because the
effectiveness criteria are no longer met or the hedged item
is sold or ceases to exist), the cumulative amounts posted to
equity are transferred to income as and when the hedged
item itself impacts income, or immediately if the hedged
item ceases to exist.
Hedge of a net investment in a foreign operation
These hedges are accounted for in the same way as cash
flow hedges.
Unrealised gains and losses posted to equity are transferred
to income when the net investment is sold in full or in part.
Macro-hedges (fair value hedges)
The Group applies the IAS 39 “carve-out” as adopted by
the European Union.
The version of IAS 39 adopted by the European Union does
not include certain hedge accounting provisions that seem
incompatible with overall interest rate risk mitigation strategies
Effectiveness is demonstrated by the fact that at inception,
all derivatives are required to reduce the interest rate risk of
the underlying portfolio.
If the hedge is terminated, the difference is either amortised
on a straight line basis over the remaining term of the initial
hedge if the hedged item is still carried in the accounts, or
taken directly to income if the hedged item no longer
appears in the balance sheet. Macro-hedges may be disqualified from hedge accounting when the nominal value of
the hedged item falls below the nominal value of the hedging instrument, for example due to early loan repayments or
the withdrawal of deposits
Embedded derivatives
An embedded derivative is part of a financial or non-financial hybrid contract that meets the definition of a derivative.
It must be separated from the host contract and accounted
for separately as a derivative if the hybrid instrument is not
measured at fair value through profit or loss, and if the economic characteristics and risks associated with the derivative are not closely related to those of the host contract.
The “separable” embedded derivatives used by the Group
are plain vanilla or complex interest rate options liable to have
a large leverage effect on loans, bonds or financial liabilities,
instruments indexed to bond market performance and instruments indexed to a counterparty risk other than that of the
issuer of the underlying debt instrument (synthetic CDOs).
5 - Human and
6 - Risk management
7 - Consolidated
There is no separation in the case of instruments containing
an indexation clause that does not meet the definition of an
embedded derivative (e.g. cash CDOs).
When the Group has an embedded derivative, it accounts
for the transaction under the fair value option.
4.2.5 - Determination of fair value
Financial assets and liabilities at fair value through profit or
loss and available-for-sale financial assets are stated at fair
value at the balance sheet date. Fair value is defined as the
price at which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an armslength transaction. The fair value of a financial instrument
on initial recognition is normally the transaction price, i.e.
the fair value of the consideration paid or received.
In the case of financial instruments, the best evidence of fait
value is a quoted price on an active market. Entities must
use quoted prices on active markets whenever these are
available.
If there are no quoted prices, fair value may be determined in
accordance with generally accepted valuation methods
reflecting accepted financial theories and preferring observable market valuation methods over data specific to the entity.
If observable market inputs are inadequate, fair value may
be determined applying a valuation method based on internal models. The model used must be periodically updated
by reconciling its results with prices for recent transactions.
A market is considered active if quoted prices are readily
and regularly available from an exchange, broker, dealer,
pricing service or regulatory authority, and those prices represent actual and regularly occurring market transactions
conducted at arms length
The lack of an active market or observable data can be documented based on the following criteria:
• the volume of trading in the primary market is virtually
zero and is also very low in the secondary market;
• quoted prices are extremely difficult to obtain;
• there are few market participants and/or major players are
not trading on the market;
• actual prices are very volatile and vary considerably
between different sources;
• prices are significantly different from intrinsic asset values,
with a large spread between bid and ask prices.
These criteria should be adapted to the characteristics of
the assets in question and they may be supplemented by
any other proof demonstrating that an active market no
longer exists for the asset.
Pursuant to the amendments to IAS 39 and IFRS 7 dated
13 October 2008, available-for-sale securities quoted on an
inactive market have been reclassified as "Loans and
receivables". Consequently, the "Available-for-sale financial
assets" account only comprises securities listed on an
active market which are marked to market.
4.2.6 – Financial assets and liabilities accounted for at fair
value under the fair value option
The amendment to IAS 39 adopted by the European Union
on 15 November 2005 allows financial assets and liabilities
to be initially designated as at fair value through profit or
loss. This classification may not be subsequently changed.
The fair value option can only be applied in the following
circumstances:
Elimination or significant reduction of a measurement or
recognition inconsistency (accounting mismatch)
The option allows:
• the elimination of accounting mismatches arising from
different valuation rules applied to instruments managed
in accordance with a single strategy;
• the elimination of restrictions concerning the designation,
monitoring and analysis of hedge effectiveness in the case
of fair value hedges, as the opposite changes in fair value
are automatically offset in income (e.g. for a fixed-rate
bond combined with a fixed-rate borrower swap).
December 2008
Harmonisation of accounting treatment and performance
management and measurement
The option applies to a group of assets and/or liabilities
managed and valued on a fair value basis, provided that it is
based on a formally documented risk management policy or
investment strategy, and that internal reporting mechanism
is based on fair value measurements.
Hybrid financial instruments containing one or more embedded derivatives
The option may only be applied when the embedded derivatives substantially modify the cash flows of the host contract and when the separate recognition of the embedded
derivatives is not specifically prohibited under IAS 39 (e.g.
an early redemption option at cost embedded in a debt
instrument). This option allows the entire instrument to be
measured at fair value, which avoids the need to extract,
recognise and separately measure the embedded derivative.
This treatment applies largely to structured debt issues
containing significant embedded derivatives and to structured loans.
Structured issues have been measured based on prudent
assessments of changes in the credit spread for these
issues. For structured loans, granted mainly to local authorities, the lack of a secondary market prevents measurement at market price. Consequently, these loans are measured at amortised cost adjusted for the fair value of the
derivatives embedded in the assets.
4.2.7 – Financial guarantees and financing commitments
Financial guarantees
A contract is defined as a financial guarantee when it
requires the issuers (guarantor) to make specified payments
to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due on the instrument held.
These contracts are initially measured at initial fair value,
which, if there is consideration for the guarantee, is equal to
the commission/consideration paid for the risk assumed by
the guarantor. Thereafter, such guarantees are measured at
the higher of the amount calculated under IAS 37 (equiva-
lent to the best estimate of the expense required to settle the
liability) and the initial fair value less any amortisation of the
consideration as defined under IAS 18.
However, a guarantee that gives rise to a payment resulting
from fluctuations in financial or other variables (based on
credit ratings, for example) is considered as a derivative as
defined under IAS 39 and accounted for accordingly.
If, as well as consideration, a material risk is transferred, the
financial guarantee may also meet the definition of an insurance contract under IFRS 4. Financial guarantees clearly designated as insurance contracts, and which were accounted
for using specific insurance-based principles prior to IFRS,
are recorded as insurance contracts in the Group’s financial
statements.
Financing commitments
Financing commitments that do not meet the definition of a
derivative instrument are disclosed in the notes to the financial statements.
A provision is set aside if there is a known risk of counterparty default. Impairment indicators used for financing commitments are identical to those applied in individual assessments of impairment risk on loans and receivables.
4.2.8 - Derecognition of financial assets and liabilities
A financial asset (or group of financial assets) is derecognised
when the contractual rights to the asset’s future cash flows
expire or when such rights and substantially all the risks and
rewards associated with ownership of the asset have been
transferred to a third party.
An asset or liability representing rights and obligations created
or maintained following the transfer of the asset (or group of
assets) is accounted for separately.
When a financial asset is derecognised in full, a gain or loss on
disposal is recorded in the income statement reflecting the difference between the carrying amount of the asset and the
amount of consideration received.
If control over the financial asset is retained, the asset continues to be recognised in the balance sheet to the extent of the
Group’s continuing involvement.
5 - Human and
6 - Risk management
7 - Consolidated
A financial liability (or a part of a financial liability) is only
removed from the balance sheet when it is extinguished, i.e.
when the obligation specified in the contract is discharged,
cancelled or expires.
Repurchase agreements
• Assignor
Securities sold are not derecognised. The Group records a
liability representing the obligation to return the funds
received ("Securities sold under repurchase agreements").
This is a financial liability carried at amortised cost rather
than at fair value.
• Assignee
Securities acquired are not accounted for, but a receivable
on the assignor is recorded representing the funds lent. The
amount disbursed in respect of the assets is posted to
"Securities received under repurchase agreements".
At subsequent balance sheet dates, the securities continue to
be accounted for by the assignor in accordance with the rules
applicable to their original category. The receivable continues
to be recorded at face value under loans and receivables.
• Securities lending
Securities lending/borrowing transactions cannot be treated
as transfers of financial assets as defined under IFRS.
Consequently, such transactions do not lead to derecognition of the securities loaned. Loaned securities continue to
be recognised in their original asset category and are valued
accordingly. Borrowed securities are not recognised in the
borrower’s balance sheet.
4.2.9 – Income and expenses relating to financial assets
and liabilities
Interest income and expense is recognised in the income
statement in respect of all financial instruments measured
at amortised cost using the effective interest rate method.
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the
expected life of the financial instrument to the net carrying
amount of the financial asset or liability.
The effective interest rate calculation takes account of all
transaction fees paid or received as well as premiums and
discounts. Transaction fees paid or received that are an integral part of the effective interest rate of the contract, such as
loan set-up fees and commission paid to financial intermediaries, are treated as additional interest.
Commissions are posted to income based on the type of
service rendered and according to the method used to
recognise the associated financial instrument, as follows:
• commissions payable on recurring services are spread
over the duration of the service rendered (payment processing, securities deposit fees, etc.);
• commissions payable on ad-hoc services are recognised
in full in income when the service is rendered (fund transfers, payment penalties, etc.);
• commissions payable on execution of a major transaction
are recognised in full in income on completion of the transaction.
4.3 - Non-current assets
Operating non-current assets are held for use in the production or supply of services, or for administrative purposes.
Investment property is real estate held to earn rentals or for
capital appreciation, or both.
Non-current assets are recognised at cost plus any directly
attributable acquisition costs. Newly developed software is
recorded at production cost when it meets the definition of
an asset, which includes external costs and the labour costs
of employees directly assigned to the project.
The Group applies the components-based approach for all of
its buildings. The asset’s depreciable amount takes account
of its residual value where this is material and can be measured reliably.
After initial recognition, non-current assets are stated at cost
less accumulated depreciation, amortisation and impairment. Non-current assets are depreciated or amortised in
order to reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity,
which generally corresponds to the asset’s useful life.
If one or more components of a non-current asset have different uses or patterns of consumption of economic benefits,
each component is recognised separately and depreciated
over a period appropriate to that component.
December 2008
Useful lives for depreciation/amortisation purposes are as
follows:
- buildings: 20 to 50 years;
- fixtures and fittings: 5 to 20 years;
- furniture and special equipment: 4 to 10 years;
- IT equipment: 3 to 5 years;
- software: up to 5 years.
Non-current assets are tested for impairment if, at the balance sheet date, there is any indication that they may be
impaired. If an asset is found to be impaired, its revised
recoverable amount is compared to its carrying amount, and
an impairment loss is charged to income. Should the recoverable amount change or the indications of impairment no
longer exist, the impairment is reversed.
4.4 - Leases
Leases are reviewed to determine whether, based on the
substance of the transaction and financial reality, they are
finance leases or operating leases.
Finance leases
A finance lease is defined as a lease that transfers to the lessee substantially all the risks and rewards incidental to ownership of an asset. It is treated as a loan granted by the lessor to the lessee in order to finance the purchase of an asset.
In the lessor's financial statements, a financial receivable is
recorded representing the present value of future payments
under the lease (plus any residual value). Lease payments
received are spread over the lease term and treated as repayment of principal and finance income so as to reflect a constant rate of return on the lessor’s net investment in the lease.
The interest rate used is the interest rate implicit in the lease.
Impairment charged against these receivables is determined in the same way as for other loans and receivables.
In the lessee's financial statements, finance lease contracts
with purchase options are treated as the acquisition of an
asset financed by a loan.
Operating leases
An operating lease is a lease under which substantially all
the risks and rewards incidental to ownership of an asset are
not transferred to the lessee.
In the lessor's financial statements, the asset is recognised
in non-current assets and depreciated over the lease term.
The depreciable amount does not take into account any
residual value. Lease payments are recognised in income
over the lease term.
The operating lease is not recognised in the balance sheet
of the lessee. Lease payments are expensed over the lease
term on a straight-line basis.
4.5 - Assets held for sale and related liabilities
When the Group decides to sell non-current assets and it is
highly probable that the sale will occur within 12 months,
the assets in question are shown separately on the balance
sheet under "Non-current assets held for sale". Any related
liabilities are also shown separately on the balance sheet
under "Liabilities related to non-current assets held for sale".
Once they are classified under this category, the non-current assets are no longer depreciated/amortised and are
stated at the lower of carrying amount and fair value less
costs to sell. The associated financial instruments continue
to be measured in accordance with IAS 39.
4.6 - Provisions recognised in liabilities
Provisions recognised in liabilities, other than those relating
to employee benefit obligations, home savings products,
execution risk on off-balance sheet commitments and insurance contracts, chiefly relate to disputes, penalties, tax risks
and restructuring.
Provisions are liabilities of uncertain timing or amount. They
represent a legal or constructive obligation for the Group
with regard to third parties, which is likely or certain to result
in an outflow of resources embodying economic benefits
with no equivalent consideration in return.
A liability is only recorded if its amount can be measured
reliably. The amount of the provision corresponds to the best
estimate of the expense required to extinguish the current
obligation at the balance sheet date.
5 - Human and
6 - Risk management
7 - Consolidated
Provisions are discounted if the impact of discounting is
material.
Additions and reversals to provisions are posted to income
on the lines corresponding to the type of expense for which
the provision was booked.
Termination benefits
Termination benefits are paid to employees on termination
of their contract prior to retirement, either as a result of
redundancy or following the employee’s acceptance of a voluntary retirement plan. A provision is set aside for termination benefits and the portion paid more than 12 months after
the balance sheet date is discounted to present value.
4.7 - Distinction between debt and equity
Financial instruments are classified as either debt or equity
depending on whether or not the issuer has a contractual
obligation to deliver cash to the holders of the securities.
Post-employment benefits
Post-employment benefits include lump-sum retirement
bonuses, pensions and other post-employment benefits.
Based on the conditions laid down in IAS 32 for analysing the
substance of these instruments and given their intrinsic characteristics, undated super-subordinated notes issued by the
Group are classified as debt instruments (see note 5.11.2).
Post-employment benefits can be broken down into two categories: defined contribution schemes, which do not require
the Group to book any provision for the related obligation,
and defined benefit schemes, which give rise to an obligation for the Group and are therefore measured and recognised by means of a provision.
4.8 - Employee benefits
A provision is set aside in the balance sheet for obligations
that are not funded by contributions charged to income and
paid out to pension funds or insurance companies.
Undated super-subordinated notes
Crédit Foncier grants its employees various types of benefits
which can be divided into four categories:
Short-term benefits
Short-term benefits mainly comprise wages and salaries,
paid annual leave, incentive plans, profit-sharing and
bonuses payable within 12 months of the end of the period
in which the employee renders the service.
They are recognised as an expense for the period, including
amounts remaining due at the balance sheet date.
Long-term benefits
Long-term benefits comprise benefits generally linked to
long-service awards, accruing to current employees and
payable 12 months or more after the end of the financial
year. Long-term benefits consist mainly of jubilee bonuses.
The obligations are valued using an actuarial method based
on demographic and financial assumptions such as age,
length-of-service, the probability that employees will be with
the Group at the date the benefit is paid and the discount
rate. The calculation allocates the costs over the working life
of each employee (projected unit credit method). The liability recorded takes account of the value of plan assets and
unrecognised actuarial gains and losses.
Actuarial gains and losses on post-employment benefits,
arising from changes in calculation assumptions (early
retirement, discount rates) or experience adjustments (return
on plan assets) are recognised for the portion that exceeds
the greater of 10% of the present value of the obligation and
10% of the fair value of any plan assets ('corridor' method).
Pursuant to the option available under IFRS 1, the Group
chose to transfer cumulative actuarial differences to equity
at the IFRS transition date.
A provision is set aside for these obligations at the balance
sheet date, which is assessed using the same actuarial
method as that applied to post-employment benefits.
December 2008
The annual expense regarding defined benefit schemes
includes current service cost, interest cost (impact of discounting the obligation), the expected return on plan assets
and the amortisation of any unrecognised items.
Carrying amount is deemed to be representative of market
value in the following cases:
4.9 - Deferred taxes
• short-term financial assets and liabilities for which the initial term is one year or less, provided their sensitivity to
credit and interest rate risks is not material over the period;
Deferred taxes are accounted for when temporary differences arise between the carrying amount of assets and liabilities and their tax base.
• variable-rate assets and liabilities for which changes in interest rates have no material impact on fair value, provided
their sensitivity to credit risk is not material over the period;
• liabilities repayable on demand;
Deferred taxes are calculated using the comprehensive
method, which consists of identifying all temporary differences regardless of the date when the tax is expected to be
recovered or settled.
• items linked to a regulated market (particularly regulated
savings products), for which prices are set by the public
authorities.
The tax rates applied for the calculation of deferred taxes are
those that are expected to apply to the period when the
asset is realised or liability settled based on tax rates (and
tax laws) that have been enacted or substantively enacted
by the balance sheet date.
Fair value of loans and receivables
Deferred tax balances are offset at the level of each consolidated entity or each tax consolidation group. Deferred tax
assets are only recognised to the extent that it is probable that
the temporary difference will reverse in the foreseeable future.
Deferred taxes are accounted for as tax income or expense
in the income statement, with the exception of deferred
taxes relating to unrealised gains and losses on available-forsale assets and to changes in the fair value of derivatives
designated as cash flow hedges, which are posted to equity.
4.10 - Measurement of fair value in the notes
The principles for calculating the fair value of instruments
carried at fair value in the balance sheet are described in
note 4.2.5.
For financial instruments not carried at fair value, the calculation represents the best estimate as at the balance sheet
date based on models drawing on certain assumptions.
The fair value of loans and receivables is based on internal
valuation models that discount future recoverable principal
and interest payments over the remaining term at the interest rate applicable to new loans originated in the same category and with the same maturity during the month. Early
repayment options are factored in by adjusting the loan
repayment profiles.
The fair value of securities classified as loans and receivables is based on an internal valuation model.
Fair value of liabilities
In the absence of an active market, the fair value of fixedrate amounts due to credit institutions and customers in
more than one year is assumed to equal the present value
of future cash flows discounted at market rates in force at
the balance sheet date.
Fair value of non-current assets
The fair value of the Group's investment property is based on
valuations performed by independent real estate appraisers.
The most expensive properties are valued independently
every year, while the others are valued independently on a
regular basis, unless there is a particular event materially
impacting the asset's value.
5 - Human and
6 - Risk management
7 - Consolidated
4.11- Use of estimates in the preparation of the financial statements
The preparation of the financial statements requires the use
of assumptions and estimates with regard to uncertain
future events.
Accounting estimates that require assumptions and estimates are used largely to measure the fair value of financial
instruments and to assess the value of goodwill, pension
schemes, other employee benefits and provisions.
Future results may differ from these estimates.
Management is required to exercise judgement in making
these estimates and assumptions, based on information
available at the balance sheet date.
December 2008
Note 5 - Notes to the consolidated balance sheet
Note 5.1 - Financial assets and liabilities at fair value
Financial assets in the trading portfolio consist mainly of
structured loans granted to customers and economic
hedges of these transactions.
These assets and liabilities are made up of transactions
entered into for trading purposes and include derivative
financial instruments and certain assets and liabilities
which the Group has chosen to account for at fair value
under the fair value option at the acquisition or issue date.
Financial liabilities in the trading portfolio are composed
mainly of structured issues made by Compagnie de
Derivative assets and liabilities in the trading portfolio are
contracted to hedge structured transactions.
Note 5.1.1 - Financial assets at fair value through profit or loss
2008
Trading
Fixed-income securities
2007
Fair value
option
Total
Trading
Fair value
option
Total
37
37
38
38
37
37
38
38
Loan book
2,529
2,529
1,561
1,561
Loans to credit institutions
Loans to customers
2,529
2,529
1,561
1,561
Government securities and equivalent
- Bonds
- Subordinated notes
- Securitisation funds
- Negotiable debt instruments and interbank securities
Variable-interest securities
Equities and other variable-income securities
421
Total
421
2,566
421
663
2,987
663
663
1,599
2,262
Classification of financial assets accounted for at fair value under the fair value option
Different accounting treatment
Managed at fair value
2008
Fixed-interest securities
Loans and repurchase agreements
37
37
2,529
2,529
Total
2,566
2,566
Financial assets accounted for under the fair value option mainly concern assets containing embedded derivatives, such as
certain structured loans to local authorities and bonds hedged by a structured instrument that does not qualify for hedge
accounting.
Derivatives accounted for at fair value and embedded in these assets are not separable from the host contract and are managed in the same manner.
Loans and receivables accounted for at fair value under the fair value option and credit risk
Changes in the fair value of these financial assets attributable to credit risk are not material.
5 - Human and
6 - Risk management
7 - Consolidated
Note 5.1.2 - Financial liabilities at fair value through profit or loss
2008
2007
724
686
6,027
6,237
37
5,990
37
6,116
84
6,751
6,923
Financial liabilities held for trading
Securities sold short
Other financial liabilities
Financial liabilities accounted for at fair value under the fair value option through profit or loss
Interbank term accounts and loans
Customer term accounts and loans
Debt securities
Subordinated debt
Total
Classification of financial liabilities accounted for at fair value under the fair value option
Debt securities
Subordinated debt
Total
Different accounting treatment
Managed at fair value
2008
37
5,990
37
5,990
6,027
6,027
Financial liabilities accounted for at fair value under the fair value option consist mainly of structured issues carried out by
Compagnie de Financement Foncier.
Derivatives accounted for at fair value and embedded in these assets are not separable from the host contract and are managed in the same manner.
December 2008
Financial liabilities accounted for at fair value under the fair value option and credit risk
The amount contractually due at maturity is deemed to be
the amount of the outstanding principal at the balance
sheet date, plus accrued unpaid interest. Securities are generally stated at redemption value.
Changes in value attributable to proprietary credit risk
(issuer spread) total €156 million and are recognised in full
in net banking income for the year.
Amount contractually
due at maturity
Carrying amount
Debt securities
Subordinated debt
Total financial liabilities accounted for at fair value
under the fair value option and credit risk
2008
2007
2008
2007
Difference between
carrying amount and
amount contractually due
2008
2007
Change in fair value
attributable
to credit risk
2008
2008
Period
Aggregate
37
5,990
37
6,116
84
44
6,116
44
6,234
149
(7)
(126)
(7)
(118)
(65)
(156)
(156)
6,027
6,237
6,160
6,427
(133)
(190)
(156)
(156)
Note 5.1.3 - Derivatives held for trading
These are derivative instruments put in place as economic
hedges of structured transactions.
Positive or negative fair values represent the replacement
value of these instruments.
The notional amount of these financial instruments is only
an indication of the trading volume and does not reflect the
market risks arising on these instruments.
These values may fluctuate considerably depending on
changes in market inputs.
2008
Notional
2007
Positive
FV*
Negative
FV*
Notional
Positive
FV*
Negative
FV*
Futures
9,439
420
724
9,178
656
685
Interest rate
Equities
Forex
Other
8,725
373
700
8,633
654
601
714
47
24
545
2
84
Options
495
1
9,316
7
Interest rate
Equities
Forex
Other
495
1
9,316
7
Credit derivatives
(1)
Total derivatives held for trading
12,003
9,934
421
724
30,497
1
663
686
* Fair value.
(1) This mainly refers to a credit default swap entered into with a financial institution to hedge a portfolio of securitised debt unwound in April 2008 in order to
bolster the entity’s capital adequacy ratio. The transaction gave rise to a €175 million positive cash adjustment.
5 - Human and
7 - Consolidated
6 - Risk management
Note 5.2 - Derivatives used for hedging purposes
Derivatives are designated as hedges when, as of the inception of the hedge and for their entire term, they comply with
the conditions prescribed by IAS 39, especially with regard to
the formal documentation as to the existence of an effective
hedging relationship between the derivative instruments and
the hedged items, both prospectively and retrospectively.
Fair value hedges consist mainly of interest rate swaps
hedging changes in the fair value of fixed-rate securities
attributable to changes in market rates, and purchases of
caps to hedge loans granted at "capped" rates. These
hedges convert fixed-rate assets and liabilities into variablerate items. Fair value hedges consist largely of fixed-rate
loans, securities, deposits, subordinated debt and bonds.
Cash flow hedges are a means of fixing or managing the
variability of cash flows linked to variable-income instruments. They are also used for hedging variable-rate loans
and deposits.
Fair value hedges are also used by the Group to manage
overall interest rate risk.
2008
Notional
Positive
FV*
2007
Negative
FV*
Notional
Positive
FV*
Negative
FV*
Fair value hedges
161,118
5,246
5,965
145,989
1,928
3,128
Futures
154,167
5,077
5,965
142,825
1,855
3,128
Interest rate
Equities
Forex
Other
130,721
3,575
3,320
123,546
1,592
1,495
23,446
1,502
2,645
19,279
263
1,633
Options
6,951
169
3,164
73
Interest rate
Equities
Forex
Other
6,951
169
3,164
73
Cash flow hedges
245
7
148
2
Futures
213
7
115
2
Interest rate
Equities
Forex
Other
213
7
115
2
Options
32
33
Interest rate
Equities
Forex
Other
32
33
Hedges of net investments in a foreign operation
Total
161,363
5,246
5,972
146,137
1,930
3,128
* Fair value.
December 2008
Note 5.3 - Available-for-sale financial assets
These are non-derivative financial assets that are not classified as assets at fair value through profit or loss, held to maturity, or
loans and receivables.
2008
2007
2,113
14,870
Bonds
Subordinated notes
Securitisation funds
Negotiable debt securities and interbank securities
3
2,091
2
9,610
19
2,691
2,567
Loan book
31
43
Loans to customers
31
43
337
331
6
6
2,487
15,250
Impaired receivables
GROSS
Impairment of receivables and variable-income securities
NET
(37)
(53)
2,450
15,197
Equity instruments that are not listed on an active market and whose fair value cannot be determined reliably are measured at
cost. Credit Foncier group equity instruments are measured as follows:
• shares in property companies controlled but not consolidated are measured at non-adjusted net asset value;
• shares in semi-public companies or social housing organisations are measured at the lower of cost and net carrying amount;
• securities acquired as part of tax arrangements are measured at historical cost.
In compliance with the amendment to IAS 39, available-for-sale financial assets for a nominal amount of €11,467 million were
reclassified to "Loans and receivables".
During the year, the Group also reclassified available-for-sale financial assets for €605 million to “Held-to-maturity financial assets“.
Note 5.4 - Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not traded on an active market. Most
loans granted by the Group fall into this category. Loans and receivables also include securities that are not traded on an
active market.
Mortgage loans to the subsidised sector benefit from French State guarantees both for credit and interest rate risk. These are
loans granted in the period 1950 to 1995 when Crédit Foncier had a near monopoly on the distribution of State-subsidised loans
within the scope of a policy to promote construction
The amounts concerned totalled €1,539 million at 31 December 2008 (€1,958 million at 31 December 2007).
5 - Human and
6 - Risk management
7 - Consolidated
Note 5.4.1 - Loans and receivables due from credit institutions
2008
2007
Due from credit institutions - repayable on demand
2,414
1,427
Current accounts
Overnight deposits and loans
1,291
1,123
1,157
270
Due from credit institutions - repayable at agreed maturity date
2,168
6,709
Term deposits and loans
Subordinated and participating loans
2,113
15
40
6,647
16
46
Other receivables
2,822
98
Finance leases
Unlisted securities
61
2,761
98
Non-performing items
GROSS LOANS AND RECEIVABLES
Impairment
NET
2
2
7,406
8,236
(1)
(1)
7,405
8,235
"Impairment" covers impairment calculated on both an individual and collective basis.
The fair value of loans and receivables due from credit institutions stood at €7,405 million at 31 December 2008 and €8,235 million at
31 December 2007.
In compliance with the amendment to IAS 39, €2,464 million of available-for-sale financial assets were reclassified to "Loans and receivables
due from credit institutions" as from 1 July 2008 (see note 5.7).
Note 5.4.2 - Loans and receivables due from customers
2008
2007
2
7
Other customer items
72,609
65,837
Loans to financial customers
Cash facilities
Capital goods loans
Housing loans
Export loans
Other loans
Subordinated loans
8
5,151
14,362
50,649
7
2,432
18
4,381
12,024
47,404
8
2,002
Other receivables
35,432
25,764
2,977
3,066
32,455
22,698
Current accounts in debit
Receivables under finance leases
Insurance receivables
Factoring receivables
Securities ranked as loans and receivables
Non-performing receivables
GROSS LOANS AND RECEIVABLES
Individual impairment
Collective impairment
NET
1,240
1,459
109,283
93,067
(311)
(279)
(306)
(161)
108,693
92,600
"Impairment" covers impairment calculated on an individual and collective basis.
The increase in impairment mainly reflects a further €118 million set aside on a collective basis (including €79 million in respect of securitised
tranches). The fair value of loans and receivables due from customers at 31 December 2008 totalled €107,825 million (€92,855 million
at 31 December 2007).
In compliance with the amendment to IAS 39, €8,933 million of available-for-sale financial assets were reclassified to "Loans and receivables
due from customers" as from 1 July 2008 (see note 5.7).
December 2008
Note 5.5 - Due to credit institutions and customers
Amounts due that are not classified as financial liabilities at fair value through profit or loss are accounted for at amortised cost
and posted to the balance sheet under "Due to credit institutions" or “Due to customers”.
These amounts are shown as either demand or term.
Note 5.5.1 - Due to credit institutions
2008
2007
Due credit institutions - repayable on demand
1,385
1,469
Demand deposits
Accrued interest
1,375
1,462
10
7
Due to credit institutions - repayable at agreed maturity dates
17,432
13,066
Term deposits and loans
Accrued interest
15,587
1,713
132
9,325
3,669
72
Total
18,817
14,535
At 31 December 2008, the fair value of amounts due to credit institutions stood at €18,817 million compared to €14,535 million at end-2007.
The main changes arose from financing transactions with the ECB for €6,850 million and a €1,955 million reduction in repurchase agreements.
Note 5.5.2 - Due to customers
2008
2007
89
1,390
Other demand and term deposits
379
850
Demand
Term
Accrued interest
312
67
297
548
5
19
472
3
7
1
6
3
1
18
229
19
12
2
190
487
2,712
Current accounts
Regulated savings accounts
Livret A
Livret Jeune
Livret B
PEL
CEL
Livret de développement durable
PEP
Other
Accrued interest
Demand
Term
Accrued interest
Insurance payables
Factoring payables
Total
The reduction in this item is due to the transfer of the banking business to Banque Palatine at 22 November 2008.
The fair value of amounts owed to customers at 31 December 2008 stood at €487 million (€2,712 million at 31 December 2007).
5 - Human and
7 - Consolidated
6 - Risk management
Note 5.6 - Held-to-maturity financial assetsy
These are non-derivative financial assets with fixed or determinable payments and fixed maturity which Credit Foncier has the
positive intention and ability to hold until maturity.
2008
2007
566
Bonds
Subordinated notes
Negotiable debt instruments and interbank securities
566
Loans
Loans to customers
GROSS
566
- including loaned securities
Impairment
NET
566
At 31 December 2008, the fair value of held-to-maturity financial assets stood at €501 million.
During the year, the Group reclassified €533 million to "Held-to-maturity financial assets”, representing the net carrying amount
of available-for-sale bonds.
Note 5.7 - Reclassification of financial assets
In compliance with the amendments to IAS 39 and IFRS 7 "Reclassification of Financial Assets", Crédit Foncier reclassified
certain available-for-sale financial assets to the category "Loans and receivables".
Crédit Foncier identified eligible financial assets, which at 1 July 2008 or 1 October matched the definition of loans and
receivables and for which it had the positive intention and ability to hold for the foreseeable future or until maturity.
The table below shows the carrying amount and fair value of these assets as at the reclassification and balance sheet dates:
At
reclassification At 31/12/08
date
o/w
principal
repayments
over
the period
Change
Depreciated cost
(nominal +/- premium/discount)
Accrued interest not yet due
Valuation of interest rate element (hedged)
Valuation of credit component (unhedged)
Impairment
11,222
139
176
(140)
11,571
140
1,463
(137)
349
1
1,287
3
(368)
n.a.
n.a.
n.a.
o/w
change in
value due
to exchange
differences
717
n.m.
160
n.a.
o/w
change in
value due
to interest
rates
o/w
amortisation
of credit
component at
reclassification
date
n.a.
n.m.
1,127
n.a.
n.a.
n.a.
n.a.
3
0
0
0
n.a.
n.a.
n.a.
n.a.
Carrying amount
11,397
13,037
1,640
(368)
877
1,127
3
Fair value
11,397
12,550
n.a: not applicable.
n.m: not material.
December 2008
Fair value hedges were contracted for reclassified assets showing interest rate and/or currency risks. Any change in value of
the items hedged between the reclassification date and the balance sheet date is recognised in income and offset by the
change in value of the attendant hedging instruments (interest
rate and/or currency swaps) where appropriate. Amortisation of
the credit component at the reclassification date is also posted
to income and offset by the amortisation of unrealised losses on
available-for-sale assets carried in equity to be recycled to the
income statement at the time of reclassification.
At the reclassification date, Crédit Foncier estimated that it
would recover €17,379 million in cash flows on the reclassi-
fied assets. The average effective rate of interest on these
assets is 3.63%.
If these assets had not been reclassified, equity to be recycled
to the income statement would have included additional posttax capital losses of €317 million on the credit risk component
due to wider spreads during the second half of 2008 (post-tax
capital losses recorded at 30 June 2008 in equity to be recycled to the income statement stood at €92 million).
In the period since reclassification, the impact (excluding
interest received and changes in value of hedging instruments) of the reclassified financial assets on the consolidated
income statement was as follows:
Available-for-sale financial assets reclassified as loans and receivables
Net banking income
Cost of risk
2,004
Pre-tax income on available-for-sale financial assets reclassified as loans and receivables
2,004
Note 5.8 - Financial assets pledged as guarantees
In view of the current liquidity crunch, credit institutions in
France can now utilise a number of refinancing arrangements
based on asset guarantee mechanisms.
European Central Bank (ECB)
To benefit from refinancing possibilities with the ECB, Crédit
Foncier and Companie de Financement Foncier participate in
monetary policy transactions. As a guarantee for this refinancing, participating entities must put in place a guarantee pool in
which the guarantees offered are managed on a fungible basis.
European Investment Bank (EIB)
Groupe Caisse d’Epargne plays a major role in the French
public sector and provides financing to local authorities for
their investment projects.
The group makes partial use of EIB financing so as to be able
to offer the best loan deals to its customers. The EIB
These guarantees may be of two types:
is an EU financial institution whose mission is to provide
financing on a direct basis, or through the banking system, for
priority investment areas as defined by EU bodies (cohesion,
transport networks, energy, the environment, research and
development and SMEs).
• transfer of proprietary receivables. This ranks as a transfer of
ownership within the meaning of Articles 313-23 and 31324 of the French Monetary and Financial Code (“Dailly”
mechanism);
Under this arrangement, CNCE receives funds from the EIB
and distributes these among the Caisse d'Epargne banks,
Crédit Foncier, Financière Océor and on occasions other group
institutions who lend them at preferential rates and conditions.
• pledge of securities that are registered in a securities
account with the Banque de France. These securities may
have been previously received within the scope of a lending
or repurchase agreement.
Financing obtained from the EIB is associated with guarantees
at each level under the "Dailly" mechanism, consisting of a
transfer of public authority loans to CNCE, which then guarantees them to the EIB.
5 - Human and
6 - Risk management
At the beginning of 2008, Groupe Caisse d'Epargne founded
GCE Covered Bonds, a company issuing AAA-rated Covered
Bonds on the market. These bonds are guaranteed by an
oversized pool of housing loans originated by the Caisse
d’Epargne banks and Crédit Foncier de France in compliance
with certain predefined eligibility criteria. This financial guarantee falls under Article L 431-7-3 of the French Monetary
and Financial Code.
7 - Consolidated
The table below lists by type the carrying amount of financial
assets pledged as guarantees for actual or contingent liabilities
such as securities delivered under collateralised and non-collateralised repurchase agreements recorded under various
accounting headings.
2008
2007
Equity instruments
Debt instruments (*)
Loans and advances
o/w ECB (TRICP)
o/w EIB
o/w Covered Bonds
Other
1,550
16,746
15,673
969
104
3,528
Total
18,296
4,123
595
(*) These amounts refer to repurchase arrangements on securities at maturity.
Note 5.9 - Financial assets received as guarantees and usable by the entity
These are financial instruments received as guarantees under
the terms of financial guarantee contracts conferring a right
of reuse.
The entity delivering these securities retains most of the risk
and rewards associated with the assets provided as guarantees and the beneficiary under the contract has an obligation
to return those assets. When ownership of the guaranteed
asset is transferred, the guarantor records a receivable representing the carrying amount of the asset pledged as a guarantee. This item is posted to the category in which the asset was
originally shown.
To date, Crédit Foncier has not carried out any material reuse
transactions.
Note 5.10 - Current and deferred taxes
2008
2007
Current and deferred tax assets
402
311
Current taxes
Deferred taxes
185
217
115
196
Current and deferred tax liabilities
152
262
Current taxes
Deferred taxes
3
149
31
231
December 2008
Deferred tax assets and liabilities
Deferred taxes on temporary differences were calculated based on the following accounting data:
Change over the year
2007
- Unrealised gains on UCITS
- Tax-efficient economic interest groups
- Provisions for employee benefit obligations
- Provisions for PEL-CEL home lending business
- Other non-deductible provisions
(dynamic and sector based)
- Other temporary differences
- Prepaid income on tax credits linked
to interest-free loans
Impact
on income
Impact
on reserves
(41)
22
2
13
(3)
(2)
55
51
40
7
40
32
- Deferred taxes on temporary differences
arising on the application of tax rules
129
87
- Deferred taxes arising on the utilisation
of tax loss carryforwards
20
(20)
2008
Other
movements
(28)
19
0
40
95
98
72
0
40
256
5
5
0
101
(38)
(304)
- Fair value of financial instruments where changes
in fair value are recorded in reserves
- Provisions for PEL-CEL home lending business
- Provisions established on a collective (portfolio) basis
- Other balance sheet valuation items
9
(34)
(195)
(71)
- Deferred taxes
on IFRS valuation adjustments
(186)
(105)
126
(38)
(203)
2
11
(4)
0
9
- Net deferred taxes
(35)
(27)
122
7
67
- Deferred tax assets
196
32
122
(133)
217
- Deferred tax liabilities
231
(35)
59
(27)
122
(140)
7
150
67
- Deferred taxes on restatements
and elimination of inter-company items
126
- Unrecognised deferred taxes
Note 5.11 - Debt securities and subordinated debt
Note 5.11.1 - Debt securities
Debt securities are broken down by type, except subordinated and super-subordinated notes, which are shown under
"Subordinated debt".
2008
2007
Retail certificates of deposit
Negotiable debt securities, interbank securities and other certificates of deposit
Bonds
Other debt securities
8,206
82,814
6,446
79,539
Total debt securities (excluding accrued interest)
91,020
85,985
Accrued interest
Total debt securities
2,042
1,996
93,062
87,981
The fair value of debt securities stood at €93,079 million at 31 December 2008 and €88,009 million at 31 December 2007.
5 - Human and
6 - Risk management
Note 5.11.2 - Subordinated debt
This item contains subordinated debt and super-subordinated
notes.
Subordinated debt is classified separately from issues of other
debt and bonds, because in the event of default, holders of
subordinated debt rank after all senior debt holders but before
holders of participating loans and securities and super-subordinated notes.
7 - Consolidated
The terms and conditions of super-subordinated notes issued
by the Crédit Foncier group were as follows:
- newly issued notes all had the same rank and were also
ranked pari passu with all of the issuer's other super-subordinated securities;
- interest must be paid when net income is reported for the
year, regardless of whether or not that income is paid out in the
form of dividends. In such cases the payment of the coupon is
no longer at the discretion of the issuer, and the contractual
obligation to deliver cash is indeed a financial liability within the
meaning of IFRS.
2008
2007
Term subordinated debt
Perpetual subordinated debt
Perpetual super-subordinated debt
Mutuel-type deposits
558
537
280
280
Total subordinated debt (excluding accrued interest)
838
817
Accrued interest
Total subordinated debt
17
17
855
834
At 31 December 2008, the fair value of subordinated debt stood at €855 million (€834 million at 31 December 2007).
Undated subordinated debt refers to €280 million in debt instruments issued by Crédit Foncier at 5.48% on 4 February 2004.
These were subscribed to in full by CNCE.
Breakdown of dated subordinated notes
Description
Maturity date
Rate
Currency
27/06/2012
06/03/2023
04/07/2015
Euribor 3M
CMS 20
Euribor 3M+0.42%
EUR
EUR
EUR
Variable-income
Subordinated bonds
Subordinated bonds
Subordinated loan
165
Fixed-income
Subordinated
Subordinated
Subordinated
Subordinated
Subordinated
Subordinated
Subordinated
Redemption value
at 31/12/2008
5
10
150
379
bonds
bonds
bonds
bonds
loan
loan
loan
06/01/2010
28/06/2012
28/06/2012
28/06/2012
01/05/2014
19/07/2014
17/12/2016
6.60%
6.25%
6.25%
6.25%
4.895%
5.20%
4.20%
EUR
EUR
EUR
EUR
EUR
EUR
EUR
42
11
3
1
22
170
130
December 2008
Note 5.12 - Accrual accounts and miscellaneous assets and liabilities
Accrual accounts and miscellaneous assets and liabilities correspond to technical accounts as detailed below:
Note 5.12.1 - Accrual accounts and other miscellaneous assets
2008
2007
Accruals accounts
1,084
1,517
Prepaid expenses
Accrued income
Other accruals
61
150
873
58
156
1,303
Miscellaneous assets
2,023
684
Settlement accounts relating to securities transactions
Sundry debtors (1)
1
2,022
0
684
Total
3,107
2,201
407
310
(1) including hom savings premium receivable from the State.
The increase in "Sundry creditors" arises essentially from an increase of €1,330 million in deposits paid in respect of collateralisation transactions.
Note 5.12.2 - Accrual accounts and other miscellaneous liabilities
2008
2007
Accruals accounts
2,282
2,593
Accrued expenses
Prepaid income
Collection accounts
Other accruals (1)
172
684
55
1,371
121
602
90
1,780
Total miscellaneous liabilities
1,597
975
Settlement accounts relating to securities transactions
Sundry liabilities (2)
2
1,595
2
973
Total
3,879
3,568
514
282
578
295
(1) including subsidies from FGAS
(2) including allocated public funds - mainly subsidies received on subsidised loans
The increase in “Sundry liabilities" arises essentially from an increase of €436 million in deposits received in respect of collateralised transactions.
5 - Human and
7 - Consolidated
6 - Risk management
Note 5.13 - Investments in associates
2008
Value of equityaccounted
associates
in the
consolidated
balance sheet
2007
Share in net
income of
associates
o/w
goodwill
Foncier Assurance
Banco Primus
GCE Foncier CO INVEST
Maison France Confort P-I
23
1
46
30
2
Total
70
30
4
o/w
impairment
of goodwill
and reversal
of negative
goodwill
Value of equityaccounted
associates
in the
consolidated
balance sheet
2
Share in net
income of
associates
o/w
goodwill
21
14
5
1
(1)
35
5
0
o/w
impairment
of goodwill
and reversal
of negative
goodwill
IFRS financial data for the main entities accounted for by the equity method is as follows:
2008
Total
assets
2007
Company
net income
NBI
Foncier Assurance
Banco Primus
GCE Foncier CO INVEST
1,299
18
5
93
309
1
500
2
10
Total
1,701
519
17
Total
assets
Net income
attributable
to the parent
NBI
942
121
13
4
1
(1)
1,063
17
0
In November 2008 Crédit Foncier increased its stake in Banco Primus from 37.37% to 85%.
Accordingly, as from 31 December 2008, this company has been fully consolidated.
December 2008
Note 5.14 - Non-current assets
Note 5.14.1 - Investment property
Investment property
Gross value at 1 January 2008
258
Acquisitions
Disposals, retirements (*)
Other movements (1)
10
(61)
(7)
Gross value at 31 December 2008
200
Accumulated depreciation and impairment at 1 January 2008
(98)
Additions
Reversals
Other movements
(10)
28
(3)
(1)
Accumulated depreciation and impairment at 31 December 2008
(83)
Net carrying amount at 31 December 2008
117
Net carrying amount at 1 January 2008
160
(1) Including changes in the scope of consolidation and foreign exchange rates.
(*) Main changes in 2008: sale of two properties by Crédit Foncier Gross value (€51 million); accumulated depreciation (€22 million).
At 31 December 2008, the fair value of investment property stood at €187 million (€295 million at 31 December 2007).
Note 5.14.2 - Property, plant and equipment
Land
and buildings
Gross value at 1 January 2008
Furniture,
fixtures and fittings
and other PPE
Total
116
133
249
(1)
4
(6)
12
4
(7)
12
115
143
258
Accumulated depreciation and impairment
at 1 January 2008
(28)
(82)
(110)
(1)
(12)
6
(13)
6
0
(29)
(88)
(117)
86
55
141
88
51
139
Acquisitions
Disposals, retirements
Other movements(1)
Additions
Reverals
Other movements(1)
Accumulated depreciation and impairment
at 31 December 2008
5 - Human and
7 - Consolidated
6 - Risk management
Note 5.14.3 - Intangible assets (*)
Software
applications
Leasehold rights
Other intangible
assets
Total intangible
assets
Gross values at 1 January 2008
11
78
89
Acquisitions
Disposals, retirements
Other movements(1)
(1)
14
(9)
2
14
(10)
2
10
85
Accumulated amortisation and impairment
at 1 January 2008
(2)
(53)
(55)
(18)
4
(18)
4
0
Additions
Reversals
Other movements(1)
Accumulated amortisation and impairment
at 31 December 2008
0
95
(2)
(67)
0
(69)
8
18
0
26
9
25
0
34
* Excluding goodwill
December 2008
Note 5.15 - Goodwill
This item comprises unallocated goodwill. Goodwill arising on transactions carried out during the year is detailed in
note 11 – Scope of consolidation.
2008
2007
48
26
Net value at 1 January
48
26
Acquisitions
Disposals
Translation adjustments
Other changes
23
36
5
(14)
Gross value at 31 December
76
48
Gross value at 1 January
Cumulative impairment losses at 1 January
Cumulative impairment losses at 31 December
Net value at 31 December
(46)
30
48
Breakdown of main goodwill items (net carrying amount)
2008
2007
Real estate leasing
Crédit Foncier Alsace Lorraine
Banco Primus
Services rendered
0
2
28
0
42
1
0
5
Total
30
48
Pursuant to IFRS, all items of goodwill have been tested for impairment based on an assessment of the value in use of the cashgenerating units to which they belong.
The value in use of cash-generating units (CGUs) is the result of a multi-criteria approach primarily relying on the discounted
cash flow method based on medium-term plans drawn up for Group strategic planning purposes.
As a result of these tests, the Group has posted impairment at the balance sheet date against the following CGUs:
2008
2007
Real estate leasing
Services rendered
41
5
0
0
Total
46
0
5 - Human and
7 - Consolidated
6 - Risk management
Note 5.16 - Provisions
Provisions chiefly concern employee benefit obligations and impairment attributable to credit and counterparty risk.
Movements during the period
2007
Additions
Reversals
Utilised
Provisions on regulated savings products
Provisions
Provisions
Provisions
Provisions
for
for
for
for
termination benefits
other long-term benefits
long-service awards
post-employment benefits
6
Other
movements
(2)
8
25
3
1
2
4
Provisions for distribution
of bonus Natixis shares
2008
(4)
0
(1)
9
24
3
1
(5)
2
2
Sub-total employee benefit obligations
37
8
(5)
Off-balance-sheet commitments
37
4
(13)
(1)
27
Provisions for claims, litigation
and penalties regarding operating activities
17
12
(4)
(3)
22
Provisions for claims, litigation
and penalties regarding banking activities
(1)
39
12
(4)
18
26
Sub-total provisions for litigation
17
24
(8)
(3)
18
48
Other provisions for contingencies.
and charges regarding operating activities
66
58
(11)
(19)
(16)
78
Sub-total other provisions
66
58
(11)
(19)
(16)
78
Provision for restructuring costs
32
(5)
(7)
(1)
19
(42)
(32)
(4)
211
Other provisions for contingencies.
and charges regarding banking activities
Total
195
94
The main additions in 2008 correspond chiefly to a provision for office transfer of €29 million and a provision of €8 million for
logistics expenses in dealing with litigation.
The main reversals concerned a provision for tax litigation in an amount of €4 million and a reversal of restructuring costs in an
amount of €12 million.
Note 5.17 - Share capital
Number
of shares
2008
Par value
(euros)
Share capital
Number
of shares
2007
Par value
(euros)
Share capital
Ordinary shares
At 1 January
Increase in capital
Decrease in capital
Other changes
At 31 December
98,224,450
6,712,150
6.50
6.50
638
44
81,129,851
17,094,599
6.50
6.50
527
111
104,936,600
6.50
682
98,224,450
6.50
638
Total at 31 December
104,936,600
6.50
682
98,224,450
6.50
638
There are no special shares in share capital.
December 2008
Note 6 - Notes to the consolidated income statement
Note 6.1 - Interest and similar income and expense
This line item comprises interest income and expense – calculated using the effective interest rate method – on financial assets
and liabilities measured at amortized cost, which include interbank and customer items, debt securities and subordinated debt.
It also includes accrued interest receivable on fixed-income securities classified as available-for-sale financial assets and derivatives used for hedging purposes. Gains and losses on the remeasurement of hedging derivatives and on the symmetrical
remeasurement of the hedged item, as well as the contra-entry for the fair value adjustment on the macro-hedged portfolio, are
also posted to this line item.
2008
INCOME
2007
EXPENSE
NET
INCOME
EXPENSE
NET
Available-for-sale
financial assets
447
447
601
601
- Fixed-income securities
- Loans
445
2
445
2
601
601
Interbank items
538
(622)
(84)
277
(366)
(89)
Customer items
4,730
(60)
4,670
3,608
(76)
3,532
- Demand and term accounts,
loans and borrowings
(excluding special savings products),
repurchase agreements
and commitments
4,728
(45)
4,683
3,606
(59)
3,547
2
(15)
(13)
2
(17)
(15)
190
- Special term loans and accounts
205
205
Held-to-maturity assets
Finance leases
31
31
- Fixed-income securities
- Loans
Debt securities
and subordinated debt
31
31
- Certificates of deposit
and other securities
- Bonds
190
(4,159)
(4,159)
(3,408)
(3,408)
(352)
(3,763)
(352)
(3,763)
(186)
(3,201)
(186)
(3,201)
- Participating loans
and subordinated debt
(44)
(44)
(21)
(21)
Other
(13)
(13)
(16)
(16)
6,369
(6,747)
(378)
4,940
(4,912)
28
- Fair value hedges
6,368
(6,747)
(379)
4,940
(4,912)
28
- Cash flow hedges
1
(8,778)
841
Interest on impaired
financial assets
Total
1
3
12,323
(11,601)
3
3
722
9,619
3
5 - Human and
7 - Consolidated
6 - Risk management
Note 6.2 - Commission income and expense
Commissions are recorded based on the type of service rendered and on the method of accounting for the financial instruments
to which the service relates.
This line mainly includes commissions for recurring (payment processing etc.) and occasional services, and commissions on
execution of major transactions.
However, commissions that form an integral part of the effective yield of a contract are recorded under "Net interest income".
2008
Cash transactions
and interbank items
Customer items
Financial services rendered
Sale of insurance productse
Payment processing services
Securities transactions
Securities
Foreign exchange
and arbitrage transactions
Off-balance sheet items
Other commissions
Total
INCOME
2007
EXPENSE
2
80
5
86
4
9
(5)
(7)
(5)
9
11
206
NET
INCOME
EXPENSE
NET
(3)
73
0
86
2
9
5
73
18
63
3
6
2
(8)
(5)
(5)
(4)
(5)
5
6
9
18
(5)
(1)
4
17
(28)
178
197
(26)
171
(2)
(2)
(3)
68
13
63
1
6
2
Note 6.3 - Net gains/(losses) on financial instruments at fair value through profit or loss
This line includes gains and losses (including related interest) on financial assets and liabilities held for trading or those designated at fair value through profit or loss under the fair value option.
"Hedging transactions" includes gains and losses on the remeasurement of derivatives used as fair value hedges, as well as
gains and losses from the symmetrical remeasurement at fair value of the hedged item, as well as the contra-entry of the fair
value adjustment on the macro-hedged portfolio and the ineffective portion of cash flow hedges.
2008
2007
Financial instruments held for trading
Financial instruments accounted for at fair value under the fair value option
Hedging transactions
- Ineffective portion of fair value hedges
- Fair value adjustment on hedging instruments
- Fair value adjustment on hedged items attributable to the hedged risks
Foreign exchange transactions
(296)
405
8
8
902
(894)
(63)
(125)
(14)
(14)
(739)
725
(3)
117
(205)
(233)
(205)
Total
O/w interest on financial instruments at fair value through profit or loss
December 2008
Note 6.4 - Net gains/(losses) on available-for-sale financial assets
This item includes dividends from variable-income securities, gains and losses on the sale of available-for-sale financial assets and
impairment losses on variable-income securities due to a long-term decline in value.
2008
2007
0
1
Net gains/(losses) on disposals
1
7
65
4
51
Dividends received
11
15
Other-than-temporary impairment
(8)
(1)
0
0
Available-for-sale loans
Other
3
0
Total
10
66
• Dividends received totalling €11 million principally consists of:
- dividends from the SCI real estate leasing sector (€1 million);
- dividends from the real estate investment sector (€1 million);
- dividends from Crédit Foncier equity investments, mainly Crédit Logement (€8 million).
• €8 million in impairment losses include a €7.3 million impairment charge on the Locindus portfolio.
• "Other" consists of a capital gain on the sale of bonds by Crédit Foncier.
5 - Human and
7 - Consolidated
6 - Risk management
Note 6.5 - Income and expense on other activities
This item mainly comprises income and expense on investment property (rental income and expenses, gains and losses on disposals, depreciation, amortisation and provisions) and income and expense relating to operating leases.
2008
Income and expense
on investment property
- Net gains/(losses) on disposals
of investment property
- Movements in depreciation
and impairment
of investment property
- Other income and expense
on investment property
INCOME
EXPENSE
64
(7)
55
2007
NET
INCOME
57
11
55
1
EXPENSE
NET
(6)
5
1
2
(5)
(3)
1
(4)
(3)
7
(2)
5
9
(2)
7
12
(8)
(9)
14
Income and expense
on insurance activities
- Premium income
- Claims expense
- Change in reserves
- Other underwriting
income and expense
Income and expense
on operating leases
- Net gains/(losses) on disposals
- Movements in
impairment provisions
- Other income and expense
Other banking income
and expense
- Share of income from
joint ventures
- Rebilled expenses,
income paid over
- Other operating income and expense
- Movements in provisions
on other operating
income and expense
Total
1
4
23
1
10
10
1
10
(5)
(3)
(4)
7
0
13
(4)
(5)
(4)
8
117
(168)
(51)
147
(100)
47
6
8
0
8
6
93
(2)
(147)
(2)
(54)
1
129
(1)
(81)
0
48
18
(19)
(1)
9
(18)
(9)
193
(183)
10
181
(115)
66
December 2008
Note 6.6 - Operating expenses
Operating expenses consist mainly of personnel costs including payroll expense net of rebillings, social security taxes and
employee benefits. This line also includes all administrative costs and external services.
2008
2007
Personnel costs
(329)
(390)
Other administrative costs
(265)
(234)
Taxes other than on income
External services
Other
(27)
(238)
(31)
(203)
Total
(594)
(624)
2008
2007
(31)
(26)
Net change in impairment
1
0
Additions to impairment of property, plant and equipment and intangible assets
Reversals of impairment of property, plant and equipment and intangible assets
1
0
(30)
(26)
Note 6.7 - Depreciation, amortisation and impairment of non-current assets
Net depreciation and amortisation expense
Total
5 - Human and
7 - Consolidated
6 - Risk management
Note 6.8 - Credit risk
Note 6.8.1 - Total exposure to credit risk
The total exposure of all the Group's financial assets to credit risk is shown in the table below. Exposure is stated before offset
of unrecognised items and collateral and corresponds to the carrying amount of the financial assets.
Performing
Non-performing
Impairment and
provisions
Net balance
2008
Net balance
2007
(excl. variable-income securities)
2,988
2,988
1,599
Derivatives held for hedging purposes
5,246
5,246
1,929
(excl. variable-income securities)
2,144
5
(5)
2,144
14,914
Interbank items
7,404
2
(1)
7,405
8,235
Customer items
108,043
1,240
(590)
108,693
92,600
Financial guarantees granted
Total
566
566
1,232
19
12,301
29
139,924
1,295
1,251
3,446
(27)
12,303
18,013
(623)
140,596
140,736
"Impairment and provisions" covers impairment calculated on both an individual and collective (portfolio) basis.
Procedures for managing and assessing credit risks, risk concentration, the quality of performing financial assets, and the analysis and breakdown of outstandings are disclosed in the risk management report.
Note 6.8.2 - Restructured loans and receivables
The carrying amount of restructured loans and receivables renegotiated following financial difficulties experienced by the
debtor are included in performing items, is as follows.
2008
2007
473
198
473
198
Total
December 2008
Note 6.8.3 - Cost of risk
This item reflects the net impairment expense attributable to credit risk, including impairment calculated on both an individual
and collective (portfolio) basis.
The line covers both loans and receivables and fixed-income securities with a known counterparty risk. Exceptionally, losses on
other types of instruments (e.g. derivatives or securities accounted for at fair value under the fair value option) arising following
the insolvency of credit institutions are also posted to this line.
2008
2007
Impairment expense
(410)
(188)
Interbank items
Customer items
(400)
(178)
Other financial assets
(6)
(1)
Commitments
(4)
(9)
297
290
283
284
Impairment reversals
Interbank items
Customer items
Net impairment expense and provisions
Losses on irrecoverable loans
0
1
14
5
(113)
102
(65)
(104)
(65)
(104)
12
11
10
10
Losses on irrecoverable interbank items
Losses on irrecoverable customer items
Losses on other financial assets
Losses on off-balance sheet commitments
Recoveries of loans and receivables previously written off
Recoveries of interbank items previously written off
Recoveries of customer items previously written off
Recoveries of other financial assets
2
Recoveries of off-balance sheet commitments
Total
1
(166)
9
5 - Human and
7 - Consolidated
6 - Risk management
Note 6.8.4 - Impairment attributable to credit risk
CHANGES IN THE YEAR
2007
Additions
Reversals
Utilised
Other
changes
2008
Interbank items
(1)
(1)
Individual basis
(1)
(1)
Portfolio basis
Customer items
(413)
(395)
224
43
(7)
(548)
Individual basis
(280)
(263)
224
29
(7)
(297)
Portfolio basis(1)
(133)
(132)
0
14
0
(251)
Finance leases
(54)
(5)
16
(43)
Individual basis
(26)
(5)
16
(15)
Portfolio basis
(28)
Impairment provisions recognised against assets
(28)
(8)
(6)
(476)
(406)
240
43
2
(12)
(5)
(604)
37
4
(13)
(1)
27
Impairment provisions recognised in liabilities
37
4
(13)
(1)
27
513
410
(253)
(44)
Total
5
631
(1) O/w €79 million for provisions on securitised receivables in 2008.
December 2008
Note 6.8.5 - Past due accounts
Assets classified as past due are performing loans and receivables with payment delinquencies. For example:
- a debt instrument may be considered in arrears if the bond issuer ceases to pay the related coupon;
- a loan is considered to be in arrears if a bad debt has been recognised in respect of one of the payment instalments for
accounting purposes;
- a current account in debit included under "Loans and receivables" is considered to be in arrears if the overdraft facility is
exceeded in amount or term as at the balance sheet date.
The amounts stated below do not include technical unpaid amounts, which largely consist of unpaid amounts arising from a
timing difference between the value date and the date when the payment is booked to the customer account.
At 31 December 2008, the aged breakdown of assets in arrears (principal and accrued interest on loans and the total amount
of overdrafts for current accounts) is as follows:
< 90 days
> 90 days
< 180 days
Payment arrears
> 180 days
< 1 year
> 1 year
2008
Debt instruments
Loans and advances
1,682
173
129
97
2,081
1,682
173
129
97
2,081
Total
5 - Human and
7 - Consolidated
6 - Risk management
Note 6.8.6 - Security covering payment arrears and impaired assets
Guarantees, personal security and collateral include deposits, pledges, liens, warrants, mortgages and government guarantees.
Fair value of the related security
Payment arrears
Associated with
assets impaired
on individual basis
2008
2007
Debt instruments
Loans and advances
1,318
764
2,082
2,492
1,318
764
2,082
2,492
Total
Security is capped at the value of the receivable.
Note 6.8.7 - Assets seized as security
The group has not seized any assets on which it has been granted security.
Note 6.9 - Gains or losses on disposals of other assets
This line includes gains or losses on disposals of property, plant and equipment and intangible assets used in operations, and
capital gains or losses on consolidated equity investments.
Gains or losses on disposals of property, plant and equipment
and intangible assets used in operations
Gains or losses on disposals of consolidated equity investments
2008
2007
(1)
2
2
Other
92
Total
93
2
In 2008, gains on other assets mainly comprise a €90 million gain (net of costs) on the contribution to Palatine and a €2 million
gain on the merger of Crédit Foncier with Socrelog.
December 2008
Note 6.10 - Income tax
Note 6.10.1 - Breakdown of income tax expense
2008
2007
Current taxes(1)
(49)
(67)
Deferred taxes
(27)
(8)
Total
(76)
(75)
3
22
(1) including provisions for claims and litigation, fines and penalties
Note 6.10.2 - Calculation of income tax expense
2008
2007
Net income before tax and impairment of goodwill (A)
342
300
Net income attributable to the equity holders of the parent
220
211
Goodwill impairment
46
Minority interests in consolidated companies
(1)
Income tax expense
French statutory income tax rate (B)
Theoretical income tax expense at current French tax rate (A x B)
14
1
76
75
34.43%
34.43%
118
103
1
23
29
20
Change in unrecognised deferred tax assets
Impact of permanent differences
Impact of transactions taxed at reduced tax rates
Impact of foreign tax rates
Prior year tax expense, tax credits and other taxation
9
Other items
3
(15)
76
75
22.15%
25.24%
Income tax expense
Effective tax rate (income tax expense divided by taxable income)
5 - Human and
6 - Risk management
7 - Consolidated
Note 7 - Employee benefits
Note 7.1 - Personnel costs
2008
2007
Wages and salaries
(190)
(206)
Defined contribution plan expense
(40)
(37)
Other tax and social security charges
(89)
(129)
Employee profit sharing and incentives
(10)
(18)
(329)
(390)
Total
Note 7.2 - Average number of employees
2008
2007
Managers (cadres)
1,854
1,951
Other
1,799
1,963
Total
3,653
3,914
Note 7.3 - Employee benefit obligations
Employees who joined the Crédit Foncier group prior to
1 March 2000 are covered by the supplementary defined
benefit pension plan administered as part of the Caisse de
Retraite du Crédit Foncier (CRCFF, Crédit Foncier Pension
Plan), an Institution de Retraite Supplémentaire (IRS,
Supplementary Pension Institution), which is legally independent and is designed to provide benefits in addition to the
compulsory plan where necessary, through an employee topup scheme.
The CRCFF carries out valuations on the basis of future
commitments, which are validated each year by independent actuaries on the basis of a technical rate of 1% and mortality tables for each generation. Retirement commitments
are covered by the related fund's assets.
Pursuant to Article 116 of the 21 August 2003 Act and the
17 December 2008 Social Security Financing Act for 2009,
by 31 December 2009 the Institution must be transformed
into an Institution de Gestion de Retraite Supplémentaire
(IGRS, Supplementary Pension Management Institution), as
decided by the company's staff representative bodies. For
this purpose, the employee collective agreement signed in
2008 has been amended so that it can be insured (elimination of the top-up scheme) and AXA, the insurance company, has been appointed to be the lead insurer for the new
scheme. The approval to transform CRCFF into an IGRS was
granted on 11 March 2009. The transfer of CRCFF's provisions and reserves to AXA and the two co-insurers occurred
on 31 March 2009, resulting in the full transfer of financial
risk on the pensions and hedging of risk on future pensions
through an AXA-managed fund.
Employees hired after 1 March 2000 are members of the
defined contribution pension plan in place for Groupe Caisse
d'Epargne employees.
In terms of termination benefits (IFC), employees are entitled
to receive a one-time allowance at the time of their retirement
that is directly proportional to their seniority. In order to cover
this cost and the related employer taxes, Crédit Foncier has
taken out an insurance policy for its employees.
December 2008
Note 7.3.1 - Breakdown of balance sheet assets and liabilities
2008
IFC
Present value of funded obligations
Fair value of plan assets
Fair value of redemption rights
Present value of unfunded obligations
Unrecognised actuarial differences
Unrecognised past service cost
2007
Other
commitments
49
CRCFF
Other
commitments
IFC
48
30
(2)
Total
(50)
78
(2)
(50)
(47)
78
(2)
(47)
11
11
8
8
NET AMOUNT IN THE BALANCE SHEET
Employee benefit obligations (assets)
Employee benefit obligations (liabilities)
29
(2)
Total
10
27
37
9
28
37
10
27
37
9
28
37
Note 7.3.2 - Change in balance sheet amounts
2008
2007
Other
commitments
IFC
Total
CRCFF
Projected benefit obligation at 1 January
Service cost
Interest cost
Benefits paid
Actuarial gains and losses
Past service cost for the year
Other (e.g. translation adjustments,
changes in scope of consolidation)
49
2
2
(5)
30
1
1
(4)
79
3
3
(9)
2
1
3
Projected benefit obligation at 31 December
49
(1)
at 31 December
(1)
(7)
78
48
(2)
(2)
(2)
(47)
(2)
(2)
(47)
(2)
5
(6)
5
(6)
(50)
Net
(1)
Unrecognised actuarial differences
Unrecognised past services cost
11
Net amount in the balance sheet
10
54
2
2
(4)
1
29
Fair value of assets at 31 December
Expected return on plan assets
Contributions received
Benefits paid
Actuarial gains and losses for the year
Other (e.g. foreign exchange differences,
changes in the scope of consolidation)
Fair value of plan assets at 31 December
Fair value of redemption rights at 1 January
Expected return on redemption rights
Contributions paid or received
Benefits paid
Actuarial gains and losses for the year
Other (e.g. foreign exchange differences,
changes in the scope of consolidation)
Other
commitments
IFC
27
27
32
1
1
(4)
Total
86
3
3
(8)
1
(7)
30
78
(2)
(2)
(2)
(45)
(1)
(2)
(45)
(1)
4
4
(5)
(5)
(50)
(47)
26
1
11
8
37
9
(47)
28
29
8
28
37
5 - Human and
7 - Consolidated
6 - Risk management
Note 7.3.3 - Breakdown of defined-benefit plan expense
The various items making up the defined benefit plan expense are posted to "Personnel costs".
Service cost
2008
Other
commitments
IFC
Interest cost
Total
2007
Other
commitments
IFC
Total
2
1
3
3
1
4
2
1
3
2
1
3
(2)
(2)
(2)
(5)
(5)
Expected return
on plan assets
Expected return
on redemption rights
(2)
Actuarial gains and losses
1
1
Past service cost
Exceptional events
Total defined benefit
plan expense
2
3
5
(2)
2
0
Note 7.3.4 - Key actuarial assumptions
2008
2007
Other
commitments
IFC
Other
commitments
IFC
(in percentages)
Discount rate
4.00%
4.00%
4.59%
4.59%
Expected return
on plan assets
-
-
-
-
4.00%
-
4.00%
-
Expected return
on redemption rights
December 2008
Note 8 - Segment information
Affiliated to Caisse Nationale des Caisses d'Epargne, Crédit
Foncier is the largest specialised real estate financing institution in France, providing customised financing solutions
and real estate services to individuals and to the corporate
and institutional sector as part of an overall asset management approach. It also provides financing for the public sector, both in France and abroad.
Pursuant to IAS 14 and given the considerable size of Crédit
Foncier's businesses, the Group's internal organisation and
management structures are based around five main business lines within the framework of the Group's governing
and decision-making bodies.
Individual sector
This sector engages in three different activities:
- morgage financing for first-time home buyers or rental
investment property, through both regulated and nonregulated loans, along with a range of banking services;
- complementary lending services consisting of:
- real estate surveys and real estate investment advisory
services (proposing packages for investors),
- value-enhancement of Crédit Foncier property assets
through rentals and the sale of buildings.
Private sector
The corporate and institutional sector has access to a full
range of financing products and solutions designed for real
estate professionals (developers, investors, corporations and
public-private partnerships):
- long-term or short-term financing via traditional or
structured loans;
- real estate leasing;
- guarantees and other off-balance sheet commitments
and related banking services (deposit and investment
activity).
French public sector
In this sector, Crédit Foncier provides financing to French
local authorities and social housing organisations (HLM and
semi-public corporations).
International public sector
In this sector, Crédit Foncier provides international financing
services in the form of:
- financing for foreign local authorities (by acquiring
bonds issued by public entities or quasi-public entities
and financing for foreign local authorities in the form of
loans or subscriptions of bond issues),
- acquisition of risk-free mortgage loans.
Holding structure
The holding structure houses all of the Group's proprietary
portfolio and support activities that cannot be allocated
directly to one of the operating divisions (divisional oversight),
manages Crédit Foncier's non-consolidated holdings and provides day-to-day management of the Group's excess funds. In
2008, complementary interests initially assigned to the
Individual sector and goodwill write-downs initially assigned to
the Private sector were reallocated to the holding structure.
5 - Human and
7 - Consolidated
6 - Risk management
Private
sector
French
public
sector
International
public
sector
Holding
Total
Individual
sector
Net banking income
585
225
47
78
102
1 037
Operating expenses
(419)
(95)
(22)
(18)
(70)
(624)
166
130
25
60
32
413
71.7%
44.1%
47.7%
20.7%
13
(36)
Cost/income ratio
Cost of risk
Gains and losses on the disposal of other assets
Change in value of goodwill
60.2%
(143)
(166)
1
1
93
93
(46)
(46)
Income before tax
179
94
25
60
( 63)
295
Current and deferred taxes
(62)
(32)
(9)
(21)
48
(76)
1
1
(14)
220
Minority interests
Net income attributable to equity holders of the parent
117
62
16
39
December 2008
Note 9 - Financing and guarantee commitments
Amounts shown represent the nominal value of the commitment given.
2008
2007
Commitments given
31,547
23,181
12,300
17,989
5
115
12,295
17,874
18,003
3,437
16,814
1,459
1,189
1,978
1,244
1,755
84,521
71,935
9,937
3,140
9,937
3,140
Guarantee commitments
70,262
63,075
From credit institutions
16 867
17,955
From customers
53,395
45,120
3,752
5,698
570
22
In favour of credit institutions
In favour of customers
(1)
In favour of credit institutions
In favour of customers
Insurance commitments
Security commitments (securities to be delivered)
Other commitments given
Commitments received
(2)
From credit institutions
From customers
Insurance commitments
Security commitments (securities to be received)
Other commitments received
(1) This item includes in particular €16,746 million of receivables assigned as collateral (see note 5.8)
(2) This is chiefly, at 31/12/2008, a finance commitment received from the Banque de France as part of the refinancing arrangements detailed in note 5.8.
Guarantee commitments given include off-balance sheet commitments and financial instruments given as collateral.
5 - Human and
6 - Risk management
7 - Consolidated
Note 10 - Other information
Note 10.1 - Fair value of financial assets and liabilities
Observability of inputs used in valuation models
Fair value based on quoted market prices is the fair value
obtained at the measurement date by direct reference to
quotations published on an active market to which the
entity has access.
Liquid markets provide the market data used for mark to
model valuations. IFRS defines an input as observable if it is
not proprietary (i.e. the data must come from a source external to the entity), is readily accessible (i.e. it is easy to access
the data, for example by using data services or other suppliers), is regularly available and is based on a consensus or
on market transactions (observed via quotations representing
a commitment of the counterparty to trade).
If fair value is calculated using a valuation model, the fair
values calculated using non-observable data are disclosed
separately.
Non-observable data relates to the valuation models used
by the Group and the criteria used in the valuation models.
Determining whether an input is observable is based on an
analysis of each of these criteria taken individually or in
combination.
Observability of valuation models used
Instruments whose fair value has been determined using a
model drawing on non-observable data are chiefly loans falling into the category "Financial assets accounted for at fair
value through profit or loss under the fair value option". This
classification was retained as there are no generally available quotations for these portfolios.
Valuation models are used to measure a number of products and, in particular, derivatives. The valuations obtained
are said to be equivalent to market prices when they are
based on observable criteria or on models that are widely
used by the market for the financial instrument in question.
When one of these two conditions has not been met, the
valuation obtained is considered to bebe based on nonobservable inputs.
Plain vanilla derivatives (regular interest rate swaps, CMS or
TEC, regular currency swaps and options, caps and floors,
FRAs and index-based credit derivatives) are valued using
models that are widely used by the marketplace and observable inputs.
December 2008
At 31 December 2008, the breakdown of financial instruments by price type and valuation model is shown in the table below:
Quoted on
an active
market
Valuation
Valuation
techniques using techniques using
observable
non-observable
data
data
o/w value
adjustments
are posted
to income
2008
carrying
amount
ASSETS
- trading
421
- fair value option
2,566
2,340
13
421
358
97
2,566
2,450
LIABILITIES
Financial liabilities with fair value through profit or loss
- trading
724
724
Financial liabilities with fair value through profit or loss
- fair value option
6,027
6,027
At 31 December 2007, the breakdown was as follows:
Quoted on
an active
market
Valuation
techniques using
observable
data
Valuation
techniques using
non-observable data
2007
carrying
amount
ASSETS
- trading
663
663
- fair value option
1,599
1,599
12,180
186
2,831
15,197
LIABILITIES
- trading
686
686
- fair value option
6,237
6,237
5 - Human and
6 - Risk management
Note 10.2 - Source and use of funds by maturity
The table below shows the present value of financial assets
and liabilities broken down by contractual maturity:
• for fixed-income securities, loans and debt, amortised cost
(i.e. outstanding principal + ancillary expenses/income
included in the effective interest rate + non-allocated premium/discount + impairment) is broken down according
to contractual repayment dates;
7 - Consolidated
• the positive or negative fair value of trading derivatives is
shown in the "Less than 1 month" column;
• the positive or negative fair value of hedging derivatives is
shown against the maturity date of the contract;
• on-demand receivables and payables are shown in the
"Less than 1 month" column;
• related receivables or payables are shown by default in the
"Less than 1 month" column.
• for variable-income securities, fair value (i.e. nominal value
+ value adjustments + other-than-temporary impairment) is
stated in the column "Not determined" unless otherwise
specified;
9
18
11,683
9,233
6,392
36
2,663
127
15
///
1,546
1,307
90
17
94
13,568
15
7,221
6
5,961
337
28
///
4,966
92
4,433
91
35
164
151
///
9,215
41
19
7,330
2
999
824
0
///
5,434
113
4,603
346
27
211
134
///
28,771
21
54
23,960
7
2,628
1,123
978
///
15,538
337
13,171
609
103
923
395
The procedures for managing and assessing liquidity risk are disclosed in the risk management report.
At 31 December 2008, current financial assets stood at €12,111 million and current financial liabilities €34,484 million.
Current financial assets and liabilities consist of amounts payable or recoverable within 12 months.
Financial liabilities by maturity
Subordinated debt
Revaluation adjustment on interest rate risk-hedged portfolios
399
8,382
Due to customers
2,109
43
8
724
Securitised debt
Other financial liabilities at fair value through profit or loss
Central banks and post office banks
5,599
Financial assets by maturity
3
2,135
Loans and receivables from customers
Revaluation adjustment on interest rate risk-hedged portfolios
2,586
6
360
38
///
2 to 5
years
53,458
495
197
39,766
27
4,457
3,518
4,998
///
95,119
557
1,221
82,432
3,678
1,945
3,495
1,791
///
Over
5 years
301
280
11
10
///
934
612
5
317
///
Not
determined
Total
126,229
855
285
93,062
487
18,817
5,972
6,027
724
129,136
566
1,766
108,693
7,405
2,450
5,247
2,567
420
58
///
1 to 2
years
420
3 months
to 1 year
22
1 to
3 months
22
Less than
1 month
Loans and receivables from credit institutions
Other financial assets at fair value through profit or loss
Cash in hand, central banks and post office banks
(at 31 December 2008)
Source and use of funds by maturity
December 2008
5 - Human and
6 - Risk management
7 - Consolidated
Note 10.3 - Balance sheet breakdown by currency
2008
2007
Assets
Liabilities
Assets
Liabilities
- EUR
114,489
114,489
119,676
119,676
- USD
9,450
9,450
1,444
1,444
- GBP
(80)
(80)
146
146
- JPN
4,044
4,044
1,175
1,175
- Other
5,126
5,126
797
797
133,029
133,029
123,238
123,238
Total
Note 10.4 - Finance leases
Finance leases
2008
2007
Gross investment in finance leases, receivable by maturity
Less than 1 year
434
415
Between 1 and 5 years
1,483
1,482
Over 5 years
1,830
1,790
315
306
Between 1 and 5 years
1,128
1,136
Over 5 years
1,539
1,514
765
732
Present value of future minimum lease payments
Less than 1 year
Unearned financial income
Contingent rent posted to income
Provisions for non-recoverable minimum lease payments
Unguaranteed residual values accruing to the lessor
169
The Group has not entered into any material operating leases.
December 2008
Note 10.5 - Related parties
Note 10.5.2 - Transactions with related parties
Crédit Foncier's related parties are considered to be all consolidated companies, Caisse Nationale des Caisses d'Epargne
(CNCE), including associates and the Group’s key management personnel.
At the year-end, transactions and outstanding balances between Group companies are eliminated in full on consolidation, so that only items that relate to equity-accounted companies over which the Group has a significant influence and
inter-company items with Caisse Nationale des Caisses
d'Epargne are reported.
Note 10.5.1 - Management remuneration
Key management personnel are company officers and members of Crédit Foncier's Board of Directors. Remuneration
paid in respect of financial year 2008 amounted to €1 million,
largely comprising short-term benefits as detailed on page 95
et seq. of the management report.
The Group has no joint ventures consolidated under the proportional method.
A list of fully consolidated subsidiaries showing the Group's
percentage interest is shown in the section on the Group’s
scope of consolidation.
2008
Parent company
2007
Associates
Associates
Loans
Other assets
1,009
89
17
1
1
Total assets with related companies
1,027
90
Payables
7,087
Other financial liabilities
Other liabilities
2
Total liabilities with related companies
7,089
Interest and similar income and expense
(239)
Commissions
(1)
Net income from financial transactions
21
2
2
Net income from other business activities
Total net banking income/(loss) on transactions with related companies
Commitments given
Commitments on financial futures
Total commitments with related companies
(219)
995
5,094
300
6,389
2
2
1,645
Statutory audit, certification and review of
individual and consolidated accounts
48
Fully consolidated subsidiaries
-
133
21
-
3%
1%
4%
48%
48%
96%
100%
100%
%
-
8%
1%
9%
41%
50%
91%
100%
100%
2007
-
48
15
63
750
827
1,577
1,640
1,640
-
129
42
171
470
831
1,301
1,472
1,472
2007
Amount
2008
(1) The issuer is considered to be the parent company.
(2) Including essentially the fees of the specific controller of Compagnie de Financement Foncier for an amount of €519k.
These amounts are expressed inclusive of all non-deductible taxes.
Other
Legal, tax and labour-related services
-
21
Issuer
154
698
837
1,535
1,689
1,689
2008
-
3%
1%
4%
46%
50%
96%
100%
100%
2008
%
PricewaterhouseCoopers
-
9%
3%
12%
32%
56%
88 %
100%
100%
2007
15
15
64
64
928
928
992
1,007
2
2
96
96
662
662
758
760
2007
Amount
2008
1%
1%
6%
6%
93%
93%
100%
100%
2008
Other(2)
%
0%
0%
13%
13%
87%
87%
100%
100%
2007
6 - Risk management
Services provided by the network
to the fully consolidated subsidiaries
69
824
Other procedures
and audit-related services
Fully consolidated subsidiaries
Issuer
821
1,714
Audit
(1)
1,714
AUDIT AND OTHER SERVICES
2007
Amount
2008
(in thousand of euros)
KPMG
Note 10.5.3 - Fees paid to Statutory Auditors and members of their networks
5 - Human and
7 - Consolidated
December 2008
Note 11 - Scope of Consolidation
Note 11.1 - Changes in the scope of consolidation
during the year
Goodwill of €29,805k was allocated to the value of the equity
interest in Maison France Confort P.I.
Maisons France Confort Prou Investissements
At 31 December 2008, the scope of consolidation included
12 financial institutions, 14 non-financial institutions and
one special purpose entity, in addition to the parent company. Three of these companies are accounted for under
the equity method.
Another 12 securitisation funds are also consolidated. They
are fully owned by Crédit Foncier, Compagnie de Financement Foncier and Vauban Mobilisations Garanties.
The following changes in the scope of consolidation took
place during 2008:
Acquisition of a 49% stake in Maisons France Confort P.I.
holding company for a total of €90.576 million. This company holds 50.1% of Maisons France Confort SA.
Securitised Instantly Repackaged Limited
This special purpose entity, created in 1992 to subscribe to
undated subordinated notes issued by Financière Desvieux,
was consolidated as from December 2008 since Crédit
Foncier assumed responsibility for refinancing the entity as
of September 2008.
11.1.3 - Change in ownership interests
11.1.1 - Deconsolidation
Early liquidation of three consolidated securitisation funds.
As the outstanding principal due on amounts owed by the
three debt securitisation funds had fallen to less than 10%
of the amount initially issued, the funds were liquidated and
the amounts held were transferred directly to Crédit Foncier.
This had no impact on the consolidated financial statements.
Deconsolidation of Picardie bail by Cicobail as a result of the
merger with Cicobail.
CFCAL
Crédit Foncier’s stake in CFCAL increased from 66.53% to
67.14% after it elected to receive its dividend in the form of
89,915 CFCAL Banque shares.
This reinvestment in equity by Crédit Foncier is shown in the
consolidated financial statements as goodwill of €964k.
Banco Primus
11.1.2 - First-time consolidation
GCE Foncier Coinvest
Consolidation of GCE Foncier Coinvest, a holding company
owned jointly by Crédit Foncier (49%) and CNCE (51%).
This entity received a €90,502k capital injection in order to
acquire 49% of Maisons France Confort Prou Investissements for a total of €90,576k.
In November 2008, Crédit Foncier increased its holding in
Banco Primus from 37.37% to 85% by acquiring 14,289,219
shares for a total of €31,308k. The additional goodwill arising
from this transaction amounts to €23,379k. This company
was fully consolidated as of 31 December 2008.
5 - Human and
7 - Consolidated
6 - Risk management
Note 11.2 - Scope of consolidation at 31 December 2008
CONSOLIDATED ENTITIES
Financial institutions
Compagnie de Financement Foncier
Compagnie Foncière de Crédit
Crédit Foncier et Communal d'Alsace et de Lorraine (C.F.C.A.L.)
C.F.C.A.L. - S.C.F.
Cicobail
Cinergie
S.C.A. Ecufoncier
Financière Desvieux
Comptoir Financier de Garantie (C.F.G.)
Locindus
SOCFIM
Banco Primus
Non-financial companies
Cofimab
Gramat Balard
Foncier Assurance
Vauban Mobilisations Garanties (V.M.G.)
Vendôme Investissements
Quatrinvest
Foncier Participations
Société d'Investissement et de Participation Immobilière (SIPARI)
SEREXIM
Foncière d'Evreux
SOCFIM Participations Immobilières
Foncier Expertise
G.C.E. Coinvest
Partimmo 06/2000
Partimmo 10/2001
Partimmo 07/2002
Partimmo 10/2002
Partimmo 05/2003
Partimmo 11/2003
Antilope 1
Zèbre 1
Antilope 2
Zèbre two
Zèbre 2006-1
Zèbre 2008-1
Special purpose entities
Securitised Instantly Repackaged Perpetuals Limited
LEGAL
FORM
CONSOLIDATION
METHOD
%
CONTROL
%
INTEREST
SA
SA
SA
SA
SA
SA
SCA
SA
SA
SA
SA
SA
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
99.99
99.99
67.02
99.99
65.85
99.99
95.00
99.99
99.99
67.79
100.00
85.00
99.99
99.98
67.14
67.14
65.85
65.84
5.00
99.99
99.99
67.79
99.99
85.00
SNC
SARL
SA
SA
SA
SARL
SA
SA
SAS
SA
SNC
SA
SAS
SAS
Full
Full
Equity
Full
Full
Full
Full
Full
Full
Full
Full
Full
Equity
Equity
99.99
100.00
40.00
99.98
99.99
100.00
99.99
99.99
100.00
100.00
100.00
99.94
49.00
49.00
99.99
100.00
40.00
99.98
99.99
100.00
99.99
99.99
99.99
99.99
99.99
99.94
49.00
24.01
FCC
FCC
FCC
FCC
FCC
FCC
FCC
FCC
FCC
FCC
FCC
FCC
Full
Full
Full
Full
Full
Full
Full
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
100.00
100.00
100.00
100.00
100.00
100.00
Full
100.00
100.00
December 2008
Note 11.3 - Securitisation transactions
Securitisation is a financial arrangement that enables an
entity to render its balance sheet more liquid. Technically
speaking, assets are selected on the basis of the quality of
their attendant guarantees and pooled in a special purpose
vehicle, which acquires them by issuing securities that are
subscribed by investors.
Securitisation arrangements are entered into by the Group
for its own account as part of the management of its balance
sheet so as to access refinancing on the markets at advantageous terms and conditions.
Asset type
This refinancing is carried out through two specialist subsidiaries, Compagnie de Financement Foncier and Vauban
Mobilisations Garanties.
The special purpose entities created as part of these arrangements are consolidated given that the Group exercises
control within the meaning of SIC 12.
The table below shows asset transfers that have not been
fully or partially written off.
Year
created
Expected
maturity
Initial
nominal value
Balance at
31/12/2008
Securitisation funds (FCC and FCT)
1/ Vauban Mobilisations Garanties refinancing
Partimmo 06/2000
Residential mortgage loans
30/06/00
July 2019
1,847
297
Partimmo 10/2001
29/10/01
October 2035
1,663
402
Partimmo 07/2002
10/07/02
July 2039
1,222
375
Partimmo 10/2002
12/11/02
January 2022
707
214
Partimmo 05/2003
11/06/03
July 2021
987
406
Partimmo 11/2003
12/11/03
March 2029
1,045
437
7,471
2,131
Zèbre 1
25/11/04
October 2031
1,173
514
Zèbre two
28/10/05
July 2024
739
408
Zèbre 2006-1
28/11/06
January 2046
689
504
2,601
1,426
10,072
3,557
Sub-total Partimmo
Sub-total Zèbre
Total
2/ Compagnie de Financement Foncier refinancing
Antilope 1
20/09/04
September 2041
1,230
671
Antilope 2
23/09/05
March 2044
1,752
1 142
Sub-total Antilope
2,982
1,813
Total
2,982
1,813
3/ Crédit Foncier refinancing
Zèbre 2008-1
3,180
2,972
Sub-total Zébre
3,180
2,972
Total
3,180
2,972
16,234
8,342
GRAND TOTAL
13/11/08
December 2055
5 - Human and
6 - Risk management
7 - Consolidated
This is a free translation into English of the Statutory Auditors’ report issued in French 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 the opinion on the consolidated financial statements. This information includes an explanatory
paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These 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 should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In compliance with the assignment entrusted to us by your
Annual General Meeting, we hereby report to you, for the
year ended 31 December 2008, on:
• the audit of the accompanying consolidated financial
statements of Crédit Foncier de France;
• the justification of our assessments;
• the specific verification required by law.
The consolidated financial statements have been approved by the Board of Directors. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.
In our opinion, the consolidated financial statements give
a true and fair view of the assets, liabilities and financial
position of the consolidated group of companies at
31 December 2008, and of its results for the year then
ended in accordance with IFRS as adopted for use in the
European Union.
Without qualifying the opinion expressed above, we draw
your attention to Note 2 to the consolidated financial
statements, which describes the change in accounting
method pursuant to the amendment to IAS 39 dated 15
October 2008, permitting the reclassification of some
financial assets.
II. Justification of our assessments
I. Opinion on the consolidated financial statements
We conducted our audit in accordance with professional
standards applicable in France. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement. An audit involves
performing procedures, on a test basis or by selection, to
obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. An audit also
includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as the overall presentation of the financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
The economic and financial crisis, which has led to an
exceptional rise in volatility, a sharp contraction in liquidity on certain markets and difficulties in assessing the
economic and financial outlook, has had wide-ranging
ramifications for credit institutions, notably in terms of
business activity, results, risks and refinancing, as described in Note 1.3.12 to the consolidated financial statements. This situation created specific conditions this year
for the preparation of the financial statements, especially
as regards accounting estimates. In this context, and in
accordance with the requirements of Article L.823-9 of
the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to
your attention the following matters:
December 2008
Change in accounting method
Notes 2, 4.2.2 (“Reclassification of financial assets”) and
5.7 to the consolidated financial statements describe the
amendment to IAS 39 which permits the reclassification,
subject to conditions, of financial assets from the “Held for
trading” and “Available-for-sale financial assets” portfolios
to “Loans and receivables”, and from the “Held for trading” portfolio to “Available-for-sale financial assets” and
“Held-to-maturity financial assets”.
As part of our assessment of the accounting principles
used by your Group, we ensured that the change in accounting method was correctly applied and that the notes to the
consolidated financial statements contain the appropriate
disclosures.
Accounting estimates
• As indicated in notes 1.3.13, 1.3.5, 4.2.1 and 6.8 to
the consolidated financial statements, the Group records
impairment losses and provisions to cover the credit risk
inherent in its business. We examined the control procedures applicable to monitoring credit risks, assessing the
risks of non-recovery, and determining the related
impairment losses and general or specific provisions.
• The Group holds positions relating to securities and
financial instruments. Notes 4.2.2 and 4.2.4 to the
consolidated financial statements describe the accounting rules and methods applicable to securities and
financial instruments. As part of our assessment of the
accounting rules and principles used by the Group, we
reviewed the control procedures applicable to classifying these items in the account and determining the
inputs used to measure these positions, and verified the
appropriateness of the related disclosures in the notes
to the consolidated financial statements.
• The Group performed impairment tests on goodwill,
which led to the recognition of impairment losses (see
notes 1.3.16 and 5.15 to the consolidated financial
statements). We examined the methods used to implement the impairment tests as well as the main assumptions and inputs used.
• The Group sets aside provisions to cover its pension obligations. We examined the methods used to measure
these obligations along with the assumptions and inputs
applied. We also reviewed the external actuaries’ report
and verified that notes 4.8 and 7.3 to the consolidated
financial statements provide the appropriate disclosures.
These assessments were made in the context of our audit
of the consolidated financial statements, taken as a
whole, and therefore contributed to the opinion we formed
which is expressed in the first part of this report.
III. Specific verification
As required by law we have also verified the information
given in the Group’s management report. We have no matters to report regarding its fair presentation and conformity with the consolidated financial statements.
KPMG Audit
Division of KPMG S.A
Rémy Tabuteau
Anik Chaumartin
5 - Human and
6 - Risk management
7 Financial statements
246
319
322
379
381
382
7 Parent company financial statements
December 2008
Parent company balance sheet - Assets
Parent company balance sheet - Equity and liabilities
Parent company off-balance sheet commitments
Parent company income statement
Notes to the parent company financial statements
Note 1 - Legal and financial frameworks - Significant events in the year
1.1
1.2
1.3
1.4
Legal framework
Guarantee system
Significant events in the year
Post balance sheet events
Note 2 - Information on accounting rules and principles
2.1
2.2
Accounting and valuation methods
Changes in accounting methods
Note 3 - Notes to the balance sheet
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
Securities portfolio
Property, plant and equipment and intangible assets
Other assets
Accrual accounts and other miscellaneous assets
Due to customers
Debt securities
Other liabilities
Accrual accounts and other miscellaneous liabilities
Provisions
Subordinated debt
Share capital
Note 4 - Notes to off-balance sheet items
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Financing commitments given
Guarantee commitments given
Commitments on securities
Foreign currency transactions
Forward financial instruments
Counterparty risk on forward financial instruments
324
325
326
327
328
328
328
328
328
331
332
332
338
339
339
341
345
347
348
349
349
350
351
351
351
352
355
357
359
359
359
360
361
362
363
364
5 - Human and
6 - Risk management
7 - Parent company
Note 5 - Notes to the income statement
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
365
Net commission income
Net gains/(losses) on trading portfolio transactions
Net gains/(losses) on available-for-sale portfolio transactions
Other operating banking income and expense
Operating expenses
Cost of risk
Non-recurring items
Income tax
Movements in the reserve for general banking risks (FRBG) and regulated provisions
Note 6 - Miscellaneous information
6.1
6.2
6.3
6.4
6.5
6.6
6.7
365
365
365
366
366
366
367
368
369
369
370
370
371
Transactions with affiliates and other equity investments at 31 December 2008
Statement of foreign currency positions
Statement of liquidity positions
Five-year financial summary
Information concerning subsidiaries and affiliates
Summary five-year balance sheet
Fees paid to Statutory Auditors
371
372
373
374
375
377
378
Statutory Auditors’ report on the financial statements
379
Statutory Auditors’ report prepared in connection with the payment of dividends in shares
381
Statutory Auditors’ report on related party agreements and commitments
382
December 2008
Parent company balance sheet - Assets
NOTES
31/12/2008
31/12/2007
1
1
8,002
8,243
- Demand
1,077
497
- Term
6,925
7,746
33,133
30,789
33,133
30,049
-
740
CASH AND AMOUNTS DUE FROM CENTRAL BANKS AND POST OFFICE BANKS
DUE FROM CREDIT INSTITUTIONS
DUE FROM CUSTOMERS
3.1
3.2
- Other customer loans
- Current accounts in debit
BONDS AND OTHER FIXED-INCOME SECURITIES
3.3
9,429
8,189
EQUITIES AND OTHER VARIABLE-INCOME SECURITIES
3.3
8
6
EQUITY INTERESTS AND OTHER LONG-TERM INVESTMENTS
3.3
97
108
INVESTMENTS IN ASSOCIATED COMPANIES
3.3
2,119
1,231
LEASE FINANCE CONTRACTS WITH PURCHASE OPTIONS
3
9
OPERATING LEASES
-
-
INTANGIBLE ASSETS
3.4
48
61
PROPERTY, PLANT AND EQUIPMENT
3.4
129
159
OTHER ASSETS
3.5
3,186
755
ACCRUALS ACCOUNTS AND OTHER MISCELLANEOUS ASSETS
3.6
2,894
1,958
59,049
51,509
TOTAL ASSETS
5 - Human and
6 - Risk management
7 - Parent company
Parent company balance sheet - Equity and liabilities
NOTES
31/12/2008
31/12/2007
21,900
15,327
1,364
912
20,536
14,415
680
3,051
16
468
- Demand
9
51
- Term
7
417
OTHER
664
2,583
- Demand
345
1,797
- Term
319
786
28,770
26,371
-
-
27,526
24,969
1,243
1,402
DUE TO CREDIT INSTITUTIONS
3.7
- Demand
- Term
DUE TO CUSTOMERS
3.8
REGULATED SAVINGS ACCOUNTS
DEBT SECURITIES
3.9
- Negotiable debt instruments and interbank securities
- Bonds
OTHER LIABILITIES
3.10
948
308
ACCRUALS ACCOUNT AND OTHER MISCELLANEOUS LIABILITIES
3.11
3,468
3,237
PROVISIONS
3.12
460
360
SUBORDINATED DEBT
3.13
955
982
437
437
1,431
1,436
- Share capital
682
638
- Additional paid-in capital
400
293
64
64
164
198
- Retained earnings
42
10
- Net income for the year
79
231
59,049
51,509
RESERVE FOR GENERAL BANKING RISKS (FRBG)
EQUITY EXCLUDING FRBG
- Reserves
- Regulated provisions and investment grants
TOTAL EQUITY AND LIABILITIES
3.14
December 2008
Parent company off-balance sheet commitments
NOTES
31/12/2008
31/12/2007
COMMITMENTS GIVEN
FINANCING COMMITMENTS
- Commitments to credit institutions
4.1
1,310
1,134
- Commitments to customers
4.1
8,341
8,037
- Guarantees to credit institutions
4.2
3,695
18,497
- Guarantees to customers
4.2
1,313
1,667
COMMITMENTS ON SECURITIES
4.3
1,243
1,606
- Commitments received from credit institutions
4.4
2,198
2,621
- Commitments received from customers
4.4
-
17
- Guarantees received from credit institutions
4.4
7,926
12,763
- Guarantees received from customers
4.4
20,730
12,345
COMMITMENTS ON SECURITIES
4.4
28
22
Purchases and sales of foreign currency
4.5
3,592
3,529
Outstanding forward financial instruments
4.6
99,943
119,611
GUARANTEES
COMMITMENTS RECEIVED
FINANCING COMMITMENTS
GUARANTEES
RECIPROCAL COMMITMENTS
5 - Human and
6 - Risk management
7 - Parent company
Parent company income statement
NOTES
2008
2007
5.1
2,540
1,848
Interest and similar expenses
5.1
(2,273)
(1,615)
Income from lease financing and related transactions
1
2
Expenses on lease financing and related transactions
(1)
(1)
5.2
44
190
Commission income
5.3
217
187
Commission expense
5.3
(30)
(12)
Net gains/(losses) on trading portfolio transactions
5.4
169
(2)
Net gains/(losses) on available-for-sale portfolio
and related transactions
5.5
(86)
5
Other banking operating income
5.6
195
136
Other banking operating expenses
5.6
(116)
(51)
660
686
(587)
(625)
(30)
(24)
43
37
(94)
(9)
(51)
28
34
131
(17)
159
NET BANKING INCOME
Operating expenses
5.7
Depreciation amortisation and impairment
of property, plant and equipment and intangible assets
GROSS OPERATING INCOME
Cost of risk
5.8
OPERATING INCOME
5.9
ORDINARY INCOME BEFORE TAX
Non-recurring items
5.10
-
2
Income tax
5.11
62
40
Movements in the reserve for general banking risks (FRBG)
and regulated provisions
5.12
34
31
79
231
NET INCOME
December 2008
Notes to the parent company financial statements
Note 1 - Legal and financial framework - Significant events in the year
1.1 Legal framework
This transaction was carried out for an amount of €45 million through GCE Foncier Coinvest, a subsidiary 49%-owned
by Crédit Foncier and 51%-owned by CNCE.
Crédit Foncier is a bank governed by the law of January 24
January 1984 and its implementing decrees covering the
activities and supervision of credit institutions.
• Increased investment in CFCAL Banque
A subsidiary of Groupe Caisse d’Epargne (GCE), Crédit
Foncier was fully consolidated by Caisse Nationale des
Caisses d’Epargne (CNCE) and consolidated by Nexity under
the equity method with effect from 31 December 2008
Specialised in real estate and public sector financing, Crédit
Foncier operates in the individual (real estate financing, surveys and services) and corporate, institutional and public
sectors (private sector, French public sector and international public sector).
On July 8, having reinvested its dividend in shares, Crédit
Foncier increased its interest in CFCAL Banque and notified
the AMF that its holding exceeded the two-thirds threshold.
As of 31 December 2008, Crédit Foncier held a 67.01%
stake in CFCAL Banque.
• Additional investment in Banco Primus
In the context of its international business development
strategy, as of October 2005 Crédit Foncier held a 37.4%
stake in Banco Primus, a Portuguese bank specialising in
mortgage lending and debt restructuring for individual customers. On 20 November, its stake in Banco Primus was
increased to 85% for an acquisition price of €45 million
1.2 Guarantee system
1.3.2 Transactions within Groupe Caisse d’Epargne
Pursuant to Article L. 511-31 of the French Monetary and
Financial Code, supplemented by Article L. 512-96 of said
Code, CNCE, as the central institution, has set up a guarantee and solidarity system within Groupe Caisse d’Epargne to
guarantee the liquidity and solvency of each of its component parts.
This guarantee system covers not only the individual Caisse
d’Epargne banks which are legally affiliated to CNCE in accordance with Article L. 512-95 of the French Monetary and
Financial Code, but also credit institutions operating under
French law which are affiliated to CNCE based on a decision
made by the entity in conformity with Articles R. 512-57 and
R. 512-58 of the French Monetary and Financial Code.
More generally, the guarantee system covers all Group entities based on the principle of shareholder responsibility.
Crédit Foncier is affiliated to Caisse Nationale des Caisses
d’Epargne.
1.3 Significant events in the year
1.3.1 Acquisitions
• Investment in the capital of Maisons France Confort SA
As part of Groupe Caisse d'Epargne’s real estate development strategy, Crédit Foncier took an indirect stake in MFC
PI, the controlling holding company of the Maisons France
Confort group.
• Investment in the capital of Crédit Financier Lillois
Crédit Foncier acquired a 15% stake in Crédit Financier
Lillois, a financing entity that is also 85%-owned by Nexity
Logement.
This transaction was completed on 4 January 2008 for
€1 million.
• Investment in the capital of GCE Covered bonds
As part of Groupe Caisse d'Epargne’s diversification of its
medium- and long-term funding sources, GCE Covered
Bonds was created in early 2008 to refinance the real estate
lending activities of GCE entities by issuing covered bonds.
Crédit Foncier paid €3 million for a 4.99% stake.
• Sale of SEM investment certificates belonging to Crédit
Foncier and its subsidiaries
In 2007, Groupe Caisse d’Epargne created GCE SEM, a
wholly-owned subsidiary of CNCE, to consolidate the Group’s
strategy and become the leading private financial institution
partnering semi-public companies (SEMs).
5 - Human and
6 - Risk management
7 - Parent company
To further the Group’s strategy in this market, Crédit Foncier
sold its minority holdings in 16 semi-public companies to
GCE SEM on 21 October 2008, generating a €2 million net
book capital gain before tax.
The transaction generated a net capital gain of €8 million.
Following this merger, and as consideration for Crédit Foncier’s
contribution of 100% of Picardie Bail, Crédit Foncier’s stake in
Cicobail was increased from 60.72% to 65.85%.
• Sale of shares in La Compagnie 1818 – Banquiers Privés
• Liquidations of securitisation funds
On 6 October 2008, Crédit Foncier sold its remaining 13.5%
holding in La Compagnie 1818 – Banquiers Privés to Natixis,
generating a €2 million net book capital gain before tax.
Three consolidated securitisation funds (fonds communs de
créances – FCC) were liquidated prior to maturity during the
year, the seller (Crédit Foncier) exercising its preferential
right to acquire all of the securities in the funds’ assets in a
single transaction.
• Transfer of Crédit Foncier’s banking business to Banque
Palatine
Seeking to refocus on its real estate financing business for
individuals and small business professionals, Crédit Foncier
decided to transfer its banking business to Banque Palatine,
a wholly-owned CNCE subsidiary.
On 10 June 2008, the two parties signed a partial contribution of assets agreement concerning Crédit Foncier’s banking
products and services for individuals and small business professionals. The total amount of customer accounts transferred
was €2,345 million. The transfer took place on 22 November
2008 and generated a capital gain in the books of Crédit
Foncier of €97 million. As consideration for the transfer,
Crédit Foncier took an 8.33% stake in Banque Palatine.
1.3.3 Restructuring and internal transactions
• Increase in the capital of Compagnie de Financement Foncier
On 24 June 2008, Crédit Foncier subscribed to all of the
shares issued in a capital increase carried out by Compagnie
de Financement Foncier, a subsidiary in which Crédit
Foncier already had a 99.99% holding. The investment
amounted to €770 million, and was paid in part by offsetting
the amount against €800 million of principal debt owed to
Crédit Foncier in the form of redeemable subordinated notes.
The share issue increased Compagnie de Financement
Foncier’s share capital from €154 million to €924 million at
30 June 2008.
• Complete transfer of assets and liabilities of Socrelog to
Crédit Foncier
In December 2008, Crédit Foncier, the sole shareholder of
Socrelog, decided to wind up its subsidiary, a credit institution
that had been dormant for several years. The transaction was
completed by a transfer of all assets and liabilities (transmission universelle de patrimoine), leading to a merger premium
of €2 million recorded by Crédit Foncier.
• Merger by absorption of Picardie Bail into Cicobail
As part of the restructuring of the “Real estate leasing”
division begun in 2006 to bring together the leasing activities of GCE subsidiaries, Picardie Bail was merged into
Cicobail.
This transaction was carried out in accordance with the
fund’s regulations, which allow for this possibility if the principal outstanding on amounts held by the funds represent
less than 10% of the initial amount of the issue.
The funds concerned are:
- Partimmo 11/98
- Partimmo 03/99
- Partimmo 11/99
• Creation of a securitisation fund
In 2008, Crédit Foncier carried out a debt securitisation
transaction in an amount of €3,180 million, resulting in the
creation of the Zèbre 2008.1 Securitisation Fund,managed
by Eurotitrisation.
Crédit Foncier refinanced Zèbre 2008.1 by subscribing to
senior bonds rated AAA by Standard & Poor's, issued by the
fund in an amount of €2,862 million with quarterly amortisation. It also took over specific fund units subordinated to
senior bonds in an amount of €318 million.
1.3.4 Capital increase
Following CNCE’s decision to exercise its option to receive
dividends in the form of shares, the share capital of Crédit
Foncier was increased to €682 million.
At 31 December 2008, CNCE held a 76.6% stake in Crédit
Foncier (compared to 75% previously), with Nexity holding
the remaining 23.4%.
1.3.5 Adjustable-rate loans
In December 2007, Crédit Foncier decided to propose
exceptional measures to customers that had taken out certain categories of adjustable-rate loans (interest rate caps
and/or extension of protection mechanisms for regulated
PAS/PC loans to unregulated loans), and in 2007 accounted for the cost of these measures estimated as at that date.
In 2008, implementation of the measures and a continuation of the analysis of files led to the recognition of additional costs. Accordingly:
December 2008
- The provision covering potential losses resulting from the
restructuring measures (conversion to fixed-rate loans)
was increased from €31 million to €37 million in the first
half of 2008. €10 million of this provision was reversed
during the second half, of which €8 million corresponded
to actual discounts following receipt of signed contract
amendments. All of the related income and expense from
this transaction was posted to “Cost of risk”.
Crédit Foncier recognises tax consolidation income corresponding to the income tax due by each of the subsidiaries
included in the tax group, and an overall income tax
expense for the tax consolidation group. At 31 December
2008, tax income relating to companies in the tax group
amounted to €42 million, while the Group tax expense was
assessed at €15 million.
- Thereafter, Crédit Foncier applied the agreement neutralising the effect of these measures on loans transferred to
Compagnie de Financement Foncier and incurred additional charges in an amount of €17 million on behalf of its
subsidiary. €13 million of these charges were covered by a
provision raised at end-2007.
1.3.10 Optimisation of Parisian real estate assets
The conversion of adjustable-rate loans to loans with a
capped rate or fixed-rate loans, led Crédit Foncier to modify
its interest rate risk hedging strategy by purchasing caps
and negotiating fixed-rate swaps.
During the year, Crédit Foncier decided to restructure and
refurbish its central services premises under a multi-step
programme spread over 2008 and 2009. At 31 December
2008, a provision was set aside for the related costs of €29
million (penalties for breach of the lease contract, rehabilitation costs, net carrying amount of fittings, etc.).
1.3.11 Consequences of the financial crisis
1.3.6 Sales of investment property
The financial crisis that emerged in 2007 became far more
serious in 2008, a consequence of declining property prices
in the United States and rising interest rates.
Crédit Foncier sold two investment properties with a net
carrying amount of €29 million during the first quarter of
2008. These sales generated a capital gain of €54 million
before tax.
During the first half of 2008, the slump in US housing
deepened.
1.3.7 Transfer of debt claims to Compagnie de Financement
Foncier
During financial year 2008, Crédit Foncier transferred to
Compagnie de Financement Foncier debt claims for a total
amount of €1,627 million to which should be added €1,105
million of financing commitments. Among these commitments, €395 million represented lines of credit for public
sector institutions.
1.3.8 Unwinding of hedging transactions
Due to the slump in credit markets and the impact on credit
default swap (CDS) prices, in April 2008 Crédit Foncier decided to unwind its CDS positions for its own benefit. These positions were originally contracted to bolster its Basel I regulatory
ratios.
The resulting positive cash adjustment of €175 million was
recognised in “Net gains/(losses) on trading portfolio transactions”.
1.3.9 Tax consolidation
As of 1 January 2008, Crédit Foncier set up a tax consolidation group.
Consolidated companies in this tax group calculate their
corporate tax expense based on their own taxable income as
if there were no tax consolidation. As head of the tax group,
In second-half 2008, the financial crisis intensified, prompted by severe economic and financial turmoil, including the
collapse of Lehman Brothers and Washington Mutual in
September, virtual paralysis in the interbank credit markets
for several weeks, and the bailout of major banks through
mergers, the purchase of delinquent loans and State intervention.
During the last quarter of 2008, the banking crisis gradually
gave way to a credit crisis; with the contraction in bank lending to the “real” economy coming on top of a normal cyclical
slowdown following the boom of the preceding years.
These upheavals prompted governments in most developed
countries to take far-reaching steps to restore confidence
and implement plans to secure the flow of capital into the
economy (see paragraph 7 of the risk management report).
Urged on by political leaders across the world (US Congress,
G8 summit), international accounting standard-setters (the
FASB and the IASB) attempted to provide an answer to the
debate surrounding fair value, which was considered to
have been a factor in the deepening financial crisis. The
standard-setters subsequently published a series of guidelines on how to apply fair value in a crisis and, more specifically, on how to assess the degree to which a given market
is inactive. The IASB also abolished differences between IAS
39 and US GAAP regarding the reclassification of financial
instruments. With the aim of ensuring consistency with
IFRS, the French National Accounting Board (Conseil
National de la Comptabilité – CNC) modified its guidance
governing the reclassification of portfolios under French
GAAP (see note 2.1. 3.3).
5 - Human and
6 - Risk management
In response to the financial crisis, the Financial Stability
Forum also put forward recommendations regarding transparency in its 7 April 2008 report. These were designed to
improve disclosure regarding certain types of risk exposure.
These recommendations are based on the work of the
Senior Supervisors' Group, which identified best disclosure
practices based on financial information issued by international banks.
7 - Parent company
The tests enabled securities to be classified on the basis of
the robustness of their credit rating. The provision was calculated based on the least robust structures, namely commercial mortgage-backed securities rated BBB and a number of residential mortgage-backed securities among those
most recently rated AAA. All other securitised outstandings
are rated AAA.
The risk management report provides a discussion of risks
in accordance with these recommendations.
An additional €33 million provision was recognised for outstanding performing loans and receivables, reflecting the
deterioration in real estate markets.
The main impacts of the financial crisis on the Crédit Foncier’s
Group’s financial statements are as follows:
Provisions for bridging loans that have reached maturity
total €20 million.
a) Securitised at-risk receivables, which are eligible for the
collective provision, represent €99 million.
Income totalling €36 million was recorded following the calling-in of a financial neutrality guarantee covering ICADE securities sold in 2008 by the subsidiary Compagnie Foncière de
Construction.
b) Lehman’s bankruptcy prompted Crédit Foncier to book
an impairment loss of €5 million for a claim against this
institution. The remaining unhedged exposure is now just
€4 million.
1.4 Post balance sheet events
1.3.12 Changes in the cost of risk
• CNCE’s acquisition of Nexity's 23.4% stake in Crédit Foncier
For the first time in 2008, Crédit Foncier has included its
portfolio of securitised receivables in the calculation of provisions for performing loans and receivables, resulting in a
€79 million expense.
Following an announcement in December 2008, Nexity and
Caisse Nationale des Caisses d’Epargne (CNCE) signed an
agreement on 29 January 2009 under which CNCE acquired
Nexity's 23.4% stake in Crédit Foncier de France.
As Crédit Foncier had granted a credit risk guarantee to
Compagnie de Financement Foncier on 26 August 2008
covering a securitisation portfolio, the provision was calculated on the basis of stress scenarios applied to the securitised mortgage loans of the two entities.
As a result, CNCE currently holds the entire share capital of
Crédit Foncier. This change in shareholding structure does
not call into question the tax consolidation group in 2009.
December 2008
Note 2 - Information on accounting rules and principles
2.1 - Accounting and valuation methods
2.1.2 Loans and receivables due from customers
The financial statements of Crédit Foncier were approved by
the Board of Directors on 19 February 2009.
Receivables due from customers include all advances
granted to economic players other than credit institutions,
with the exception of transactions involving securities, securities received under repurchase agreements and the related receivables. They are broken down into trade receivables, overdrafts and other loans.
The financial statements have been drawn up and are presented in conformity with the rules set out by CNCE, the
Accounting Regulations Committee (CRC) and the Banking
and Financial Regulations Committee (CRBF). Pursuant to
CRBF regulation 91-01 as amended by CRC regulation
2000-03, the financial statements have been presented in
the format applicable to credit institutions.
The annual financial statements are presented in the same
way as the previous year. General accounting conventions
have been applied in accordance with the conservatism
principle, based on the following core assumptions:
• going concern;
• consistency of accounting methods from one financial
period to the next;
• accrual principle;
and in conformity with general rules for preparing and presenting annual financial statements.
The items presented in the financial statements have been
valued on the basis of historical cost and all balance sheet
items have been presented, if applicable, net of depreciation, amortisation, provisions and value adjustments.
The main accounting methods used are described below.
2.1.1 Loans and receivables due from credit institutions
Loans and receivables due from credit institutions include all
loans and receivables resulting from banking transactions
with credit institutions, with the exception of transactions
involving securities. They also include securities received
under repurchase agreements and the related receivables,
and are broken down into demand and term accounts.
Receivables due from credit institutions have been recorded
in the balance sheet at their principal amount plus interest
accrued but not due, net of any impairment losses attributable to credit risk.
Loans granted to credit institutions have been recorded in
the balance sheet at their principal amount plus interest
accrued but not due, net of any impairment losses attributable to credit risk.
Guarantees received have been recorded in the accounts and
are presented in note 4.4. They are remeasured on a regular
basis. The carrying amount of all guarantees for a given loan
is limited to the outstanding amount of the loan.
Loans granted to customers have been recorded in the balance sheet at their principal amount plus interest accrued
but not due, net of any impairment losses attributable to
credit risk.
Loans originated are shown on the balance sheet for the
portion of the loan actually paid in the event of enforcement
proceedings. Outstanding amounts are recorded off-balance sheet under “Financing commitments given”.
Guarantees received have been recorded in the accounts
and are presented in note 4.4. They are remeasured on a
regular basis. The carrying amount of all guarantees for a
given loan is limited to the outstanding amount of the loan.
Non-performing loans include all outstanding amounts –
whether or not these are due or secured by a guarantee –
owed by debtors for which a known credit risk has been
individually identified on at least one commitment. A known
risk exists when it is probable that the bank will not receive
all or part of the amount due under the terms of the commitments entered into by the counterparty, notwithstanding
the existence of any guarantees or collateral.
With effect from 30 September 2008, outstanding amounts
under home purchase loans are classified as non-performing based on regulations, at the latest when there have been
one or more payment delinquencies in the last six months
or 180 days (compared to three months or 90 days previously). The period continues to be nine months for loans
granted to local authorities.
This change in method resulted in a €128 million reduction
in outstanding non-performing receivables and a €6 million
reversal of provisions through “Cost of risk”.
Within the non-performing category, doubtful loans are
loans which are highly unlikely to be recovered and are
expected to be ultimately written off. Loans on which an
event of default has been recorded, together with cancelled
finance lease contracts, undated credit facilities for which a
termination notice has been issued and loans which have
been classified as non-performing for more than one year,
are considered as doubtful loans unless demonstrated otherwise, for example if such loans are secured by a guarantee covering substantially all of the associated risk.
5 - Human and
6 - Risk management
Irrecoverable loans are written off and the corresponding
impairment is reversed.
Non-performing loans are reclassified as performing if regular payments resume for amounts corresponding to the
repayment terms of the loan agreement and provided the
counterparty no longer presents any default risk.
Loans restructured at off-market conditions due to financial
difficulties experienced by the borrowers, are identified in a
specific sub-category until final repayment. When a loan is
restructured, a discount is applied equivalent to the difference between the net present value of the repayments initially expected under the loan agreement and the net present
value of the future repayments of capital and interest resulting from the restructuring. The discount rate is the original
effective interest rate for fixed-rate loans and the most recent
effective interest rate prior to the restructuring for variablerate loans. The discount is recognised in the income statement under “Cost of risk” and in the balance sheet as a
deduction from the corresponding outstanding amount. It is
released to income on the interest line based on a yield-tomaturity approach over the remaining term of the loan.
Impairment recognised in respect of identified probable
losses cover all expected losses calculated on the basis of
present value based on the difference between the amount
due and the expected amount recoverable. Risk is assessed
on a case-by-case basis for material loans and automatically for others, based on the present value of guarantees
received and the value of mortgage collateral, taking into
account a 10% discount based on an expert valuation.
When credit risk arises on off-balance sheet financing or
guarantee commitments, the risk is recognised as a provision and recorded under liabilities.
Interest on non-performing loans is included in banking
operating income and provided for in full, as is interest on
doubtful loans.
Counterparties not impaired on an individual basis are
assessed on the basis of portfolios of loans and receivables
with similar characteristics. The existence of a known credit
risk on a group of loans and receivables with similar characteristics gives rise to an impairment loss, even though the risk
cannot at this stage be allocated to individual counterparties.
The approach adopted by the Group to identify groups of
loans on which a credit risk has risen since the loans were
granted, is based on an analysis of payment delinquencies
and internal credit ratings drawing on historic data, combined with a review of external credit ratings where applicable. An analysis by sector orgeographic region may also be
performed, based on an advanced assessment taking
account of various economic factors intrinsic to the loans
and receivables in question.
7 - Parent company
The collective provision is based on expected losses on an
identified population. The probability of default is calculated
up to maturity.
For the presentation of the notes to the financial statements
(notes 1b and 2c), the loan segmentation used is the
approach adopted by the Crédit Foncier Group for internal
reporting purposes, in particular in sales, financial and risk
management areas.
2.1.3 Securities
The term securities covers all interbank securities, treasury
bills and other negotiable debt securities, bonds and other
marketable, fixed-income securities (offering certain returns),
equities and other variable-income securities.
Securities transactions are governed from an accounting
standpoint by two main regulations:
• regulation CRC 2005-01, amending regulation CRB 90-01
of February 23, 1990, the reference to be used in accounting for securities, supplemented by instruction 94-07
issued by the French banking commission, defining general rules governing the recognition and measurement of
securities;
• regulation CRBF 89-07, supplemented by instruction 94-06
issued by the French banking commission, outlining rules
concerning certain specific transactions such as temporary
sales of securities.
Securities can be classified as equity interests and shares in
affiliates, other long-term investments, held-to-maturity securities, portfolio securities, available-for-sale securities and trading securities.
For trading, available-for-sale, held-to-maturity and portfolio
securities, any known counterparty default risk whose impact
can be separately identified will result in the recognition of an
impairment loss. Changes in impairment are recorded under
cost of risk.
Crédit Foncier does not hold any trading or portfolio securities or other long-term investments.
2.1.3.1 Available-for-sale securities
Securities not included in any other category are considered
to be available-for-sale.
These securities are initially recorded on acquisition at cost,
excluding acquisition fees.
Where appropriate, accrued interest on fixed-income securities is recognised as an offsetting entry under “Interest and
similar income”.
Any difference between the acquisition cost and the redemption price (premium or discount) of fixed-income securities is
taken to the income statement over the remaining life of the
relevant securities using the yield-to-maturity method.
December 2008
Available-for-sale securities are measured at the lower of
acquisition cost and market price. Equities and other variable-income securities are measured by reference to the
market price for listed securities, the net asset value based
on prevailing market conditions at the balance sheet date for
mutual fund units, or the share of equity for unlisted shares.
Unrealised capital losses are covered by a provision calculated for each group of securities with similar characteristics, with no offsetting permitted against capital gains arising
on other categories of securities.
Any gains on hedging instruments are taken into account
when calculating impairment. Unrealised capital gains are
not recognised.
Capital gains and losses realised on the disposal of available-for-sale securities, as well as movements in impairment, are recognised in “Net gains/(losses) on available-forsale portfolio and related transactions”.
2.1.3.2 Held-to-maturity securities
Held-to-maturity securities are fixed-income securities with
a fixed maturity, acquired or reclassified from the “availablefor-sale category, for which the entity has the positive intention and ability to hold until maturity. Such securities should
not be subject to legal or other constraints that might undermine the intention of holding the securities to maturity.
Classification of securities in this category does not prevent
them from being designated as hedged items in a hedge
protecting against interest rate risk.
Held-to-maturity securities are recognised on the date of
acquisition at cost, excluding acquisition fees. If they were
previously recorded as available-for-sale, they are recognised
at cost and any impairment previously recognised is reversed
over the residual term of the securities concerned.
Any difference between the acquisition cost and the redemption price of the securities, as well as any related accrued
interest, is accounted for using the same methods as those
applicable to available-for-sale fixed-income securities.
Impairment may be recognised if there is a strong probability that the entity will not hold the securities until maturity
due to a change in circumstances. Unrealised capital gains
are not recognised.
Any gains or losses on disposals and any movements in provisions are recorded under “Gains and losses on non-current assets”.
Held-to-maturity securities cannot be sold or transferred
into another category except under special circumstances.
2.1.3.3 Reclassification of financial assets
With the aim of harmonising practices and ensuring consistency with IFRS, the French National Accounting Board published regulation 2008-17 on 17 December 2008 amending
regulation 19-01 issued by the Banking Regulations
Committee concerning the recognition of securities transactions. This regulation incorporates the provisions of notice
2008-19 of 8 December 2008 concerning transfers of securities out of the “trading” or “available-for-sale” categories.
Securities may be reclassified out of the trading category
into the held-to-maturity or available-for-sale categories in
the following two situations:
a) in exceptional market circumstances requiring a change
of strategy;
b) when fixed-income securities, subsequent to their acquisition, are no longer traded on an active market, and if
the company has the positive intention and ability to hold
the securities for the foreseeable future or until maturity.
The effective date for transfers out of the “trading” or “available-for-sale” categories cannot be before 1 July 2008 and
must be the same as the date of preparation of the consolidated financial statements.
Crédit Foncier did not use these new reclassification options
in 2008.
2.1.3.4 Equity interests and investments in affiliates
This category includes securities for which a long-term holding is deemed to be useful to the entity because it enables
the company to exercise significant influence or control over
an issuer’s governing bodies.
Equity interests and investments in affiliates are recorded on
the date of acquisition at acquisition cost, excluding acquisition fees.
At year-end, they are valued separately at the lower of acquisition cost and value in use. Value in use is based on criteria such as the strategic nature of the investment, the entity’s willingness to fund or maintain its investment in the affiliate, share price, net book assets, adjusted net asset value
and forecasts. An impairment provision is set aside for unrealised capital losses on a line-by-line basis, with no offsetting
against unrealised capital gains. Unrealised capital gains
are not recognised.
Gains or losses on disposals and movements in provisions
are recognized under “Gains and losses on non- current
assets”.
5 - Human and
6 - Risk management
Equity interests and investments in affiliates cannot be
transferred to any other accounting category.
2.1.4 Intangible assets
Accounting rules governing intangible assets and property,
plant and equipment are governed by:
7 - Parent company
Where appropriate, an impairment loss may be recognised
against property, plant and equipment.
Net gains or losses on the disposal of property, plant and
equipment not used in operations are recorded within net
banking income under “Other banking operating income” or
“Other banking operating expense”.
- CRC regulation 2002-10 on depreciation, amortisation
and impairment of assets;
2.1.6 Other property, plant and equipment
- CRC regulation 2004-06 implementing CNC notice
2004-15 on the definition, recognition and measurement of assets.
Other property, plant and equipment is recorded at cost
(purchase price including ancillary costs), production cost
or remeasured cost. The cost of assets denominated in foreign currencies is translated into euros at the exchange rate
on the transaction date.
Intangible assets are recognised at cost (purchase price
plus incidental expenses).
The cost of software developed internally and intended for
use is capitalised.
Items that can be amortised are amortised based on their
likely useful lives. Software is amortised over a maximum
period of five years.
Any additional amortisation which software may be entitled
for tax purposes is recorded as accelerated amortisation.
2.1.5 Buildings, fixtures and fittings
Buildings comprise various components which each have
different uses. Accordingly, each item is accounted for separately at cost and depreciated over a period appropriate for
that component.
The depreciable amount is the gross value less residual value
where this is material, long-term and can be reliably measured. The principal components of buildings are depreciated
according to the pattern in which the future economic benefits to be derived from the asset are expected to be consumed, which generally corresponds to the asset’s useful life.
Component
Life
Walls, foundations, framework and fixed partitions 20 to 50 years
Roofing
25 years
Lifts
15 years
Heating and air-conditioning installations
10 years
Signboards and facade fittings
Doors and windows
Enclosures
Security equipment
5 to 10 years
10 years
10 years
5 to 10 years
Wiring
10 years
Other fixtures and fittings
10 years
Assets are depreciated according to the period over which
the future economic benefits are expected to be consumed,
which generally corresponds to their useful life, as follows:
- Furniture and special equipment: 4 to 10 years
- Computer equipment: 3 to 5 years
The declining balance method is generally used based on a
rate of 40% for certain items in the following captions:
machinery and equipment, vehicles, office equipment and
computer equipment.
Where appropriate, impairment may be recognised against
non-current assets.
2.1.7 Due to credit institutions and customers
Amounts due to credit institutions are classified on the basis
of their duration on inception (demand or term), while
amounts due to customers are classified according to type, as
either regulated savings accounts or other customer deposits.
Depending on the counterparty involved, these captions may
include repurchase agreements involving securities and other
assets. Accrued interest is recorded on a separate line.
2.1.8 Repurchase agreements
Repurchase agreements are accounted in accordance with
CRBF regulation 89-07, supplemented by instruction 94-06
issued by the French banking commission.
Assets transferred under repurchase transactions continue
to be shown in the balance sheet of the assignor, which
records the funds received as a liability, representing the
amount owed to the assignee. The assignee records the
amount paid in assets, corresponding to the amount receivable from the assignor.
At the balance sheet date, any securities transferred under
repurchase agreements, as well as amounts owed to the
assignee or receivable from the assignor, are measured
according to specific rules for each transaction.
December 2008
2.1.9 Debt securities
Debt securities are classified on the basis of the nature of
the underlying asset.
The gross amount of the principal outstanding on instruments issued by Crédit Foncier is recognised as a liability in
the balance sheet. Loans in foreign currencies are valued in
euros at year-end exchange rates.
Issuance expenses are recognised under “Other banking
operating expense”.
Bond issuance or redemption premiums are amortised in line
with the borrowings to which they relate under “Interest and
similar expense on bonds and other fixed-income securities”.
Post-employment benefits can be broken down into two categories: defined contribution schemes, which do not require
the Group to book any provision for the related obligation, and
defined benefit schemes, which give rise to an obligation for
the Group and are therefore measured and recognised by
means of a provision.
A provision is set aside in the balance sheet for obligations
that are not funded by contributions charged to income and
paid out to pension funds or insurance companies.
The obligations are valued using an actuarial method based on
demographic and financial assumptions such as age, lengthof-service, the probability that employees will be with the company at the date the benefit is due, and the discount rate.
Interest accrued but not due relating to these securities is
recorded in a related liabilities account as a contra-entry of
the income statement
The calculation allocates the costs over the working life of
each employee (projected unit credit method). The liability
recorded takes account of the value of plan assets and any
unrecognised actuarial gains and losses.
2.1.10 Employee benefits
Actuarial gains or losses on post-employment benefits, arising from changes in calculation assumptions (early retirement, discount rates) or experience adjustments (return on
plan assets), are recognised for the portion that exceeds the
greater of 10% of the present value of the obligation and
10% of the fair value of any plan assets ('corridor' method).
Benefits paid to employees are accounted for in accordance
with CNC recommendation 2003-R-01, and can be divided
into four categories:
• Short-term benefits
Short-term benefits mainly comprise wages and salaries,
paid annual leave, incentive plans, profit-sharing, and
bonuses payable within 12 months of the end of the period
in which the employee renders the service. They are recognized as an expense for the period, including any amounts
due at the balance sheet date.
The annual expense regarding defined benefit schemes
includes current service cost, interest cost (impact of discounting the obligation), the expected return on plan assets,
and the amortisation of any unrecognised items.
• Long-term benefits
In accordance with Article 3 of CRBF regulation 90-02 and
French banking commission instruction 86-05 as amended,
the reserve for general banking risks is intended to cover risks
inherent to Crédit Foncier’s business.
Long-term benefits comprise benefits generally linked to longservice awards, accruing to current employees and payable
12 months or more after the end of the financial year. Longterm benefits consist mainly of jubilee bonuses.
A provision is set aside for the amount of these obligations at
the balance sheet date, which is assessed using the same
actuarial method as that applied to post-employment benefits.
• Termination benefits
Termination benefits are paid to employees on termination
of their contract prior to retirement, either as a result of
redundancy or following the employee’s acceptance of a voluntary retirement plan. A provision is set aside for termination benefits and the portion paid more than 12 months after
the balance sheet date is discounted to present value.
• Post-employment benefits
Post-employment benefits include lump-sum retirement
bonuses, pensions and other post-employment benefits.
2.1.11 Reserve for general banking risks (FRBG)
2.1.12 Forward financial instruments
Hedging and trading transactions on interest rate, currency
or equity futures are recognised in accordance with CRBF
regulations 88-02 and 90-15. Commitments arising from
these transactions are recorded as off-balance sheet items
for the nominal value of the contracts. At 31 December, the
amount of these commitments represented the volume of
transactions that had not been unwound by year-end.
Crédit Foncier does not have any firm futures on organised
markets. Instruments held are mainly interest rate or currency
swaps, forward swaps and interest rate caps or floors. These
can be considered as a series of options and are accounted for
accordingly.
5 - Human and
6 - Risk management
Accounting methods used are based on the type of instrument
and the intentions of the issuers at inception.
Transactions carried out mainly concern interest rate swaps
entered into for hedging purposes. Income and expenses on
forward financial instruments used to hedge and manage the
company’s overall interest rate exposure are recognised in
the income statement on a pro rata basis. Unrealised gains
and losses are not recognised. Realised gains or losses on
hedging transactions are recognised in the income statement
symmetrically with the gains or losses on the hedged item,
and accounted for on the same lines as income and expense
relating to the item in question.
Hedging swaps taken out in respect of loans are systematically classified as separate open positions if the loan becomes
non-performing.
Income and expenses on certain contracts representing separate open positions are recorded in the income statement
when the contracts are unwound or on a pro rata basis
depending on the nature of the instrument. A provision is
recognised in liabilities for any unrealised losses with respect
to market value. Unrealised gains are not recognised.
Market value is determined based on the nature of the market in question (organised markets and similar exchanges or
over-the-counter). In organised markets, instruments are
traded continuously and are sufficiently liquid to justify valuation at market price.
Over-the-counter markets can be considered similar to organised exchanges if institutions acting as market makers provide
continuous price quotations within realistic spreads, or if the
underlying asset is itself listed on an organised market. For
interest rate or currency swaps, market value is determined
based on the price of the instrument calculated by discounting future cash flows at market interest rates and taking into
account counterparty risk and the present value of future
management fees. Changes in the value of unlisted options
are determined using mathematical calculations.
2.1.13 Provisions
This item includes provisions intended to cover contingencies and expenses not directly associated with banking transactions within the meaning of Article L311-1 of the French
Monetary and Financial Code, and related transactions as
defined in Article L311-2 of said Code, the purpose of which
is clearly specified but whose timing or amount is uncertain.
In accordance with CRC regulation 2000-06, a provision is
set aside only if there is an obligation to a third party on the
balance sheet date and no equivalent consideration is
expected in return.
7 - Parent company
This item also includes provisions intended to cover contingencies and expenses associated with banking transactions
within the meaning of Article L311-1 of the French Monetary
and Financial Code, and related transactions as defined in
Article L311-2 of said Code, which are likely to occur due to
current or past events and have a specific purpose, but
whose actual occurrence is uncertain.
Provisions for tax-efficient EIGs
Crédit Foncier is a member of a certain number of economic
interest groups (EIGs). Any profit or loss arising on these entities, which qualify for direct tax assessment of their members,
is recognised in proportion to Crédit Foncier’s share in determining the tax base used to calculate corporate income tax.
In order to neutralise the impact of any resulting tax, a provision for tax-efficient EIGs has been set aside under
“Provisions” in liabilities. The main purpose of this provision
is to offset future tax liabilities resulting from Crédit Foncier’s
share of profits arising on the EIGs during their profit-making
phase, against any tax savings from EIG tax losses reported in
a previous period.
2.1.14 Foreign currency transactions
Balance sheet and off-balance sheet transactions are translated into euros at the end of each month at the prevailing
exchange rate for the particular currency. Corresponding
income and expense items are translated into euros at the
exchange rate on the date they are recognised in the income
statement.
Unrealised or realised currency translation gains and losses
resulting from Crédit Foncier’s proprietary transactions are
recorded under “Net gains/(losses) on trading portfolio transactions”.
Exceptionally, a provision is set aside in “Provisions” under
liabilities for any unrealised losses arising on foreign currencies traded on illiquid markets in an amount equivalent to the
net risk incurred. Unrealised gains are not recognised in the
income statement.
2.1.15 Sale of receivables
Until 2005, Crédit Foncier set aside regulated provisions
with a view to spreading any capital gains or losses on the
sale of receivables for tax purposes over the remaining life
of those receivables under the yield-to-maturity method.
Capital gains from the sale of receivables were recognised
using the yield-to-maturity method. Capital losses were
charged in full to the income statement on the date the
receivables were sold.
December 2008
Since 1 January 2006, new tax rules applicable to sales of
receivables provide for the immediate taxation of associated
capital gains or losses. As a result, regulated provisions may
no longer be recognised for tax purposes.
This neutralisation is reflected in accrual accounts, and will
be reversed over the average life of loans and receivables
sold after 1 January 2006.
For accounting purposes, the company has decided to neutralise the full amount of net gains on sales made since
1 January 2006, given the risk of accumulated unrealised
losses in macro-hedges. Crédit Foncier de France systematically hedges the interest rate risk on originated loans and
advances.
2.2 Changes in accounting methods
There have been no changes in accounting methods affecting the 2008 financial statements.
5 - Human and
6 - Risk management
7 - Parent company
Note 3 - Notes to the balance sheet
3.1 - Loans and receivables due from credit institutions
3.1.1 - Loans and receivables due from credit institutions
31/12/2008
31/12/2007
NON-GROUP
473
1,076
- Demand
416
199
416
199
- Deposits and loans
-
-
- Unallocated amounts
-
-
- Repurchase agreements
-
-
- Accrued interest
-
-
56
876
2
812
- Repurchase agreements
15
16
- Subordinated loans
39
47
- Accrued interest
-
1
- Non-performing loans and receivables
2
2
(1)
(1)
7,529
7,167
661
297
6,868
6,870
8,002
8,243
- Term
- Deposits and loans
- Impaired loans and receivables
GROUP TOTAL
- Demand
- Term
(1)
GRAND TOTAL
(1) Including a subordinated loan granted to Compagnie de Financement Foncier in an amount of €1,350 million in 2008 and 2007
December 2008
3.1.2 - Breakdown of outstanding loans and receivables due from credit institutions
GROSS
31/12/2008
IMP.
NET
DEMAND
1,077
-
1,077
497
TERM
6,926
(1)
6,925
7,746
17
-
17
42
- Non-subsidised home loans
4
-
4
5
- Public entities
-
-
-
-
- Structured financing
-
-
-
189
6,903
-
6,903
7,510
2
(1)
1
-
8,003
(1)
8,002
8,243
(1)
- Subsidised home loans
- Other loans to credit institutions
- Non-performing term loans
GRAND TOTAL
(1) No performing loans had been restructured at off-market conditions at 31 December 2008.
31/12/2007
NET
5 - Human and
6 - Risk management
7 - Parent company
3.2 - Loans and receivables due from customers
3.2.1 - Loans and receivables due from customers
31/12/2008
31/12/2007
NON-GROUP
28,126
23,433
Customer loans
27,712
22,971
7
8
496
152
6,547
4,427
19,298
17,269
1,195
989
- Loans to financial institutions
8
13
- Securities received under repurchase agreements
-
-
- Unallocated amounts
3
5
- Subordinated loanss
-
-
158
107
- Trade receivables
- Export credit
- Cash facilities
- Capital goods loans
- Home loans
- Other customer loans
- Accrued interest
Current accounts in debit
1
-
1
- Accrued interest
-
-
633
660
Impaired loans and receivables
(219)
(199)
GROUP TOTAL
5,007
7,357
33,133
30,789
Non-performing loans and receivables
TOTAL
No permanent credit facilities had been granted to customers at 31 December 2008.
No performing loans had been restructured at off-market conditions.
December 2008
3.2.2 - Impairment and provisions set aside in respect of credit risk
31/12/07
Merger
contribution
Additions
Exchange
differences
31/12/08
200
-
207
(188)
1
220
1
-
-
-
-
1
199
-
207
(188)
1
219
-
-
-
-
-
-
PROVISIONS RECOGNISED IN LIABILITIES
165
-
137
(38)
-
264
- Loans to customers
and credit institutions
117
-
121
(10)
-
228
27
-
16
(28)
-
15
2
-
-
-
-
2
19
-
-
-
-
19
365
-
344
(226)
1
484
IMPAIRMENT DEDUCTED FROM ASSETS
- Credit institutions
- Customer items
- Current accounts
- Provisions for losses
and expenses on commitments
- Provisions for country risk
- Provisions for miscellaneous real estate risks
TOTAL
Reversals
5 - Human and
7 - Parent company
6 - Risk management
3.2.3 - Breakdown of customer outstandings (1/2)
31/12/2008
Performing
loans
Total
non-performing
o/w doubtful loans
GROSS
LOANS TO HOUSEHOLDS
15,847
345
(93)
251
Individuals
14,611
299
(77)
-
-
14,257
PROV.
NET
99
(61)
38
222
79
(48)
31
-
-
-
-
-
283
(74)
209
76
(46)
30
354
16
(3)
13
3
(2)
1
1,236
46
(16)
29
20
(13)
7
-
-
-
-
-
-
-
1,232
44
(15)
29
19
(12)
7
4
2
(1)
-
1
(1)
-
16,872
287
(126)
161
126
(90)
36
Public sector (local authorities)
3,384
-
-
-
-
-
-
Social housing
2,512
8
(3)
4
3
(3)
-
-
-
-
-
-
-
-
2,238
5
(1)
4
-
-
-
- Other
274
3
(3)
-
3
(3)
-
Real estate professionals
109
60
(20)
41
-
-
-
109
60
(20)
41
-
-
-
-
-
-
-
-
-
-
4,006
161
(65)
96
77
(57)
19
-
-
-
-
-
-
-
1,185
71
(25)
46
32
(21)
11
- Other
2,820
90
(40)
50
45
(37)
8
Structured financing
1,470
50
(34)
15
42
(27)
15
62
44
(34)
10
42
(27)
15
- Major projects
1,408
5
-
5
-
-
-
Other
5,392
8
(4)
5
4
(3)
1
TOTAL
32,719
633
(219)
413
225
(152)
73
- Other
Small business owners
- Other
LOANS TO COMPANIES AND LOCAL AUTHORITIES
- Other
Real estate investors
- Transport
GROSS
PROV.
NET
GROSS
December 2008
3.2.3 - Breakdown of customer outstandings (2/2)
31/12/2007
Performing
loans
GROSS
LOANS TO HOUSEHOLDS
15,080
Individuals
13,915
Total
non-performing
GROSS
NET
GROSS
PROV.
NET
(7)
22
(96)
328
29
376
(81)
295
23
(5)
18
-
7
(2)
5
-
-
-
13,734
355
(77)
278
23
(5)
18
181
14
(3)
12
-
-
-
1,166
48
(15)
33
6
(2)
4
-
-
-
-
-
-
-
1,160
48
(15)
32
6
(2)
4
- Other
6
1
-
1
-
-
-
LOANS TO COMPANIES AND LOCAL AUTHORITIES
-
-
-
-
-
-
-
Public sector (local authorities)
1,780
-
-
-
-
-
-
Social housing
1,788
5
(4)
1
2
(2)
-
-
-
-
-
-
-
-
1,707
2
(2)
-
-
-
-
80
3
(2)
1
2
(2)
-
Real estate professionals
255
2
(2)
-
-
-
-
255
2
(2)
-
-
-
-
-
-
-
-
-
-
-
3,326
161
(57)
104
53
(12)
40
-
-
-
-
-
-
-
1,170
102
(19)
82
22
(4)
18
- Other
2,156
60
(38)
22
31
(9)
22
Structured financing
1,128
55
(36)
19
-
-
-
68
47
(36)
12
-
-
-
- Major projects
1,060
8
-
8
-
-
-
Others
6,971
13
(4)
9
2
(1)
1
TOTAL
30,328
660
(199)
461
86
(22)
63
- Other
Small business owners
- Other
- Other
Real estate investors
- Transport
424
PROV.
o/w doubtful loans
5 - Human and
7 - Parent company
6 - Risk management
3.3 - Securities portfolio
3.3.1 - Bonds, equity interests and other fixed- and variable-income securities
31/12/08
GROSS
BONDS AND OTHER FIXED-INCOME SECURITIES
IMP.
31/12/07
NET
9,520
(91)
9,429
8,189
- Listed securities
1,573
(91)
1,482
1,463
- Unlisted securities
3,763
-
3,763
5,060
- Listed securities
2,862
-
2,862
-
1,218
-
1,218
1,524
103
-
103
141
EQUITIES AND OTHER VARIABLE-INCOME SECURITIES
8
-
8
6
Available-for-sale securities
8
-
8
6
123
(26)
97
108
13
(13)
-
-
108
(13)
95
108
2
-
2
-
2,199
(80)
2,119
1,231
297
(50)
247
292
1,902
(30)
1,872
939
11,850
(197)
11,653
9,534
(1)
(2)
Held-to-maturity securities
Accrued interest
EQUITY INTERESTS AND OTHER LONG-TERM INVESTMENTS
Equity interests
- Listed securities
Other long-term investments
Deposit guarantee fund certificates
INVESTMENTS IN ASSOCIATES
- Listed securities
TOTAL
(3)
(1) “Bonds and other fixed-income securities” includes securities issued by public organisations for a net carrying amount of ?909 million. Crédit Foncier does not
hold any trading or portfolio securities. Unrealised capital gains on the available-for-sale portfolio at 31 December 2008 were not material.
(2) There were no doubtful outstandings at 31 December 2008.
(3) Pursuant to the BAFI letter of January 2007, deposit guarantee fund certificates have been reclassified from “Intangible assets” to “Other long- term investments”.
Guarantees granted by Crédit Foncier in the context of securitisation transactions consist of investments in specific securitisation fund units which are first in line to incur any fund losses .
At 31 December 2008, specific units in securitisation funds held by Crédit Foncier amounted to €1,037 million.
December 2008
3.3.2 - Premiums and discounts
Amounts at 31/12/2008
Gross value
Redemption value
- Bonds
3,273
3,273
- Other fixed-income securities
1,627
1,599
- Bonds
2,862
2,862
- Other fixed-income securities
1,218
1,226
Difference +\-
28
(7)
3.3.3 - Impairment of securities portfolio
Balance
31/12/2007
Additions
3
104
-
-
3
Equity interests
TOTAL
Reversals
(15)
Merger
Contributions 31/12/2008
-
92
-
-
-
80
(3)
-
80
27
1
(2)
-
26
33
185
(20)
-
198
5 - Human and
7 - Parent company
6 - Risk management
3.4 - Property, plant and equipment and intangible assets
3.4.1 - Changes in property, plant and equipment and intangible assets
INTANGIBLE ASSETS
Gross at Acquisitions Disposals Miscellaneous Gross at
(1)
31/12/07
in 2008
in 2008
31/12/08
Depreciation
& amortisation
Gross at
31/12/08
110
13
(10)
(2)
111
(63)
48
-
-
-
-
-
-
-
- Concessions and similar rights
110
13
(10)
(2)
111
(63)
48
288
15
(58)
-
245
(116)
129
Land
68
1
(15)
-
53
(1)
52
- Used in operations
50
-
-
-
50
(1)
49
- Not used in operations
18
1
(15)
-
3
-
3
Buildings, fixtures and fittings
171
4
(39)
-
135
(82)
53
- Used in operations
133
2
(3)
-
132
(80)
52
- Not used in operations
38
2
(36)
-
3
(2)
1
Other
49
10
(3)
-
57
(33)
24
- Other property, plant and equipment
43
2
(3)
-
43
(33)
10
6
8
(1)
-
14
-
14
398
28
(68)
(2)
356
(179)
177
- Capital increase expenses
- Property, plant and equipment
under construction
TOTAL (A) + (B)
(1) Pursuant to the BAFI letter of January 2007, deposit guarantee fund certificates have been reclassified from “Intangible assets” to “Other long-term investments”.
December 2008
3.4.2 - Depreciation, amortisation and impairment of property, plant and equipment and intangible assets
At
31/12/07
Additions
2008
Decreases/
reversals
2008
Disposals/
Scrapped
49
12
-
(2)
63
129
12
-
25
116
179
24
-
23
179
Intangible assets
(1)
(2)
TOTAL
At
31/12/08
(1) Including €8 million in impairment of leasehold rights at 31 December 2008.
(2) Including €1 million in impairment of buildings at 31 December 2008.
Disposals for €22 million reflect a reversal of impairment on the sale of the Rivoli and Courcelles buildings.
3.5 - Other assets
Options purchased
31/12/2008
31/12/2007
206
92
4
35
915
41
1,374
74
13
5
Home savings premiums
-
-
CODEVI regulated savings accounts
-
11
33
16
555
410
87
73
3,186
755
Margin calls on repurchase transactions
Security deposits paid to securitisation funds
Security deposits paid on collateralisation transactions
Other deposits and guarantees
Advances to partners or shareholders
Tax credits on interest-free loans
Other miscellaneous debtors
TOTAL
5 - Human and
6 - Risk management
7 - Parent company
3.6 - Accrual accounts and other miscellaneous assets
31/12/2008
31/12/2007
Deferred charges
Issue and redemption premiums on fixed-income securities
Issuance costs of securitisation funds and miscellaneous
Fees on PAS, PTZ and PVH (social/interest-free) loans
Losses on sales of receivables
25
34
1
1
32
8
337
254
115
68
1,114
1,123
153
164
-
12
1,117
294
2,894
1,958
Other accrual accounts
Prepaid expenses
Accrued income on swaps
Other income due
FGAS grants due
Miscellaneous
(1)
TOTAL
(1) Includes currency translation adjustments and return clearing accounts
3.7 - Due to credit institutions
NON-GROUP
31/12/2008
31/12/2007
9,802
5,474
Demand
526
357
Current accounts
524
346
Other amounts due
1
9
Accrued interest
1
2
Term
9,276
5,117
Term accounts and loans
7,596
3,238
Securities delivered under repurchase agreements
1,609
1,831
71
49
12,098
9,852
837
555
Term
11,261
9,298
GRAND TOTAL
21,900
15,327
Accrued interest
GROUP
Demand
December 2008
3.8 - Due to customers
NON-GROUP
31/12/2008
31/12/2007
381
2,517
16
468
- Demand
9
51
- Term
7
417
Other non-Group
365
2,049
- Demand
283
1,473
Current accounts
3
1,265
Securities delivered under repurchase agreements
-
-
278
204
2
3
- Term
82
576
Term deposits
82
572
-
5
299
534
62
325
- Term
237
209
TOTAL
680
3,051
Regulated savings accounts
Other amounts due to customers
Accrued interest
Accrued interest
GROUP
- Demand
The significant decrease in the item “Due to customers” between 2007 and 2008 reflects Crédit Foncier’s transfer of its banking activities to Banque Palatine on
22 November 2008 (see details in note 1.3.2).
5 - Human and
6 - Risk management
7 - Parent company
3.9 - Debt securities
31/12/2008
Retail certificates of deposit
Negotiable debt securities
(1) (2)
Bonds
Accrued interest
TOTAL
(1) Including mortgage bonds subscribed by Compagnie de Financement Foncier.
(2) Including negotiable debt securities subscribed by Vauban Mobilisations Garanties:
- MTN
31/12/2007
-
-
27,291
24,680
1,203
1,360
276
331
28,770
26,371
9,044
6,966
4,916
2,050
8,831
8,894
6,504
2,390
3.10 - Other liabilities
Options sold
31/12/2008
31/12/2007
-
4
Miscellaneous creditors
927
290
Allocated public funds
21
13
948
308
TOTAL
3.11 - Accrual accounts and other miscellaneous liabilities
31/12/2008
31/12/2007
Deferred subsidies for PAS and PTZ (social/interest-free) loans
705
504
Deferred gains on sales of receivables
140
160
Other deferred income
105
152
1,131
997
82
79
-
-
18
2
1,287
1,343
3,468
3,237
Accrued expenses on swaps
Other payables
Adjustment accounts
Collection accounts
Miscellaneous
(1)
TOTAL
(1) This item includes bank transfers and cheques issued to be cashed
and various bills sent to the automated clearing system.
366
583
December 2008
3.12 - Provisions
31/12/07
31/12/08
Balance
Additions
150
103
(39)
(40)
(6)
168
4
5
-
(2)
-
7
Provisions for contingencies
and expenses relating to operations
Reversals
Utilised
Surplus
Other
movements
Balance
Banking provisions
Provision for losses on interest rate swaps and caps
Provision for litigation
11
7
-
(4)
-
14
6
13
(8)
(6)
-
5
13
-
-
(13)
-
-
6
-
(2)
15
7
(5)
(5)
Provision for operating disputes
3
13
-
Provision for miscellaneous contingencies
2
-
(1)
Provision for other expenses (including restructuring)
-
2
Provision for pre-retirement working time adjustment (1)
25
Provisions for pensions
31
Provision for long-service awards
3
Provision for pension commitments for active employees
8
Provision for removals
-
Provision for IT restructuring
13
Provision for costs incurred on adjustable
rate loan restructuring
10
Provision for losses and expenses on commitments
Prov. for losses and expenses on adjustable-rate loans
Provision for regulated savings products
Provision for other miscellaneous banking transactions
(4)
-
-
12
(1)
-
15
-
-
1
-
-
-
2
4
-
(5)
-
24
-
(7)
(5)
(1)
18
-
-
-
-
3
2
-
-
(1)
9
29
-
-
-
29
10
(6)
-
-
17
11
(10)
-
-
11
-
Non-banking provisions
Provision for contingencies and expenses
in connection with external services
Provisions recognised in cost of risk
-
1
-
-
163
125
(7)
(20)
1
261
Banking provisions
Provisions for country risk
Provision for losses and expenses on commitments
Provisions for unrealised exchange losses
2
-
-
-
-
2
21
3
(7)
(7)
-
10
1
-
-
-
-
1
19
-
-
-
-
19
Provisions for other miscellaneous risks
3
1
-
(3)
-
1
Provisions for miscellaneous risks
-
-
-
-
-
-
117
121
-
(10)
-
228
-
Provisions for miscellaneous real estate risks
Provisions for potential risks on performing loans
Provisions for miscellaneous risks
Other provisions
-
-
-
-
46
1
(2)
(14)
31
37
-
-
(11)
-
26
Provision for tax disputes and other contingencies
9
1
(2)
(3)
-
5
Provision for restructuring costs
-
-
-
-
-
-
359
229
(48)
(74)
(6)
460
Provisions for tax-efficient EIGs
(2)
TOTAL
(1) This provision is intended to cover commitments assumed by Crédit Foncier where the collective agreement provides for a reduction in working hours in
the year prior to retirement.
(2) Provisional maturity from 2009 to 2017.
5 - Human and
7 - Parent company
6 - Risk management
(IGRS, Supplementary Pension Management Institution), as
decided by the company's staff representative bodies. For
this purpose, the employee collective agreement signed in
2008 has been amended so that it can be insured (elimination of the top-up scheme) and AXA, the insurance company, has been appointed to be the lead insurer for the new
scheme. The approval to transform CRCFF into an IGRS was
granted on 11 March 2009. The transfer of CRCFF's provisions and reserves to AXA and the two co-insurers occurred
on 31 March 2009, resulting in the full transfer of financial
risk on the pensions and hedging of risk on future pensions
through an AXA managed fund.
3.12.1 - Employee benefits
I. Employee benefit obligations
Employees who joined the Crédit Foncier Group prior to
1 March 2000 are covered by the supplementary defined
benefit pension plan administered as part of the Caisse de
Retraite du Crédit Foncier (CRCFF, Crédit Foncier Pension
Plan), Institution de Retraite Supplémentaire (IRS, Supplementary Pension Institution), which is legally independent
and is designed to provide benefits in addition to the compulsory plan where necessary, through an employee top-up
scheme.
Employees hired after 1 March 2000 are members of the
defined contribution pension plan in place for Groupe Caisse
d'Epargne employees.
The CRCFF carries out valuations on the basis of future
commitments, which are validated each year by independent actuaries on the basis of a technical rate of 1% and mortality tables for each generation. Retirement commitments
are covered by the related fund's assets.
In terms of termination benefits (IFC), employees are entitled
to receive a one-time allowance at the time of their retirement
that is directly proportional to their seniority. In order to cover
this cost and the related employer taxes, Crédit Foncier has
taken out an insurance policy for its employees.
Pursuant to Article 116 of the 21 August 2003 Act and the
17 December 2008 Social Security Financing Act for 2009,
by 31 December 2009 the Institution must be transformed
into an Institution de Gestion de Retraite Supplémentaire
II. Breakdown of balance sheet assets and liabilities
2008
2007
IFC
Other
commitments
Total
IFC
Other
commitments
Total
48
27
76
48
28
76
(51)
-
(51)
(47)
-
(47)
-
-
-
-
-
-
11
-
11
8
-
8
9
27
36
8
28
36
Employee benefit obligations (assets)
9
27
36
8
28
36
Employee benefit obligations (liabilities)
-
-
-
-
-
-
Present value of funded commitments
Fair value of plan assets
Present value of unfunded commitments
Unrecognised items
(actuarial gains or losses and past service costs)
December 2008
III. Change in balance sheet amounts
2008
2007
IFC
Other
commitments
Total
IFC
Other
commitments
Total
48
28
76
54
30
84
Service cost
2
1
3
2
1
4
Interest cost
2
1
3
2
1
3
(5)
(4)
(9)
(4)
(4)
(8)
2
1
4
1
-
1
Other (translation adjustments, changes
in scope of consolidation etc.)
(1)
-
(1)
(7)
-
(7)
Projected benefit obligation at 31 December
48
27
76
48
28
76
Fair value of assets at 1 January
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Benefits paid
-
-
-
-
-
-
Actuarial gains or losses for the year
-
-
-
-
-
-
-
-
-
-
-
-
Fair value of plan assets at 31 December
-
-
-
-
-
-
(47)
-
(47)
(45)
-
(45)
(2)
-
(2)
(2)
-
(2)
-
-
-
-
-
-
Benefits paid
5
-
5
4
-
4
(6)
-
(6)
-
-
-
-
-
-
(5)
-
(5)
(50)
-
(50)
(47)
-
(47)
TOTAL NET OBLIGATION
(2)
27
25
-
28
28
Actuarial gains or losses and past service cost
not recognised at 31 December
11
-
11
8
-
8
9
27
36
8
28
36
Projected benefit obligation at 1 January
Benefits paid
Fair value of redemption rights at 1 January
Actuarial gains or losses for the year
Fair value of redemption rights at 31 December
5 - Human and
7 - Parent company
6 - Risk management
IV. Breakdown of defined benefit plan expense
2008
IFC
2007
Other
commitments
Total
IFC
Other
commitments
Total
Service cost
2
1
3
2
1
4
Interest cost
2
1
3
2
1
3
-
-
-
-
-
-
(2)
-
(2)
(2)
-
(2)
(amortisation for the period)
-
1
1
-
-
-
Exceptional events
-
-
-
(5)
-
(5)
TOTAL DEFINED BENEFIT PLAN EXPENSE
2
4
6
(2)
2
-
V. Key actuarial assumptions
2008
IFC
Discount rate (percentage)
Expected return on plan assets (percentage)
Expected return on redemption rights (percentage)
2007
Other
commitments
IFC
Other
commitments
4.00%
4.00%
4.59%
4.59%
-
-
-
-
4.00%
-
4.00%
-
3.13 - Subordinated debt
I. Accounting data
Item
31/12/2008
31/12/2007
Subordinated loans
586
613
Subordinated notes
72
72
280
280
18
18
955
982
Perpetual super-subordinated notes
Accrued interest
Total subordinated debt
December 2008
II. Details of subordinated loans
a) Financial characteristics
Issue
date
Maturity
date
Subordinated loan issued in francs
29/04/92
29/04/12
PIBOR (3 mths) - 0.1%
Annual
136
Subordinated loan issued by CNCE
4/02/04
19/07/14
5.20%
In full at maturity
170
20/12/04
17/12/16
4.20%
In full at maturity
130
19/12/06
04/07/15
Euribor (3 mths) + 0.42%
Description
Interest
rate
Redemption
terms
Quarterly
Balance at
31/12/08
150
b) Characteristics of the loan issued in francs
c) Characteristics of loans issued by CNCE
Conditions of early repayment
Conditions of early repayment
Crédit Foncier may repay early some or all of the loan without any penalty. Any loan repaid early may be redrawn by
Crédit Foncier at any time.
Any early repayment is subject to the prior agreement of the
French Banking Commission.
Subordination conditions
In the event of the company’s voluntary or court-ordered liquidation or winding up, repayment of the principal amount
of the loan plus any accrued interest shall be subordinated
to the payment or reimbursement of all Crédit Foncier’s
other creditors with the exception of subordinated debt
holders and holders of Crédit Foncier securities or participating loans. This debt may not be converted into capital or
any other type of liability.
Subordination conditions
In the event of liquidation of the borrower, the loan shall be
repaid after all other preferential or unsecured creditors
have been paid, but before reimbursement of equity loans
granted to the borrower and any equity loans issued by the
borrower.
III. Perpetual super-subordinated securities
a) Financial characteristics
Description
Bonds with a value of €280 million
Issue
date
Maturity
date
Interest
rate
Redemption
terms
Balance at
31/12/08
04/02/04
-
5.480%
-
280
b) Conditions of early redemption
c) Subordination conditions
The bonds may be redeemed in full on 30 July 2014 at the
option of the issuer. The issuer may also decide to redeem
the bonds prior to this date in the event of changes in tax
regulations or statutory provisions. In the latter case, early
redemption would be subject to the prior agreement of the
French banking commission.
In the event of liquidation of the borrower, the debt shall be
repaid after all other preferential or unsecured creditors and
ordinary holders of subordinated debt have been paid, and
after reimbursement of any participating loans granted to
the borrower or participating securities.
5 - Human and
7 - Parent company
6 - Risk management
IV. Breakdown of main subordinated notes
Financial characteristics
Issue
date
Maturity
date
Interest
rate
Repayment
terms
Subordinated bonds issued by IXIS CIB
28/12/01
6/01/10
6.600%
In full at maturity
42
Non-Group subordinated bonds
27/06/02
27/06/12
Euribor 3 Mths In full at maturity
5
28/06/02
28/06/12
6.250%
In full at maturity
11
3/07/02
28/06/12
6.250%
In full at maturity
4
3/07/02
28/06/12
6.250%
In full at maturity
1
6/03/03
6/03/23
CMS 20
In full at maturity
10
Description
Balance at
31/12/08
3.14 - Share capital
3.14.1 - Changes in equity (excluding reserve for general banking risks – FRBG)
(2)
Capital
Add.
paid-in
Capital
AT 31 DECEMBER 2006
527
277
53
229
-
275
1,361
Movement during year
111
17
11
(31)
10
(43)
75
AT 31 DECEMBER 2007
638
294
64
198
10
232
1,436
Capital increase
-
-
-
-
-
-
-
Appropriation to reserves
-
-
-
-
-
-
-
44
106
-
-
32
(232)
(50)
Change in method
-
-
-
-
-
-
-
Other changes
-
-
-
(34)
-
-
(34)
Net income at 31 December 2008
-
-
-
-
-
79
79
Interim dividend
-
-
-
-
-
-
-
682
400
64
164
42
79
1,431
(1)
Dividends paid
AT 31 DECEMBER 2008
Reserves
Regulated
reserves
Retained Income/
earnings (loss)
Total equity
excluding
F.R.B.G
(1) The share capital comprises 104,936,600 ordinary shares with a par value of €6.50, which confer identical rights on all holders.
During the first half of the year, 6,712,150 new shares were issued with a par value of €6.50.
To date, no voluntary revaluation has been made by Crédit Foncier.
(2) Including, as of 31 December 2008, €13,650k of accelerated depreciation, €3,955k of provisions for investments and €127,401k relating to the cancellation
of gains on loans sold to Compagnie de Financement Foncier.
December 2008
3.14.2 - Proposed distribution of earnings
(in millions of euros) 31/12/2008
SOURCE OF FUNDS
Retained earnings
42
Income for the year
79
Amount released from reserves
Amount released from additional paid-in capital
103
USE OF FUNDS
Allocations to reserves
- Legal reserve
4
- Special long-term capital gains reserve
-
- Other reserves
-
- Ordinary reserve
-
Dividends
220
Other distributions
-
Retained earnings
-
TOTAL
224
224
5 - Human and
6 - Risk management
7 - Parent company
Note 4 - Notes to off-balance sheet items
4.1 - Financing commitments given
31/12/2008
Non-Group commitments
8,341
8,019
-
-
Customers
8,341
8,019
Group commitments
1,310
1,151
TOTAL
9,651
9,170
Credit institutions
31/12/2007
4.2 - Guarantee commitments given
31/12/2008
31/12/2007
Non-Group guarantees
749
2,379
Credit institutions
141
1,399
604
971
4
9
4,258
17,785
5,008
20,164
Customers
Group guarantees
(1)
(2)
TOTAL
(1) Non-performing items relate to irrecoverable commitments with specialised subsidiaries.
(2) Crédit Foncier has provided a guarantee of €3,529 million to Compagnie de Financement Foncier through the purchase of credit risk protection from an AAArated European public institution.
December 2008
4.2.1 - Assets pledged as guarantees
In view of the current liquidity squeeze, credit institutions in France can now utilise a number of refinancing arrangements based
on financial asset guarantee mechanisms.
At 31 December 2008, loans pledged by Crédit Foncier in the context of these measures included (in millions of euros):
- Receivables assigned to Banque de France (“TRICP” process)
5,224
- Real estate loans pledged to GCE Covered Bonds
104
- Receivables provided as collateral for BEI financing
969
TOTAL
6,297
4.3 - Commitments on securities
Securities for delivery
Group commitments
Other commitments
TOTAL
(1)
(2)
(1)
31/12/2008
31/12/2007
1,243
1,606
8
1
1,235
1,604
1,243
1,606
(1) Additional price consideration for Arthur Communication shares (€1 million) and Banco Primus (€7 million).
(2) Corresponds to the commitment to resell shares in the securitisation fund currently recorded in the balance sheet as held-to-maturity securities.
5 - Human and
6 - Risk management
7 - Parent company
4.4 - Commitments received
31/12/2008
2,198
2,638
Non-Group commitments
2,198
1,621
Credit institutions
2,198
1,621
Customers
-
-
Group commitments
-
1,017
Credit institutions
-
1,000
Customers
-
17
28,656
25,108
Non-Group guarantees
26,381
22,987
6,176
10,643
20,205
12,345
Group guarantees
2,275
2,121
Credit institutions
1,750
2,121
525
-
Commitments on securities
28
22
Securities receivable
28
22
30,882
27,768
Credit institutions
Customers
(1)
(2)
Customers
TOTAL COMMITMENTS RECEIVED
31/12/2007
(1) Guarantee commitments received from credit institutions include transactions involving the transfer of credit risk with a European AAA-rated public institution
for €3,431 million. They also include a guarantee received from CNCE for FLA loans obtained from IXIS CIB for €795 million on 31 December 2008.
(2) Crédit Foncier recognised guarantees it received from SGFGAS on eligible FGAS loans in an amount of €2,172 million at 31 December 2008 compared to
€1,208 million at 31 December 2007.
Crédit Foncier records mortgage guarantees related to assets financed. These guarantees amounted to €14,806 million at
31 December 2008 compared to €8,527 million at 31 December 2007.
December 2008
4.5 - Foreign currency transactions
Crédit Foncier does not carry out any forward currency transactions on organised markets.
31/12/08
Forward transactions
Currencies
receivable
31/12/07
Currencies
for delivery
Currencies
receivable
Currencies
for delivery
1,962
1,612
1,769
1,760
-
-
-
-
1,962
1,612
1,769
1,760
- Micro-hedging transactions
1,807
1,459
1,687
1,680
- Macro-hedging transactions
-
-
-
-
- Micro-hedging transactions
155
153
82
80
-
-
-
-
-
-
-
-
Other forward transactions
-
-
-
-
Financial swaps
-
-
-
-
Spot transactions
9
9
-
-
1,971
1,621
1,769
1,760
Over-the-counter markets
Hedging transactions
Financial swaps
Currency swaps
Options
Total foreign currency transactions
TOTAL
Fair value of forward transactions
3,592
3,529
352
2
5 - Human and
6 - Risk management
7 - Parent company
4.6 - Forward financial instruments
Crédit Foncier does not carry out any forward financing transactions on organised markets.
There are no doubtful commitments.
31/12/08
Euros
(1)
Forex
31/12/07
(2)
Euros
(1)
Forex
(2)
Over-the-counter markets
Options
7,015
-
12,304
-
Purchases
47
-
125
-
Sales
37
-
970
-
6,627
-
10,859
-
37
-
66
-
Micro-hedging transactions
Macro-hedging transactions
Purchases
Sales
Other options
Purchases
114
-
134
-
Sales
153
-
150
-
Firm forward transactions
92,923
4
107,301
6
Micro-hedging transactions
28,646
4
22,785
6
Interest rate instruments
28,646
4
22,785
6
-
-
-
-
-
-
-
-
Currency instruments
Other instruments
Macro-hedging transactions
62,280
62,280
-
72,491
-
-
-
-
-
Other instruments
-
-
-
-
Other transactions
1,997
Other instruments
(3)
Firm forward transactions and options
TOTAL
Fair value of forward financial instruments
Options
Firm forward transactions
72,491
12,025
52
-
23
-
-
-
-
-
1,945
-
12,003
-
4
119,605
6
99,938
99,943
119,611
(913)
(61)
163
70
(1,076)
(131)
(1) Value in euros of IN currencies
(2) Value in euros of OUT currencies
(3) At 31 December 2007, corresponding to a credit risk transfer transaction with a top-ranking European bank. At 31 December 2008, the amount of €1,945
million represents the credit derivative for protection granted on outstanding securitised debt carried by the subsidiary Compagnie de Financement Foncier.
No portfolio transfers were carried out in 2008.
December 2008
4.7 - Counterparty risk on forward financial instruments
Counterparty risk is measured as the probable loss that Crédit
Foncier would incur if a counterparty could not meet its commitments. Crédit Foncier’s exposure to counterparty risk on
interest rate or currency forward financial instruments and
options can be determined by calculating an equivalent credit risk within the meaning of instruction 96-06 published by
the French banking commission. This requires aggregating:
- the potential credit risk resulting from add-ons as defined
by the above-mentioned instruction, calculated on the
basis of the nominal value of the contracts according to
their nature and remaining term.
Counterparty risk is mitigated by Crédit Foncier through the
signature of collateral agreements involving pledges of cash
or securities.
- the positive replacement cost of these instruments calculated at market value, net of any offsetting agreements which
meet the conditions of Article 4 of CRBF regulation 91-05;
OECD
OECD financial
governments,
institutions
Other
central banks
31/12/2008
and similar counterparties
and similar
organisations
organisations
Equivalent unweighted credit risk
before offsetting or collateralisation agreements
-
1,116
-
1,116
Impact of offsetting via liquidation agreements
-
-
-
0
Impact of collateralisation
-
497
-
497
(1)
-
619
-
619
(1)
-
124
-
124
-
317
-
317
Equivalent unweighted credit risk
after offsetting or collateralisation agreements
Equivalent weighted credit risk
after offsetting or collateralisation agreements
(1) Of which net positive replacement cost.
Only transactions referred to in French banking commission instruction 96-06 have been included in this table, namely transactions carried out on over-the-counter markets and organised exchanges.
5 - Human and
7 - Parent company
6 - Risk management
Note 5 - Notes to the income statement
5.1 - Interest and similar income
INCOME
EXPENSES
2008
2007
2008
450
342
(764)
(345)
1,631
1,315
(88)
(192)
- On bonds and other fixed-income securities
426
176
(1,357)
(1,024)
- On subordinated notes and debt
/////
/////
(51)
(54)
- Other
33
15
(13)
-
2,540
1,848
(2,273)
(1,615)
- On transactions with credit institutions
- On transactions with customers
TOTAL
2007
5.2 - Income from variable-income securities
2008
- Equity interests
2007
8
5
- Investments in associates
36
185
TOTAL
44
190
5.3 - Net commission income
2008
EXPENSES
NET
7
(25)
(18)
4
(8)
(4)
98
(2)
96
88
(1)
87
9
-
9
10
(1)
10
- On sales of insurance policies
86
(1)
85
65
(1)
63
- Other
17
(2)
15
20
(1)
19
TOTAL
217
(30)
187
187
(12)
175
- On transactions with credit institutions
- On transactions with customers
- On securities transactions
INCOME
INCOME
2007
EXPENSES
NET
December 2008
5.4 - Net gains/(losses) on trading portfolio transactions
2008
Currency and arbitrage transactions
2007
-
(1)
Forward financial instrument transactions
169
(2)
TOTAL
169
(2)
5.5 - Net gains/(losses) on available-for-sale portfolio transactions
2008
- Capital gains or losses on disposals
- Net change in impairment
(1)
NET
(1) Of which net change in impairment of securitisation fund units.
2007
3
1
(89)
4
(86)
5
-
5
5.6 - Other operating banking income and expense
INCOME
2008
EXPENSE
NET
INCOME
2007
EXPENSE
NET
Total income and expense on investment property
57
(1)
56
5
(2)
3
Net gains/(losses) on the disposal of investment property
55
-
55
1
-
1
Movements in provisions for investment property
-
-
-
-
(1)
(1)
Total income and expense on investment property
2
(1)
1
5
(1)
4
138
(115)
23
131
(49)
82
Rebilled expenses, income paid over
69
-
69
69
-
69
Ancillary income
17
-
17
19
-
19
-
(29)
(29)
-
(28)
(28)
Other miscellaneous banking income and expense
37
(68)
(31)
32
(9)
22
Net change in provisions
relating to other operating income and expense
15
(18)
(3)
11
(12)
(1)
195
(116)
79
136
(51)
85
14
-
14
18
-
18
Total other banking income and expense
Share in income of joint ventures
(1)
Subsidy paid to Financière Desvieux
TOTAL
(1) Of which reinvoicing of services to leasing companies
and real estate investment companies (SCPIs).
5 - Human and
6 - Risk management
7 - Parent company
5.7 - Operating expenses
2008
2007
Personnel costs
- Wages and salaries
(191)
(205)
- Pension expense
(36)
(40)
- Other employee benefit expenses
(67)
(71)
- Payroll taxes
(30)
(32)
- Employee incentive plans
(5)
(12)
- Employee profit sharing
(3)
(5)
- Movements in provisions for operating claims and litigation
-
-
- Movements in provisions for contingencies and expenses related to personnel
8
(23)
28
23
(14)
(22)
- Reversal of provision for miscellaneous risks
-
3
- Net tax allowances
-
-
(270)
(264)
(42)
(8)
36
30
(587)
(625)
- Expenses reinvoiced in euros
Taxes other than on income
- Taxes and other duties
External services and other administrative expenses
- External services
- Net movements in other provisions
- Expenses reinvoiced in euros
TOTAL
5.7.1 - Management remuneration
Key management personnel are company officers and members of Crédit Foncier's board of directors. Remuneration paid during financial year 2008 amounted to €1 million, comprising mainly short-term benefits as detailed on pages 95 et seq. of the
management report.
NB: As part of its routine banking transactions, Crédit Foncier grants loans to CNCE, its corporate head. At 31 December 2008,
these loans amounted to €321 million.
December 2008
5.8 - Cost of risk
2008
Additions to impairment and provisions
(273)
(106)
(143)
(47)
(6)
(1)
(3)
(11)
(121)
(47)
156
131
128
100
2
15
16
8
Performing items
10
7
(117)
25
(14)
(43)
(14)
(43)
-
-
-
-
(10)
(1)
(10)
(1)
-
-
-
-
47
10
Recovery of customer loans written off
10
10
Recovery of other financial assets
37
-
-
-
(94)
(9)
2007
Interbank transactions
Customer transactions
Performing items
Reversal of impairment and provisions
Interbank transactions
Customer transactions
Net change in impairment and provisions
Losses on irrecoverable loans and receivables covered by impairment
Losses on irrecoverable interbank loans
Losses on irrecoverable customer loans
Losses on irrecoverable loans and receivables not covered by impairment
Losses on irrecoverable interbank loans
Losses on irrecoverable customer loans
Recovery of loans and receivables written off
Recovery of interbank loans written off
Recovery of off-balance sheet commitments
TOTAL
5 - Human and
6 - Risk management
7 - Parent company
5.9 - Gains and losses on non-current assets
2008
Property, plant and equipment and intangible assets
2007
(1)
2
1
4
- Capital losses on the disposal of operating assets
(2)
(3)
Financial assets
35
129
- Reversals of provisions for investments in affiliates
3
3
- Reversal of provisions for equity interests
2
1
(80)
(6)
(1)
(1)
112
132
- Capital losses on disposals of financial assets
(2)
(1)
NET
34
131
- Capital gains on the disposal of operating assets
- Addition to provisions for investments in affiliates
- Addition to provisions for equity interests
- Capital gains on disposals of financial assets
(1)
(1) In 2008, this item includes a €2 million merger bonus following the transfer of all of the assets and liabilities of Socrelog, a €97 million capital gain on the
contribution of the banking business to Banque Palatine, and an €8 million capital gain on the contribution of Picardie Bail shares to Cicobail (2007: a €72
million merger bonus following the transfer of all of the assets and liabilities of ACFF, a €12 million merger bonus following the transfer of all of the assets and
liabilities of CFAC, and a €45 million capital gain on the disposal of Foncier Vignobles shares).
5.10 - Non-recurring items
2008
2007
Non-recurring income
-
2
- Reversal of provision for restructuring costs
-
2
Non-recurring expenses
-
-
- Additions to provision for restructuring costs
-
-
- Restructuring costs covered by provisions
-
-
NET
-
2
December 2008
5.11 - Income tax
2008
2007
- Income tax income and expense - standard rate
(27)
(2)
- Income tax income and expense - reduced rate
-
(7)
- Tax consolidation
42
-
- Prepaid taxes and tax credits on interest-free loans
32
22
4
31
- Movements in provisions for tax-efficient EIGs
11
(4)
TOTAL
62
40
- Movements in provisions for tax claims and litigation
5.12 - Movements in the reserve for general banking risks (FRBG) and regulated provisions
2008
2007
39
40
- Additions to regulated provisions
(5)
(9)
TOTAL
34
31
(1) Including capital gains on the sale of loans and receivables to Compagnie de Financement Foncier
carried out before 2006, recognised over the term of the loan.
29
33
- Reversals of regulated provisions
(1)
5 - Human and
6 - Risk management
7 - Parent company
Note 6 - Miscellaneous information
6.1 - Transactions with affiliates and other equity investments at 31 December 2008
(1)
Credit
institutions
Customers
Total
- Demand
661
-
661
6,868
5,007
11,875
837
62
899
11,261
237
11,498
- Financing
1,310
-
1,310
- Guarantees
3,554
705
4,258
7
1
8
-
1,310
1,310
- Guarantees
1,750
-
1,750
Bonds and other fixed-income securities
2,120
1,097
3,218
-
2,880
2,880
11,501
8,137
19,637
787
138
925
- Term
Deposits
- Demand
- Term
Commitments given
- Securities for delivery
- Financing
Debt securities
Subordinated debt
(1) The concept of “Group” refers to Groupe Caisse d'Epargne to which Crédit Foncier belongs.
December 2008
6.2 - Statement of foreign currency positions
At 31 December 2008 - Recommendation 89.01
Description
Canadien $
US $
Sterling
Swiss
francs
Yen
Other OUT
currencies
Total
BALANCE SHEET
- Financial assets
-
183
1,185
182
-
-
1,549
- Financial liabilities
-
142
8
19
-
-
169
Balance sheet spread
-
40
1,177
162
-
-
1,380
- Commitments received
-
178
1,235
49
-
-
1,462
- Commitments given
-
218
2,412
212
-
-
2,842
Balance sheet spread
-
(40)
(1,177)
(162)
-
-
(1,379)
Overall spread
-
-
1
-
-
-
1
OFF-BALANCE-SHEET
Financial assets comprise loans and receivables due from credit institutions and customers, bonds, other fixed-income securities
and subordinated term loans. Financial liabilities comprise amounts owed to credit institutions and customers.
5 - Human and
7 - Parent company
6 - Risk management
6.3 - Statement of liquidity positions
At 31 December 2008 - COB recommendation 89.01
Remaining term
6-12 mths 1-5 years
> 5 years
Total
(2)
< 3 mths
3-6 mths
3,434
540
1,141
6,343
36,598
48,055
1,004
117
265
531
2,958
4,875
1,493
419
835
5,692
24,026
32,466
922
-
36
104
8,264
9,325
15
4
3
16
1,350
1,389
18,503
8,410
749
15,755
6,442
49,860
8,878
4,435
186
2,998
3,885
20,382
13
4
1
26
283
326
9,612
3,971
562
12,534
1,814
28,494
-
-
-
-
-
-
- Interbank market securities
-
2,290
-
9,044
-
11,334
9,612
1,651
562
3,385
746
15,957
- Bonds
-
30
-
105
1,068
1,203
- Other debt securities
-
-
-
-
-
-
Subordinated term loans
-
-
-
198
460
658
Balance sheet spread (I)
(15,069)
(7,870)
392
(9,413)
30,156
(1,805)
255
-
322
1,621
-
2,198
Engagements donnés
299
-
8,171
1,094
87
9,651
Off-balance sheet spread (II)
(44)
-
(7,848)
527
(87)
(7,453)
(15,113)
(7,870)
(7,457)
(8,886)
30,069
(9,258)
335
40
46
1,309
5,285
7,015
BALANCE SHEET
Financial assets
(1)
Bonds and other fixed-income securities
Subordinated term loans
Financial liabilities
Due to customers
Debt securities
- Negotiable debt instruments
OFF-BALANCE SHEET
Overall spread (I) + (II)
Outstanding options
(1) As all of these financial assets concern credit institutions or customers, none are eligible for refinancing with the Banque de France or foreign central banks.
(2) The difference between this column and amounts appearing on the balance sheet is due to unpaid loans, non-performing items and accrued interest.
December 2008
6.4 - Five-year financial summary
(in euros)
Items
2004
2005
2006
2007
2008
401,101,909
441,493,175
527,344,032
638,458,925
682,087,900
61,707,986
67,922,027
81,129,851
98,224,450
104,936,600
None
None
None
None
None
a) Net revenue
918,473,000
1,907,275,250
1,969,574,529
2,365,964,612
3,079,890,112
b) Income before tax, employee profit-sharing
and incentive plans for the year depreciation
and amortisation expense and provisions
(69,493,727)
232,649,613
29,034,094
191,516,235
153,618,110
c) Income tax
(27,392,915)
19,101,773
8,341,942
(39,637,237)
(61,641,201)
d) Employee profit-sharing and incentive plans
15,220,173
15,609,425
15,900,000
16,891,394
8,239,882
e) Income after tax, employee profit-sharing
and incentive plans, depreciation
34,559,464
186,884,011
274,941,312
231,490,643
78,900,173
150,567,486
230,255,672
349,669,658
199,395,634
220,366,860
(0.93)
2.91
0.06
2.18
1.97
b) Income after tax, employee profit-sharing
and incentive plans, depreciation
0.56
2.75
3.39
2.36
0.75
c) Dividend per share
2.44
3.39
4.31
2.03
2.10
2,365
3,711
3,875
3,779
3,514
666
1,483
1,867
1,913
1,813
1,699
2,228
2,008
1,865
1,701
113,412,815
188,794,540
198,210,672
197,397,476
187,287,438
69,959,461
106,739,067
111,122,494
110,480,070
103,603,056
I) SHARE CAPITAL AT YEAR END
a) Share capital
b) Number of shares issued
c) Number of convertible bonds
II) RESULTS FOR THE YEAR
f) Dividends paid
III) PER SHARE DATA
a) Income after tax, employee profit-sharing
and incentive plans, but before depreciation
IV) EMPLOYEE DATA
a) Number of employees (FTE)
- Managerial staff (cadres)
- Non-managerial staff
b) Total payroll
c) Employee benefits paid
Addresse
Other
equity
€k
Share
Capital
€k
b) Foreign affiliates (all)
- Other entities
- CREDIT LOGEMENT
a) French affiliates
50, bld de Sébastopol 75002 Paris
2 - Affiliates not included in section A
b) Foreign subsidiaries (all)
a) French subsidiaries (all)
-
5,306
1,743
-
-
-
40,082
-
4,732
-
87,649
105,357
97
87,649
130,633
97
-
-
-
-
-
-
6.99%
-
-
-
-
-
-
82
-
-
-
6,825
1,047
510
-
-
7,304
1,077
44,592
44,592
49.00%
(2)
91,005
19, rue des Capucines 75001 Paris
GCE FONCIER COINVEST
B) Other subsidiaries and affiliates
1 - Subsidiaries not included in section A
138,688
16,899
16,899
40.00%
32,518
20,400
16, rue Volney 75002 Paris
FONCIER ASSURANCE
4,471
-
2 - Equity investments (10% to 50% of capital held by Crédit Foncier)
- 63
12,117
84,366
84,366
99.99%
52,750
19,462
4, quai de bercy 94224 Charenton
VENDÔME INVESTISSEMENTS
9,310
533,879
19,310 4,983,207
19,310
99.98%
28,408
- 65
16,424
8,380
8,380
99.99%
16,807
1,686
SIPARI
19,311
1,583
905
15,855
15,855
99.99%
7,045
15,000
FONCIER PARTICIPATIONS
16, rue Volney 75002 Paris
6,842
18,141
18,144
99.99%
1
VMG
9,583
2,211
1,885
534,993
23,603
71,128
79,649
99.99%
66,769
182
-
18,140
8,089
18,674
-
FINANCIERE DESVIEUX
276,380
COFIMAB
Other companies
44,853
69,182
3,553,816 4,439,856
2,414,118
1,189,655 1,189,655
99.99%
468,009
924,000
Quinta da Fonte. Edificio D. João I - 1a
2770-192 Paço d'Arcos Portugal
44,853
-
8,528
23,851
-
92,566
92,566
67.01%
61,909
5,314
1, rue Dôme 67000 Strasbourg
CFCAL BANQUE
COMPAGNIE DE
FINANCEMENT FONCIER
BANCO PRIMUS
(ex SECUNDIS FINANCE)
85.00%
4,940
13,757
135,440
-
96,688
154,634
204,234
67.79%
155,082
46,837
LOCINDUS
(6,474)
1,160
22,261
399,996
-
1,159,211
156,708
178,408
65.84%
101,738
74,306
CICOBAIL
30,000
16,084
1,056
33,424
-
303,429
49,612
49,612
99.99%
3,078
1,430
30,041
-
280,604
47,140
47,140
99.99%
25,730
Dividends
received
by the parent
company
€k
39,958
Income
for the past
financial
year
€k
26,209
Revenue
Guarantees &
endorsements for the past
granted by the
financial
parent company
year
€k
€k
5, rue Masseran 75008 Paris
€k
€k
Loans &
advances
granted by
the parent
company
€k
Net
Gross
Carrying amount
SOCFIM
Interest
held
%
CFCR
Credit institutions
A) Subsidiaries and affiliates whose carrying amount exceeds 1% of the capital (€6,820,879)
1 - Subsidiaries (at least 50% of capital held by CFF)
Company
6.5 - Information concerning subsidiaries and affiliates (1/2)
December 2008
6.5 - Information concerning subsidiaries and affiliates (2/2)
C) IInformation on partnerships with unlimited responsibility (not included in section A)
pursuant to appendix V of Banking Regulations Committee regulation 91-01.
Commercial partnerships
SNC Centre Divert Assoc.
Immeubles administratifs RN 34 - 77700 Chessy
SNC Cheyenne Hôtel Assoc.
SNC Hôtel Nexyork Assoc.
SNC Hôtel Santa Fé Assoc.
SNC Newport Bayclub Assoc.
SNC Sequoia Lodge Assoc.
SNC Sofipar Logement
19 rue des Capucines - 75001 Paris
SNC Sofoneg
Limited partnership with shares
SCA ECUFONCIER
Non-commercial partnership
BALCONS DES ARENES (Sci les)
369-371 promenade des Anglais - 06200 Nice
CAD (Sci du)
6 place Abel Gance - 92100 Boulogne-Billancourt
COLOMIA 31 (SCI)
COMELIA (SCI)
FRANCILIA (SCI)
GPT DES PROPRIETES DE LA CDC ET CNP
5 rue Bellini - 92800 Puteaux
RESIDENCE DU VAL BOSQUET (SCI)
MANTELIA (SCI) (ex les collegiens)
NOYELLES (SCI de) (440 154 953)
11 rue du fort de Noyelles - 59113 Seclin
VALENCE (SCI)
31 rue de Mogador - 75009 Paris
5 - Human and
7 - Parent company
6 - Risk management
6.6 - Summary five-year balance sheet
31/12/08
31/12/07
31/12/06
31/12/05
31/12/04 31/12/04
(proforma) (published)
ASSETS
Cash and amounts due from central banks and post office banks
1
1
2
2
22
Government bonds and similar securities
-
-
-
-
-
-
8,002
8,243
5,810
5,205
4,316
4,134
33,133
30,789
25,341
23,556
21,603
8,310
Securities portfolio
11,653
9,534
3,475
3,197
3,530
4,842
Lease finance contracts with purchase options
3
9
11
16
18
-
Operating leases
-
-
-
2
1
152
Non-current assets
-
177
220
227
230
209
Other assets
3,186
755
617
946
667
272
Accrual accounts and other miscellaneous assets
2,894
1,957
1,346
1,090
1,132
732
59,049
51,509
36,830
34,243
31,499
18,442
-
-
-
-
-
21,900
15,327
7,456
7,465
5,946
5,966
680
3,051
2,865
2,696
2,203
160
28,770
26,371
20,792
19,333
18,411
8,391
Total assets
EQUITY AND LIABILITIES
Due to central banks and post office banks
Due to customers
Debt securities
Other liabilities
948
308
353
398
461
157
3,468
3,237
2,181
1,477
1,537
1,261
Provisions
460
360
316
310
289
216
Subordinated debt
955
982
1,069
964
1,068
824
Reserve for general banking risks (FRBG)
437
437
437
437
437
437
Regulated provisions and investment grants
164
198
229
260
238
215
1,188
1,006
857
718
781
781
Accrual accounts and other miscellaneous liabilities
Share capital, reserves and retained earnings
Net income for the year
Total equity and liabilities
79
231
275
187
129
35
59,049
51,509
36,830
34,243
31,499
18,442
OFF-BALANCE SHEET COMMITMENTS
Commitments given
- Financing
9,651
9,170
6,693
7,176
5,812
4,267
- Guarantees
5,008
20,164
3,595
3,777
3,862
3,624
- Securities
1,243
1,606
1
-
-
-
Total commitments given
15,902
30,940
10,289
10,953
9,674
7,891
30,882
27,768
9,661
8,398
3,599
2,760
3,592
3,529
179
319
796
796
-
-
-
-
-
-
99,943
119,611
75,154
65,221
64,688
38,178
103,535
123,140
75,333
65,540
65,484
38,974
Reciprocal commitments
- Purchases and sales of foreign currencies
- Currency lending and borrowing transactions
- Unwound forward financial instruments
Total reciprocal commitments
December 2008
6.7 - Fees paid to Statutory Auditors
PricewaterhouseCoopers
2008
Amount
%
KPMG
2007
Amount
%
2008
Amount
%
2007
Amount
%
AUDIT
Statutory audit of the financial statements,
review of individual and consolidated
Other procedures and audit-related services
TOTAL
827
98.22%
831
95.19%
821
97.51%
837
97.55%
15
1.78%
42
4.81%
21
2.49%
21
2.45%
842
100%
873
100%
842
100%
858
100%
Amounts indicated represent an expense for the current financial year and take into account non-deductible VAT.
5 - Human and
6 - Risk management
7 - Parent company
Statutory auditors’ report on the financial statements
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 the opinion on the financial statements. This information includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account
captions or on information taken outside of the financial statements.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In compliance with the assignment entrusted to us by your
Annual General Meeting, we hereby report to you, for the
year ended 31 December 2008, on:
In our opinion, the financial statements give a true and fair
view of the Company’s financial position and its assets and
liabilities as of 31 December 2008, and of the results of its
operations for the year then ended in accordance with the
accounting rules and principles applicable in France.
• the audit of the accompanying financial statements of
Crédit Foncier de France;
• the justification of our assessments;
• the specific verifications and information required by law.
The financial statements have been approved by the Board
of Directors. Our responsibility is to express an opinion on
these financial statements based on our audit.
I - Opinion on the financial statements
We conducted our audit in accordance with professional
standards applicable in France. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit involves performing procedures, on a test basis or by selection, to obtain audit evidence about the amounts and disclosures in the financial
statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as
the overall presentation of the financial statements. We
believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
II - Justification of our assessments
The economic and financial crisis, which has led to an
exceptional rise in volatility, a sharp contraction in liquidity
on certain markets and difficulties in assessing the economic and financial outlook, has had wide-ranging ramifications
for credit institutions, notably in terms of business activity,
results, risks and refinancing, as described in Note 1.3.11
to the financial statements. This situation created specific
conditions this year for the preparation of the financial statements, especially as regards accounting estimates. In this
context, and in accordance with the requirements of Article
L.823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we
bring to your attention the following matters:
Accounting estimates
• As indicated in note 1.3.5 (adjustable-rate loans) and
notes 1.3.12 and 2.1.2 to the financial statements, the
Company records impairment losses and provisions to
cover the credit risks inherent in its business. We examined the control procedures applicable to monitoring credit risks, assessing the risks of non-recovery, and determining the related impairment losses and general or specific
provisions.
December 2008
• The Company holds positions relating to securities and
financial instruments. Notes 2.1.3 and 2.1.12 to the financial statements describe the accounting rules and methods applicable to securities and financial instruments. As
part of our assessment of the accounting rules and principles used by the Company, we reviewed the control procedures applicable to classifying these items in the
accounts and determining the inputs used to measure
these positions, and verified the appropriateness of the
related disclosures in the notes to the financial statements.
• The Company sets aside provisions to cover its pension
obligations. We examined the methods used to measure
these obligations along with the assumptions and inputs
applied. We also reviewed the external actuaries’ report
and verified that notes 2.1.10 and 3.12.1 to the financial
statements provide the appropriate disclosures.
III- Specific verifications and information
We have also performed the specific verifications required
by law.
We have no matters to report on:
• the fair presentation and the conformity with the financial
statements of the information given in the Board of Director’s
management report, and in the documents addressed to the
shareholders with respect to the financial position and the
financial statements;
• the fair presentation of the information provided in the management report in respect of compensation granted to certain company officers and any other commitments made in
their favour in connection with, or subsequent to, their
appointment, termination or change in function.
The assessments were made in the context of our audit of
the financial statements, taken as a whole, and therefore
contributed to the opinion we formed which is expressed in
the first part of this report.
KPMG Audit
Division of KPMG S.A.
Rémy Tabuteau
Anik Chaumartin
5 - Human and
6 - Risk management
7 - Parent company
Annual General Meeting of 10 April 2009
speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing
standards applicable in France.
In our capacity as Statutory Auditors of Crédit Foncier de
France S.A. and pursuant to Article L.232-19 of the French
Commercial Code (Code de commerce), we hereby report to
you on the payment of dividends in shares to shareholders,
as the Annual General Meeting may recommend.
The price for shares to be issued in respect of dividends has
been set by the Board of Directors. Our responsibility is to
report on the application of the rules governing the calculation of the issue price based on our work.
The calculation was based on the following: the issue price
for new shares will be equal to shareholders’ equity (as
shown in the financial statements at 31 December 2008
submitted for your approval in the first resolution) divided by
the number of shares outstanding. This represents an
amount of €11.53 per share.
We have no matters to report on the application of the rules
governing the calculation of the share issue price.
We performed the procedures we considered necessary in
accordance with professional standards applicable in
France. Our work consisted in verifying that the share issue
price has been calculated in accordance with the rules
defined by law.
KPMG Audit
Rémy Tabuteau
Partner
Anik Chaumartin
Partner
Partner
December 2008
Statutory Auditors’ report on related party agreements
and commitments
To the shareholders,
In our capacity as Statutory Auditors of your company, we
hereby present our report on related party agreements and
commitments.
22 November 2008. The agreement provides for support
during the transfer process and defines the terms and conditions governing cooperation between the two institutions in
developing their future activities.
The agreement had no financial effect in 2008.
I - Related party agreements and commitments
authorized in 2008
1.2 Agreements between your company
and Compagnie de Financement Foncier
In accordance with article L.225-40 of the French
Commercial Code, we have been informed of the related
party agreements and commitments previously authorized
by your Board of Directors.
• Surety on part of the RMBS portfolio
We are not required to ascertain whether any other related
party agreements or commitments exist but to inform you,
on the basis of the information provided to us, of the main
terms and conditions of the agreements and commitments
of which we were informed. It is not our role to determine
whether they are beneficial or appropriate. It is your responsibility, under the terms of article R.225-31 of the
Commercial Code, to assess the merit of these agreements
and commitments with a view to approving them.
We conducted our work in accordance with the professional standards issued by the French national institute of statutory auditors relating to this engagement. Those standards
require that we plan and perform our work so as to verify
that the information provided to us is consistent with the
documents from which it was derived.
1.1 Agreement between your company
and Banque Palatine
• Industrial agreement
Related parties: MM. François Blancard, Nicolas Mérindol
and Michel Gonnet
On 24 April 2008, your Board of Directors authorized the
signature of an industrial agreement with Banque Palatine
to set out a framework for future relations between the two
institutions.
The agreement was entered into on 4 July 2008 in connection with the transfer of your company’s banking business to
Banque Palatine. The transfer became legally effective on
Related parties: M. Thierry Dufour, le Crédit Foncier de
France
On 29 July 2008, your Board of Directors authorized the signature of an agreement for your company to provide surety
to Compagnie de Financement Foncier on part of its RMBS
portfolio for 1,944,804,585 euros as at 31 December 2008.
The agreement was signed on 26 August 2008. It lays down
the terms of the commitment made by your company to offset any decrease in the weighting of RMBSs should there be
a lowering of their credit rating.
As at 31 December 2008, the commissions recorded by
your company and determined on the basis of 0.01% of the
average balance of the hedged portfolio amounted to
€93,723.
• Amendment to warranty agreement
France
On 16 October 2008, your Board of Directors authorized the
signature of an amendment to the immunization agreement
on adjustable rate loans.
At the date of this report, the amendment had not been
signed.
• Debt transfer agreement on Lehman Brothers
France
On 16 October 2008, your Board of Directors authorized the
purchase of the debt held by Compagnie de Financement
Foncier on Lehman Brothers International. This agreement
5 - Human and
6 - Risk management
was signed on 13 November 2008, and became effective on
30 September 2008.
On 30 September 2008, your company purchased a claim
for the balance of €36,742,603 corresponding to the termination payment on futures for €9,185,651.
• Tax agreement
France
On 19 December 2008, your Board of Directors authorized
a tax agreement with Compagnie de Financement Foncier.
This agreement was signed on 19 December 2008, with
retroactive effect from 1 January 2008.
The tax receivable recognized in connection with the agreement amounted to €22,326,939 in 2008.
1.3 1.3 Agreement between your company
and GCE Covered Bonds
• Financial warranty agreement
Related parties: MM. Nicolas Mérindol, Julien Carmona,
Guy Cotret, Jean-Marc Carcèles, la Caisse Nationale des
Caisses d’Epargne
On 27 February 2008, your Board of Directors authorized
the signature of a financial warranty agreement given by
your company to GCE Covered Bonds in relation with the
refinancing of Caisse d'Epargne group through the issuance
of covered bonds.
The agreement, which was signed on 17 April 2008, defines
the assets that are eligible for pledging and specifies how
the guarantees will be managed between GCE Covered
Bonds and the guarantee providers: CNCE, your company
and “caisses régionales”.
As at 31 December 2008, the guaranteed assets provided
by your company amounted to €103,875,225.
1.4 1.4 Agreement between your company
and Caisse Nationale des Caisses d’Epargne
• Sales and purchase agreement for Banque Palatine shares
Related parties: MM. Alain Lemaire, Julien Carmona, Guy
Cotret, Jean-Marc Carcèles, la Caisse Nationale des Caisses
d’Epargne
7 - Parent company
On 19 December 2008, your Board of Directors authorized
the signature of a sales agreement and a purchase agreement on Banque Palatine shares with CNCE. The agreements, which were signed on 19 December 2008, resulted
from the acquisition of Banque Palatine shares by your company in connection with the sale of its banking business.
Your company promises to sell a 8.33% stake in Banque
Palatine to CNCE between 23 November 2011 and 22 June
2012 for a price ranging from €85,500,000 to
€104,500,000, while CNCE promises to acquire a 8.33%
stake in Bank of Palatine between 23 June 2012 and 22
December 2012 for a price ranging from €85,500,000 to
€104,500,000.
II - Related party agreements and commitments
not approved prior to coming into effect
We also present our report on the agreements and commitments subject to the provisions of Article L. 225-42 of the
French Commercial Code.
In accordance with Article L.823-12 of the Commercial
Code, we inform you that the following related party agreements were not approved by your Board of Directors prior to
coming into effect.
It is our responsibility, on the basis of the information given
to us, to inform you of the main terms and conditions of
these agreements, and of the reason the authorization procedure was not followed, without determining whether they
are beneficial or appropriate. It is your responsibility, under
the terms of Article R. 225-31 of the Commercial Code, to
assess the merit of these related party agreements with a
view to approving them.
We conducted our work in accordance with the professional standards issued by the French national institute of statutory auditors relating to this engagement. Those standards
require that we plan and perform our work so as to verify
that the information provided to us is consistent with the
documents from which it was derived.
2.1 Agreement between your company
and Vauban Mobilisations Garanties (VMG)
• Extension of the framework agreements
Related parties: MM. Thierry Dufour et Gérard Barbot
December 2008
The extension of the following framework agreements was
not approved by your Board of Directors prior to their coming into effect:
- Participating loans framework agreement, giving VMG the
right to place the proceeds obtained from its issues with
your Company, in the form of loans. The extension was
signed on 24 July 2008 for a period of 364 days. Related
interest income in 2008 amounted to €241,345,633.
- Framework agreement concerning subordinated shareholders’ current account advances providing for the
financing by your Company of the extraordinary expenses of VMG. The extension was signed on 24 July 2008 for
a period of 364 days. The agreement had no financial
effect in 2008.
2.2 Agreements between your company and
Caisse Nationale des Caisses d’Epargne
Related parties: MM. Alain Lemaire, Julien Carmona, Guy
Cotret, Jean-Marc Carcèles, la Caisse Nationale des Caisses
d’Epargne
The amendments to the following partnership agreements,
which were not approved prior to coming into effect, were
authorized by your Board of Directors on 19 February 2009:
• Amendment to the business development agreement
concerning customers of local authorities and institutions
Under the business development agreement signed by
CNCE and Crédit Foncier, and given the financial and banking situation and general absence since September 2008 of
market values for medium and long-term bonds, the related
parties agreed that the exceptional economic situation during 2008 had affected the initial intent of the agreement.
Consequently, to restore the economic balance between the
related parties, the parties agreed that it was in their respective interests to distribute amounts comprising:
- a primary business development commission for new business
contributed to Caisses d’Epargne (aggregate €9,420,037),
- a commission on any renegotiated loans to Caisses d'Epargne
(aggregate €419,681 euros),
- an arrangement fee payable to Credit Foncier (aggregate
€27,073).
These commissions and fees represent a net expense of
€9,812,645, recorded by your company for 2008.
• Amendment to the partnership agreement “package PLS” “Package PLI”
Under the partnership agreement “package PLS” - "Package
PLI” between CNCE and Crédit Foncier, the parties agreed to
waive the rules governing primary business development
commissions on new business payable to Caisse d’Epargne.,
Given the current financial situation, the exemption will only
apply to 2008 commissions and is for the sole purpose of
restoring the economic balance between the related parties.
The aggregate commissions expensed by Crédit Foncier
under this agreement amounted to €868,419 for 2008 for all
the Caisses d’Epargne concerned.
III - Related party agreements and commitments
approved in previous years, which continued
to apply in 2008
In accordance with the Commercial Code, we have been
informed of the following related party agreements and commitments, which were approved in previous years and continued to apply in 2008.
3.1 Agreement on the recharging of expenses to
your Company by Caisse Nationale des Caisses
d’Epargne (“CNCE”)
This agreement defines the terms under which the CNCE
may reinvoice the control and oversight services it renders
to your Company as a member of the group.
Your Company expensed €2,116,000 under this agreement
in 2008.
3.2 Acquisition of rights to use a software package and related services with Ixis Corporate
& Investment Bank (Ixis CIB)
Your Company has entered into agreements with Ixis CIB
under which Ixis CIB has given your Company the non-transferable, non-exclusive and personal right to utilize the software package AMeRisC. Ixis CIB also provides market and
econometric data for input into AMeRisC, on a daily basis.
5 - Human and
6 - Risk management
This agreement had no financial effect in 2008.
3.3 Agreements between your Company
and Compagnie de Financement Foncier
• Guarantee on adjustable-rate loans agreement
In the context of the exceptional measures proposed to customers holding adjustable-rate loans in order to secure their
monthly repayments, your company has decided to indemnify Compagnie de Financement Foncier for the costs of the
scheme by granting a guarantee in its favor.
In 2008, your company indemnified its subsidiary for an
aggregate €16,800,000.
• Agreement concerning the provision of banking services
This agreement concerns the provision of banking services
relating to the management of the financial flows arising
from the loans held by Compagnie de Financement Foncier.
• Management services agreement
Pursuant to Articles L. 515-13 et seq of the Financial and
Monetary Code, your Company provides the following services to Compagnie de Financement Foncier: management
and recovery of loans and other assets, property bonds and
other resources, whether privileged or not, as well as all
services required in respect of the management of its operations of a financial, administrative or accounting nature,
and the required audit and control functions.
In return for the services provided under these agreements,
your Company invoiced Compagnie de Financement
Foncier €87.8 million in 2008.
Your Company grants cash advances to Compagnie de
Financement Foncier under the agreement for the management and recovery of receivables, representing the share of
the cumulative amount of overdue payments on market sector regulated loans partially financed by it. In the event of
overdue payments on State-subsidized loans, the amount
advanced by your Company to Compagnie de Financement
Foncier corresponds to the overdue amounts or its share of
these when not fully financed.
7 - Parent company
Your Company had made related cash advances to its subsidiary totaling €21.1 million as at the end of 2008.
Your Company retains the penalty interest charged to customers as remuneration for these cash advances. It amounted to €5.3 million in 2008.
The credit risk is borne by the financial institution that holds
the transferred receivable on its balance sheet. The risk on
the part of a loan not transferred to Compagnie de
Financement Foncier is subordinate to the risk on the part
transferred.
• Participation loan
Your Company has granted a subordinated participation
loan of €1,350 million to Compagnie de Financement
Foncier, repayable on 21 October 2040. The annual money
rate of interest +2.50% is payable annually on condition that
the net income of Compagnie de Financement Foncier for
the year amounts to a minimum of €10 million after payment of the interest expense.
Your Company recorded interest income of €87.6 million in
2008 under this agreement.
• Redeemable subordinated bonds (TSR)
Your Company has subscribed to redeemable subordinated
bonds issued by Compagnie de Financement Foncier on 30
December 2003 and 28 December 2007. The nominal
amount of the bonds subscribed was €2,100 million as at
31 December 2008, maturing on 30 December 2043, with
an interest rate of 3-month Euribor +0.50%.
A bond repayment for a nominal amount of €800 million
was made on 20 June 2008.
Your Company recognized interest income of €135 million
on these subscriptions for the year ended 31 December
2008.
• Warranty and indemnification agreement
As part of an agreement to transfer certain assets and liabilities from your Company to Compagnie de Financement
Foncier, your Company:
- has undertaken to offset the effects of any changes in
interest rates on Compagnie de Financement Foncier’s net
income should it not be possible to obtain fixed rate
financing in the market;
December 2008
- has guaranteed a minimum return on the credits transferred;
- has undertaken to indemnify Compagnie de Financement
Foncier in the event of changes in the treatment of all borrowing costs allocated to the subsidized sector.
This agreement did not generate any cash flows in 2008.
• Disbursing agent agreements
Your Company has entered into disbursing agent agreements with Compagnie de Financement Foncier pusuant to
which the former undertakes to record the financial operations on loans in connection with the first and second property bond issues.
The remuneration for this service is included in payments
received for financial services.
• Agreement for the management and recovery of State-subsidized loans
Amendment to the agreement between the State,
Compagnie de Financement Foncier and your Company in
connection with the management and recovery of Statesubsidized loans.
The remuneration for this service is included in payments
received for financial services.
3.3 Agreements between your company and VMG
• Warranty on adjustable-rate loans agreement
In connection with the exceptional measures proposed to
customers with adjustable-rate loans to secure their monthly repayments, your company has decided to indemnify
VMG for the costs incurred under the scheme, by granting
a guarantee in its favor.
• Overall framework agreement
The overall framework agreement enables the various
agreements between your Company and VMG to be associated. These agreements form a single contractual schema
setting out the framework of the relationship and associated
receivables and payables resulting from each agreement.
There were no financial flows under this agreement in 2008.
• Framework agreement on guarantee deposits
This agreement is intended to guarantee VMG the reimbursement by your Company of any indemnities paid by
VMG to investors, banks or counterparties upon the early
termination of transactions.
As at 31 December 2008, the guarantee deposits amounted to €236,571,762. Your Company recorded income of
€6,968,590 in 2008 under this agreement. There were no
early terminations triggering the application of this agreement in 2008.
• Framework agreement on the subscription of negotiable
debt instruments
The framework agreement on the subscription of negotiable
debt instruments enables VMG to subscribe to issues by
your Company.
As at 31 December 2008, VMG had subscribed to issues
amounting to €6,965,842,622, including accrued interest.
The interest expense recorded by your Company was
€362,689,214 in 2008.
• Framework agreement on loans
This agreement enables VMG to lend your Company the
proceeds obtained from its issues.
As at 31 December 2008, no loans had been made by VMG
to your Company.
• Sub-contracting agreement
Under this agreement, VMG sub-contracts to your Company
its accounting, back office, middle office and company secretariat functions.
In 2008, fees received by your Company in this respect
amounted to €254,931 excluding value-added tax.
• Cash management agreement
The cash management agreement enables VMG to invest its
cash resources and the cash resulting from credit account
balances not yet settled.
For this service, your Company receives management fees,
which amounted to €304,375 excluding value-added tax for
the year ended 31 December 2008.
5 - Human and
6 - Risk management
7 - Parent company
3.4 Agreements between your company
and Locindus
3.6 Net warranty obligation in favour
of Société des Immeubles de France
• Management agreement
The warranties granted in connection with the take-over of
Société des Immeubles de France by Immobilière Foncier
Madeleine (I.F.M.) have expired.
This agreement includes the services provided by your
Company to Locindus in the following areas:
- legal and technical assistance relating to the implementation of financing operations through leaseholds, long-term
rentals and loans
- research for investment operations for operating leases;
- information systems, administrative, accounting and financial,management;
- internal control;
- marketing and communication.
In 2008, your company recorded income of €1,418,009
excluding value-added tax, for services provided under this
agreement.
• Agreements on the secondment of personnel from your
company to Locindus
These agreements concern the part-time secondment of
Jean-Michel Brunet and Etienne Procureur to Locindus to
act as company managers.
The agreements provide for the recharging by your
Company of 40% of the gross remuneration paid to JeanMichel Brunet and Etienne Procureur to Locindus S.A., plus
the employer social security charges.
Your Company recharged €141,411 in 2008 under these
agreements.
3.5 Debt waiver in favour of Compagnie Foncière
de Construction
In 1998, your Company granted a debt waiver of €41,2 million
in favour of Compagnie Foncière de Construction, associated
with a return to financial health clause.
Your company recognized income of €1,979,014 in 2008
pursuant to this clause.
Certain provisions previously recorded by Crédit Foncier
under this agreement amounting to €5,143,390 have
been reversed. Provisions of €300,000 have been maintained to cover off-balance sheet liabilities.
3.7 Substitution agreement between
your Company and Nexity
Your company has signed a substitution agreement with Nexity
in connection with the purchase commitment for LCL’s 15%
shareholding in Crédit Financier Lillois.
The acquisition of 15% shareholding in Crédit Financier Lillois
was made on 4 January 2008 for €1,483,500.
3.8 Agreements between your Company
and François Blancart and Thierry Dufour
On 27 February 2008, your Board of Directors authorized the
implementation of a termination indemnity arrangement for
François Blancart and Thierry Dufour, in connection with
their appointment as Company officers under the following
terms and conditions:
- in the event of the non-renewal of their appointment at
term, or the removal or loss of regulatory approval, not
resulting from a serious breach of duty leading to their
complete departure from the Caisse d’Epargne group,
- subject to your Company making a profit in the year immediately preceding the termination of their appointment,
François Blancard and Thierry Dufour will each receive, on
condition that they obtain an average of at least 50% of
their performance-related remuneration over the effective
duration of their appointment, a gross indemnity equal to
the higher of the following two amounts: either 36 months’
fixed gross monthly remuneration, or the average of the last
three years’ annual fixed and performance-based remuner-
December 2008
ation paid by the Company. In the event they obtain at least
40% of their performance-based remuneration, they will be
entitled to receive 75% of the above-mentioned indemnity.
In the event they obtain at least 30% of their performancebased remuneration, they will be entitled to receive 50% of
the above-mentioned indemnity. In the event of the termi-
nation by your Company of the employment contract of
Thierry Dufour, the redundancy indemnity will be deducted
from amount of the indemnity.
These agreements did not have any financial effect in 2008.
KPMG Audit
Rémy Tabuteau
Partner
Anik Chaumartin
Partner
Partner
5 - Human and
6 - Risk management
8 Additional information
8.1 GENERAL INFORMATION
390
8.2 ORDINARY GENERAL MEETING OF APRIL 10, 2009
392
8.3 PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT
AND FOR AUDITING THE FINANCIAL STATEMENTS
395
8.4 CROSS - REFERENCE TABLES
397
8.1 General information
Corporate identity
Legal name: Crédit Foncier de France
Commercial name: Crédit Foncier
Crédit Foncier de France is incorporated as a French
société anonyme (public limited company) with a Board of
Directors. Crédit Foncier de France is a credit institution
authorised to carry out banking transactions and is subject
to French Monetary and Financial Code provisions applicable to credit institutions. It has a Government Auditor
appointed by the Ministry of Economy, whose duties are
defined by Articles D615-1 et seq. of the French Monetary
and Financial Code.
Incorporation: Crédit Foncier was incorporated in March
1852 under the name Banque Foncière de Paris. It changed
its name to Crédit Foncier de France on March 3, 1853.
Registration: Identification No. 542 029 848, Paris Trade
and Companies Register – APE Code 6419Z
Registered office: 19, rue des Capucines 75001 Paris
Principal executive offices: 4 quai de Bercy 94224
Charenton cedex – Tel. +33(0)1 57 44 80 00
Financial year: : January 1st to December 31st
Term: The term of the company has been fixed in the Articles
of Association at 99 years from December 31, 1965.
Corporate purpose
(Article 2 of the Articles of Association)
Art. 2 – I - The Company's purpose in France
and abroad is to perform:
• As part of its routine business, any banking transactions
or provide any investment services, as defined by the
French Monetary and Financial Code, as well as any transactions relating to such activities, with or for any person
or legal entity, under private or public law, whether they
be French or of any other nationality, under the conditions
defined by current legislation and regulations
• as a secondary activity, and in accordance with current
regulations, any transactions other than those referred
to above, including insurance broking activities.
II - More specifically, but not exclusively, the company is
authorised to perform all types of credit transactions
• involving real estate, under any terms and conditions,
• for the financing of transactions of any kind, so long as
the loans are secured by a mortgage or an equivalent
real estate security, or by a legally enforceable claim on
the equity or shares of real estate companies,
• for the financing of any investments or development or
construction projects carried out by governments, local
authorities or groupings of local authorities, public institutions, institutions, organisations or other public sector
entities, or carried out on their initiative or on their behalf.
In particular, the company may originate any loans that
are likely to be granted or acquired by a société de crédit
foncier.
It is also authorised to complete any projects in the public
interest as requested by the French government or, more
generally, by a local, national or international authority.
III - The Company may obtain any appropriate source of funding to finance its operations, within the limits of the legislation governing its activities, by:
• issuing bonds, negotiable debt securities or other financial instruments,
• selling loans it has originated to a société de crédit
foncier; it controls an authorised société de crédit
foncier for this purpose, in accordance with the provisions of Articles L. 515-13 et seq. of the French
Monetary and Financial Code,
5 - Human and
6 - Risk management
• selling receivables to any debt securitisation fund or
equivalent entity,
• using any other means in general to raise finance, with
or without transfer of ownership.
IV - It may acquire, hold and sell shares in any company or
group that furthers the interests of its business.
More generally, it may engage in any operations, related to
its corporate purpose, or any similar or related purposes,
likely to directly or indirectly help the Company reach its
goals or promote its expansion or development.
Statutory appropriation of earnings
(Article 40 of the Articles of Association)
Art. 40 - Net earnings consist of the net income for the
financial year, less the Company's general and other
expenses, including all depreciation and provisions.
At least 5% of net earnings, less any previous losses, is
first allocated to the legal reserve; this appropriation ceases to be mandatory once the legal reserve reaches ten percent of the share capital.
Earnings available for distribution consist of net income
for the year, less any losses carried over from previous
years and the appropriation referred in the preceding paragraph, plus retained earnings.
The General Meeting that approves the annual financial
statements, or the Board of Directors, depending on
whether a dividend or an interim dividend is under discussion, may offer each shareholder the possibility to receive
all or part of their dividend payment in cash or in kind, in
particular in the form of shares in Crédit Foncier de France.
Dividends are paid out annually, at the times set forth by
the General Meeting or by the Board of Directors.
However, dividends must be paid out within the maximum
period of nine months after the financial year end.
Shareholders' General Meetings
(Article 26 to 36 of the Articles of Association)
Shareholders' General Meetings shall be convened pursuant to the procedures determined by French law.
Prior to convening a General Meeting, the Company publishes a notice of meeting in the Bulletin des Annonces
Légales Obligatoires (BALO, French legal gazette), at least
35 days before the meeting date.
Registered shareholders are individually summoned to
General Meetings by letter.
Any shareholder may take part in General Meetings under
the conditions set forth by law.
Multiple voting rights cannot be granted.
Earnings are appropriated as follows:
• the General Meeting may take up the Board of Directors'
proposal and allocate earnings to one or more extraordinary reserve funds or allocate them to retained earnings,
• any remaining earnings are paid out as dividends to
shareholders, in equal amounts per share.
Documents on public display
Financial press releases, annual reports and reference
documents for the current year and the previous two
financial years may be consulted on the Company's website: www.creditfoncier.fr.
Legal documents may be consulted at the company's principal executive offices located at 4 quai de Bercy, 94224
Charenton Cedex.
8.2 Ordinary General Meeting of April 10, 2009
8.2.1 Board of Director’s report
Dear Shareholders,
The General Meeting is called, after reading the reports of
the Board of Directors and the Statutory Auditors, to vote on
the draft resolutions put forward by the Board of Directors.
Shareholders are asked to vote on the following issues:
The purpose of the first and second resolutions is to
approve the individual and consolidated financial statements for the financial year ended December 31, 2008.
The third resolution concerns the appropriation of earnings.
Earnings for the
€78,900,173.48.
financial
year
amounted
to
After integrating retained earnings (€42,258,293.33)
and appropriating €4,362,897.50 to the legal reserve,
earnings available for distribution amount to
€116,795,569.20.
After appropriating and amount of €103,602,430.80
from the share premium account, shareholders are asked
to approve a dividend of €2.10 per share for a total of
€220,366,860.
The fourth resolution offers shareholders the option to
receive their dividends in the form of shares. The issue
price of new shares will be equal to the amount of shareholders’ equity before dividends are paid out, as indicated in the balance sheet at December 31, 2008, divided
by the number of existing shares. New shares will thus be
issued at €11.53 per share.
The fifth resolution concerns the approval of related party
agreements concluded in 2008. The agreement concerning
the extension of the framework agreements for subordinated current account advances and participating loans with
VMG, dated February 19, 2009, is also submitted for your
approval. This agreement takes effect on September 11,
2008.
The sixth, seventh and eighth resolutions concern the ratification of Director's appointments.
These are the purposes of the various resolutions submitted to the General Meeting for approval.
5 - Human and
6 - Risk management
8.2.2 Draft resolutions
First resolution
Approval of the individual financial statements
Third resolution
Appropriation of earnings
The General Meeting, having considered the Board of
Directors' report on the Company's management, the
report of the Chairman of the Board and the Statutory
Auditors' report concerning individual financial statements of Crédit Foncier de France for the year ended
December 31, 2008, approves the individual financial
statements as presented, showing net earnings of
€78,900,173.48.
The General Meeting recognises that earnings for the year
ended December 31, 2008 amount to €78,900,173.48
and that retained earnings from previous years amount to
€42,258,293.22.
Second resolution
Approval of the consolidated financial statements
The General Meeting, having considered the report of the
Board of Director and the Statutory Auditors' report concerning consolidated financial statements of Crédit Foncier
de France for the year ended December 31, 2008,
approves the consolidated financial statements as presented, showing net earnings of €220,398,000.
After appropriating €4,362,897.50 to the legal reserve,
earnings available for distribution amount to
€116,795,569.20.
After appropriating and amount of €103,602,430.80 from
the share premium account to these earnings, the General
Meeting approves the appropriation of this combined
amount as proposed by the Board of Directors:
• payment of dividends amounting to €220,366,860,
paid on the 104,936,600 outstanding shares comprising the share capital,
• appropriation of €31,140 to retained earnings.
Dividends to be paid out to shareholders amount to
€220,366,860 or €2.10 per share.
In accordance with disclosure requirements, the following table lists the dividends paid out during the previous three financial years:
Financial year
Number of shares
Dividend total per share
Dividend paid out *
in euros
2005
67,922,027
3.39
3.39
2006
81,129,851
4.31
4.31
2007
98,224,450
2.03
2.03
* Eligible for the 40% tax deduction pursuant to Article 158-3 of the French Tax Code
Fourth resolution
Dividend payable in shares
Pursuant to Article 40 of the Articles of Association, the
General Meeting, having considered the Statutory
Auditors' special report, decides to allow each shareholder the possibility to receive payment of their dividends in
the form of shares. The new shares will have the same
characteristics and benefit from the same rights as the
shares that entitled them to a dividend payment. Their
entitlement date is set at January 1, 2009.
The issue price of the new shares will be equal to the
amount of shareholders' equity as disclosed in the balance
sheet at December 31, 2008 and approved by the General
Meeting in the first resolution above, divided by the number of existing shares. New shares will therefore be issued
at €11.53 per share.
The number of shares allotted to shareholders who opt to
receive payment of their dividends in shares will therefore
be based on said price.
If the amount of dividends to be paid cannot be divided
into a whole number of shares, the shareholder who has
opted for payment in shares can receive the next lowest
whole number of shares and the rest of the dividends in
cash, or the next highest whole number of shares by paying the difference in cash.
The option period will commence on April 11, 2009 and
will end on May 11, 2009.
Any shareholder who has not exercised this option by May
11, 2009 will receive the dividend in cash when the dividends are paid out.
The General Meeting grants all necessary powers to the
Board of Directors to determine the number of shares
issued and the resulting capital increase, and consequently to modify Article 4 of the Articles of Association.
Fifth resolution
Approval of the agreements referred to in Article
L. 225-38 of the French Commercial Code
The General Meeting, having considered the Statutory
Auditors' special report concerning the agreements
referred to in Article L. 225-38 of the French Commercial
Code, approves each of the agreements that are mentioned therein.
• The General Meeting approves the agreement concerning the extension of the framework agreements for subordinated current account advances and participating
loans with VMG, dated February 19, 2009 and disclosed pursuant to Article L. 225-42 of the French
Commercial Code.
• The General Meeting approves the amendment to the
business developpement agreement concerning customers of local authorities and institutions with CNCE
dated February 19, 2009, submitted for shareholder
approval pursuant to Article L. 225-42 of the French
Commercial Code.
• The General Meeting approves the amendment to the
partnership agreement "PLS Package – PLI Package"
with CNCE dated February 19, 2009, submitted for
shareholder approval pursuant to Article L. 225-42 of
the French Commercial Code.
Sixth resolution
Ratification of the co-optation to the Board
of Directors
The General Meeting, voting under the quorum and majority conditions required for Ordinary General Meetings, ratifies the Board of Directors' co-optation of Mr. Jean Merel
as Director on July 29, 2008 to replace Mr. Christophe
Estivin following the latter's resignation for the duration of
his predecessor's term which ends at the General Meeting
convened to approve the financial statements for the 2011
financial year.
Seventh resolution
of Directors
The General Meeting, voting under the quorum and majority conditions required for Ordinary General Meetings, ratifies the Board of Directors' co-optation of Mr. Pierre
Quercy as Director on July 29, 2008 to replace Mr. PaulLouis Marty following the latter's resignation for the duration of his predecessor's term which ends at the General
Meeting convened to approve the financial statements for
the 2011 financial year.
Eighth resolution
of Directors
The General Meeting, voting under the quorum and majority conditions required for Ordinary General Meetings, ratifies the Board of Directors' co-optation of Mr. Alain
Lemaire as Director on December 19, 2008 to replace Mr.
Nicolas Mérindol following the latter's resignation for the
duration of his predecessor's term which ends at the
General Meeting convened to approve the financial statements for the 2011 financial year
Ninth resolution
Powers
Full powers are conferred to the holder of a copy or extract
of this document to carry out all legal publication and disclosure formalities.
5 - Human and
6 - Risk management
8.3 Persons responsible for the reference document
and for auditing the financial statements
Person responsible for the document
Mr François Blancard, Chief Executive Officer of Crédit Foncier de France
Statement from the person who assumes responsibility for the reference document
“I hereby declare, after having taken every reasonable measure for this purpose, that the information provided in this reference document is, to the best of my knowledge, true to fact and that no information has been omitted that would change the
interpretation of the information provided.
I hereby declare that, to the best of my knowledge, the financial statements have been prepared in accordance with applicable accounting standards and are an accurate reflection of the assets, financial position and results of the Company and
the consolidated companies, and that the management report presents an accurate picture of events that occurred during
the period, the results and the financial position of the Company and the consolidated companies as well as a description of
the principal risks and uncertainties they are exposed to.
I received a letter from the Statutory Auditors indicating that they have completed their work which consisted of verifying the
information on the financial position and the financial statements provided in this reference document and have read the
document in its entirety."
The consolidated financial statements for the year ended December 31, 2008, included in this Reference Document, were
reported on by the Statutory Auditors on pages 319 and 320. Their Report contains an observation.
Signed in Paris on April 30, 2009
François Blancard
Person responsible for the financial information
M. Philippe Druart, Strategy,
Institutional Relations
Communication
and
Alternate Statutory Auditors
Marie-Christine FERRON-JOLYS
Persons responsible for auditing
the financial statements
Member of the Compagnie Régionale des Commissaires
aux Comptes de Versailles (Regional Association of
Statutory Auditors of Versailles).
Permanent Statutory Auditors
1, Cours Valmy – La Défense 92923
KPMG Audit
Start of first term: May 26, 2004
Length of term: 6 years
1, Cours Valmy – La Défense 92923
Expiration of current term: At the end of the General
Meeting called to approve the financial statements for
the financial year ending December 31, 2009.
Represented by Rémy Tabuteau and Philippe SaintPierre
Pierre COLL
Start of first term: May 26, 2004
the financial year ending December 31, 2009
63, rue de Villiers - 92200 Neuilly-sur-Seine
Date term was renewed: May 16, 2006
63, rue de Villiers - 92200 Neuilly-sur-Seine
Represented by Anik Chaumartin and Jean-Baptiste
Deschryver
Date term was renewed: May 16, 2006
5 - Human and
6 - Risk management
8.4 Cross-reference tables
Listing of debt security issues and derivatives exceeding a nominal value of €50,000 - Appendix IX
The following cross-reference table refers to the main sections required by European Regulation No. 809/2004, which implemented the "Prospectus" Directive, and to Crédit Foncier's 2007 Reference Document.
Pages
1.
Persons responsible
1.1.
Persons responsible for the information
395
1.2.
Declaration by those responsible
395
2.
Statutory Auditors
2.1.
Identification of Statutory Auditors
396
2.2.
Statutory Auditors for the period covered by the historical financial information
396
3.
Risk factors
3.1.
Disclosure of risk factors
4.
Information about the issuer
4.1.
History and development of the Company
4.1.1.
Legal and commercial name of the Company
390
4.1.2.
Place of registration of the Company and its registration number
390
4.1.3.
Date of incorporation and term of the Company
390
4.1.4.
Registered office and legal form of the Company
390
4.1.5.
Recent events affecting the Company which have
a material impact on the evaluation of the Company’s solvency
n.a.
131 - 244
5.
Business Overview
5.1.
Principal activities
5.1.1.
Description of the Company's main activities
5.1.2.
Competitive position of the Company
6.
Organisational structure
6.1.
Description of the Group and the Company's position within the Group
6.2.
Links of dependency with other Group companies
29 - 51
33
15/51/317
7.
Trend information
7.1.
Declaration that no significant deterioration has affected the outlook
of the Company since the date of its last financial report
8.
Profit forecasts or estimates
9
24
n.a.
Pages
9.
Administrative, executive and supervisory bodies and senior management
9.1.
Information concerning the members of administrative and executive bodies
60
9.2.
Conflicts of interests at administrative, executive
and supervisory and senior management levels
94
Compliance with current corporate governance regulations
Application of Article L. 225-68 of the French Commercial Code
as amended by Law No. 2003-706 of August 1, 2003 - LSF
Report by the chairman of the Board of Directors on the operation of the Board and internal auditing
103 - 117
Statutory Auditors' report on the report by the Chairman of the Board of Directors
118 - 119
10.
Major shareholders
10.1.
Ownership, control
10.2.
Known arrangements which may result in a change in control
11.
Financial information concerning the Company's assets & liabilities, financial position and profit and losses
11.1.
Historical financial information*
2007: Reference Document No. D.08-0343 - pages 172 to 230
246 - 318
11.2.
Financial Statements
246 - 318
11.3.
Auditing of annual historical financial information*
11.3.1
Declaration that historical financial information has been audited by the statutory auditors
2007 : Reference Document No. D.08-0343 - pages 231 to 232
11.3.2
Other information audited by the statutory auditors
381
11.3.3
Financial information not obtained from the audited financial statements
n.a.
11.4.
Date of latest financial or sales information
11.4.1
Last year for which financial information has been audited
11.5.
Legal and arbitration proceedings
11.6.
Significant change in the financial position
12.
Material contracts
13.
Third party information ans statement by experts and declarations of interest
13.1.
Report attributed to a person as an expert
n.a.
13.2.
Declaration
n.a.
14.
Documents on public display
391
12 - 13
10
319 - 320
319 - 320
242
24
243
n.a. = not applicable
* Under Articles 28 of EC Regulation No. 809-2004 and 212-11 of the AMF General Code, the consolidated financial statements for the year ended December 31, 2007 and the Statutory
Auditors' report on the consolidated accounts at December 31, 2007, to be found on pages 172 to 230 and 231 to 232 respectively in Reference Document No. D.08-0343 filed with the
AMF on April 30, 2008, are included for reference.
5 - Human and
6 - Risk management
CROSS-REFERENCE TABLE BETWEEN THE ANNUAL FINANCIAL REPORT
AND THE REFERENCE DOCUMENT
Information required for the annual financial report
Pages in this
document
Statement from the person responsible for the document
395
Management report
- Analysis of the results, financial position, risks and list of delegations
to raise the capital of the parent company and the consolidated entity
(Art. L.225-100 and L.225-100-2 of the French Commercial Code)
17 - 244
- Information required by Article L.225-100-3 of the French Commercial Code relating
to factors that may have an impact in the event of a public offering
n.a.
- Information on share buybacks (Art. L.225-211, paragraph 2 of the French Commercial Code)
n.a.
Financial Statements
- Annual financial statements
322 - 378
- Statutory Auditors’ report on the annual financial statements
379 - 380
- Consolidated financial statements
246 - 318
- Statutory Auditors’ report on the consolidated financial statements
319 - 320
Notes
Design and production: Phiéconéo - Printing: printed in EEC by Assistance Printing
Reference document
1et4doscarre20_GB.qxp:Mise en page 1 11/08/09 16:22 Page2
Reference
document 2008
Crédit Foncier de France SA (French public limited company) with share capital of €682,087,900
Paris Trade and Companies Register No. 542 029 848
Offices and postal address: 4, Quai de Bercy – Charenton Cedex 94224 - Tel: +33 1 57 44 80 00
Head office: 19, rue des Capucines - 75001 Paris

6 Risk management

Transcription

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