PUBLIC JOINT-STOCK COMPANY «CORPORATE AND INVESTMENT BANK CREDIT AGRICOLE»

Transcription

1 PUBLIC JOINT-STOCK COMPANY «CORPORATE AND INVESTMENT BANK CREDIT AGRICOLE» Annual Financial Statements 2010 Public joint-stock company «Corporate and Investment Bank Credit Agricole» Ukraine, Kyiv, 23à Volodymyrska str., tel +380 (44) , fax +380 (44)

2 CONTENTS PRINCIPAL ACTIVITIES... 9 Banking operations Strategic goal of Bank s operations Bank specialization Banking operation characteristics Contractors segments description Merger, acquisition, division, separation, transformation of banks Risk management Creditworthiness Discontinued individual banking operations Assets ownership restrictions Corporate governance Shares held by the management Significant participation in the bank Foreign investors (companies and countries) and their share in the issued capital BALANCE SHEET INCOME STATEMENT CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTE 1. ACCOUNTING POLICIES Note 1.1. Principal activities Note 1.2. Basis of preparation Note 1.3. Consolidated financial statements Note 1.4. Initial recognition of financial instruments Note 1.5. Securities held for trading Note 1.6. Loans and advances to customers Note 1.7. Securities available for sale Note 1.8. Securities held to maturity Note 1.9. Investment property Note Property and equipment Note Intangible assets Note Operating lease Note Finance lease Note Non-current assets of disposal group classified as held for sale Note Discontinued operations Note Derivatives and hedging Note Income tax Note Treasury shares purchased from shareholders Note Income and expenses Note Foreign currency Note Offsetting assets and liabilities Note Segment reporting Note Effect of the changes in accounting policies and correction of errors NOTE 2. ECONOMIC ENVIRONMENT IN WHICH THE BANK OPERATES NOTE 3. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS PROVIDING THE CONTEXT IN WHICH THE STANDARDS SHOULD BE READ NOTE 4. CASH AND CASH EQUIVALENTS NOTE 5. DUE FROM BANKS NOTE 6. LOANS AND ADVANCES TO CUSTOMERS NOTE 7. SECURITIES AVAILABLE FOR SALE NOTE 8. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS NOTE 9. OTHER FINANCIAL ASSETS NOTE 10. OTHER ASSETS NOTE 11. DUE TO BANKS

3 NOTE 12. DUE TO CUSTOMERS NOTE 13. PROVISION FOR LIABILITIES NOTE 14. OTHER FINANCIAL LIABILITIES NOTE 15. OTHER LIABILITIES NOTE 16. SUBORDINATED DEBT NOTE 18. ISSUED CAPITAL NOTE 17. RESERVES NOTE 19. INTEREST INCOME AND EXPENSES NOTE 20. FEE AND COMMISSION INCOME AND EXPENSES NOTE 21. OTHER OPERATING INCOME NOTE 22. ADMINISTRATIVE AND OTHER OPERATING EXPENSES NOTE 23. INCOME TAX EXPENSE NOTE 24. EARNINGS PER ORDINARY AND PREFERRED SHARE NOTE 25. DIVIDENDS NOTE 26. REPORTING SEGMENTS NOTE 27. FINANCIAL RISKS MANAGEMENT NOTE 28. CAPITAL MANAGEMENT NOTE 29. CONTINGENT LIABILITIES NOTE 30. FAIR VALUE OF FINANCIAL INSTRUMENTS NOTE 31. RELATED PARTIES TRANSACTIONS NOTE 32. EVENTS AFTER THE REPORTING DATE NOTE 33. INFORMATION ABOUT THE AUDITOR

4 PRINCIPAL ACTIVITIES Public Joint-Stock Company (PJSC) Corporate and Investment Bank Credit Agricole is the legal successor of PJSC Calyon Bank Ukraine, which in turn was the legal successor of AT Credit Lyonnais Bank Ukraine, that was registered by the National Bank of Ukraine on 19 May 1993, No169. On 10 February 2010 the name was changed into PJSC Corporate and Investment Bank Credit Agricole ( Bank ) in line with the new name of the financing and investment arm of the Credit Agricole Group, thus demonstrating the membership of Credit Agricole Group. Credit Agricole Corporate and Investment Bank (in the past Calyon Corporate and Investment Bank, Credit Agricole CIB ) was created on 1 May 2004 as a result of a merger between Credit Agricole Indosuez and Credit Lyonnais Financing and Investment Banking Business. Credit Agricole Group is the market leader in providing universal banking services to individuals in France and one of the largest banks in Europe. Operating in 70 countries, Credit Agricole Group is the bank No 1 to private clients in financing their needs and specialized business services: daily banking transactions, deposits, housing loans and consumer loans, insurance, private banking, asset management, leasing and factoring, as well as corporate and investment banking. One of the biggest strengths of cooperative and institutional organizations of the Group is its expansion, which is provided by balanced growth in assets aimed at the real economy sectors, servicing the interests of 54 million private clients, 1,2 million shareholders, 6,1 million cooperative shareholders and employees. Credit Agricole Group has three main stability indices: Aspi Eurozone since 2004, FTSE4Good since 2005, DJSI since 2008 (Europe and World). The Group holds 8 place among the most stable companies in the world and has become No 1 in France in the Global 100. The Group has been represented in the Ukrainian market of banking services during 18 years by two subsidiary banks: Corporate and Investment Bank Credit Agricole (Credit Agricole CIB) serves large corporate companies sector and PJSC "Index Bank" serves medium corporate companies, small and medium business as well as individuals. Credit Agricole Corporate and Investment Bank has a diverse worldwide network (more than 50 countries), including Eastern and Central Europe, and successfully combine global and local diversification strategies. Credit Agricole CIB advanced technologies enable keeping the level and quality of customers servicing; significantly broaden the product portfolio of the Bank. Combined efforts of the Bank and Credit Agricole CIB influence the significant increase in the bank s share in all segments, provide the customers with the access to recourses and experience of one of the largest world s banking institution. Location: - Bank's address 23à Volodymyrska str., Kyiv 01034, Ukraine Type of the bank: - Public Joint-Stock Company Bank structure: - Bank has no branches or outlets. Statements date and reporting period: - Statements for the year ended 31 December 2010 Hryvnia, the national currency of Ukraine is the functional and presentation currency of the financial statements. The financial statements of the Bank are presented in thousand Hryvnias. As at 31 December 2010 the principal rates of exchange for translating foreign currency balances were: - 1 USD 7,9617 UAH - 1 EURO 10, UAH These financial statements were prepared in accordance with the National Bank of Ukraine regulations and Bank s accounting policy on the basis of the accounting data of the Bank taking into account the National GAAP and adjusting entries for the year. Major principles and methods of the Bank s accounting policy that were used for accounting and measuring the items of the annual financial statements are disclosed in Note 1 Accounting policy. Bank does not prepare consolidated financial statements as there are no investments in associates and subsidiaries. 9

5 Bank carries out banking operations, stipulated in the Bank s Articles of association under banking license No111 as of 18 February 2010, issued by the National Bank of Ukraine, written permission No111-3 as of 18 February Banking operations The Bank renders individual services for every customer, performs integrated servicing, aims to respond and satisfies customers needs promptly and offers to customers a variety of commercial services. Settlement and cash services: - current accounts in Hryvnias and foreign currencies; - payments in national and foreign currencies, local and international transfers; - electronic banking system offering customers the best electronic payments support system in the market - Electronic Banking Optim CLIC, for enhancements of which sophisticated, reliable and efficient internet technologies are used; Forex: spot, forward; Markets analysis. Financing: - circulating capital financing; - financing under the guarantee of foreign export credit agencies COFACE, Hermes; - joint financing with EBRD and IFC; - promissory notes discounting for obtaining more favourable conditions for trading. Depositary services: - securities depositing; Corporate actions: - voting by power of attorney; - dividends pay off; - updating information; - brokerage, including profit repatriation; - rendering advisory services in respect of shares purchase and corporate bonds issue; Trade financing: - issue and accepting the letters of credit and guarantees under acceptable collateral; - letters of credit: notification, confirmation, discounting; - export and import contracts settlements structuring; - post export / import financing; - agency in Calyon trade financing products selling worldwide; Credit Agricole CIB is an active public activities participant: - member of the Forum for Leading International Financial Institutions; - member of European business association; - partner of the National Bank of Ukraine; - member of the Board in American Chamber of Commerce. The Bank intends to continue performing all above-stated banking operations. 10

6 Strategic goal of Bank s operations Strategic goal of banking operations lies in: - financial support of the current and investment activities of multinational western companies (Credit Agricole CIB global customers) and leading Ukrainian export and import oriented enterprises; - participating in the development of money and capital markets; - promotion of foreign investors mobilization in the Ukrainian economy. Bank s mission is to fully meet customers needs through rendering first class services The Bank consistently sticks to the chosen goals i.e. corporate, business, functional and operational strategies. To reach them the Bank, first of all, uses the high level of its competency, effectively forming competitive advantages in line with external environment. Significant attention is paid to strengthening internal competitive advantages of the Bank, the key ones among them are: - increasing the service market share through better satisfaction of the Bank customers needs; - banking operations universalization; - regulatory capital formation features and priority directions of its concentration; - offering banking products that are more numerous and of better quality than those of competitors; - price flexibility features for the services offered; - new banking products introduction and improvement; - forming Bank positive image both in Ukraine and abroad (that is in turn accomplished due to the highest customers servicing standards, compliance with law, ethics and fair business conduct rules, faithful fulfilment of obligations and unceasing concern for the reputation as well as development of new technologies and banking business directions); - care about Bank s employees and creating opportunities for everybody to reach his or her potential; - services quality conformance to international standards. Bank specialization PJSC Credit Agricole CIB is a commercial universal bank, performing its operations according to the Articles of association. Banking operation characteristics 2010 was the period of stabilization for Ukrainian banks after the tumultuous events of the previous two years. Financial and capital position of the banking system improved much last year. Total losses decreased almost in three times compared with the previous year (to UAH 13.0 billion in 2010 compared with UAH 34.8 billion in 2009) in conditions of sharp reduction of allocations to reserves for losses on loans, stable operating income and reduction of administrative costs. Activities of most part of banks were productive last year despite of the overall negative financial result. In 2010 banks were also able to improve their capital positions (due to larger inflows of capital from shareholders and reduction of expenses). Capital adequacy ratio reached a level of 20,8% at the end of the year (18,1% at the end of 2009), and the amount of regulatory capital increased by UAH 25 billion last year. The total loan portfolio of the banking system increased only on 1% in The amount of corporate loans in the last year increased by 7,9% due to growth of outstanding loans in national currency, which was 13,5%, while the retail loan portfolio decreased by 13%. It was very difficult for the Banks to sell new loans during the year. On the one hand, this was due to strict requirements for credit risk and high interest rates. But on the other hand, the demand for new loans was low. Ukrainian corporate sector already had a significant debt, especially after the devaluation of the hryvnia. However, in the second half, there were some signs of loan recovery as the economy grew steadily and interest rates fell: the volume of corporate loans increased by UAH 30 billion in the second half of 2010 and many banks renewed consumer loans. The Ukrainian banks, following global experience, purchased a large number of government securities in situations with significant growth of demand on deposits and small loans from private sector. Last year government bond yield declined by half, as banks increased their portfolios of government securities by 180% up to UAH 54 billion. 11

7 As a result, the share of securities in total assets of the banking system increased from 4% to 8% in 2010 and the share of loans decreased from 67% to 59%. To summarize the above, we highlight the following key trends on financial markets in Summarizing the above, we select the following key trends in financial markets in Positive: Negative: - reduction of rate of deterioration of loan portfolios by stabilizing the borrowers' financial position and revitalizing lending (more balanced approach to risk assessment than before the crisis); - activation of sales of troubled assets to collection companies; - reduction of loss of banks in more than 3 times compared to last year; - improvement of the payment discipline of customers due to stabilization of their financial positions and need for new loans in the future; - stability of national currency rate in 2010; - deceleration of the deposits outflow and gradual restoration of their growth. - increase of the debt burden (both external and internal); - refinancing the commercial banks by the NBU on large amounts; - high reputational risks; - increase of the share of Russian capital. At the end of 2010 the Bank remained in II bank group measured by total assets according to classifier created by the National Bank of Ukraine commission on supervision and regulation over banks operations for tracing banks development dynamics, identifying its importance and degree of influence on banking system stability. Bank successfully performs its operations in the highly competitive capital region and occupies its specific niche. Banks with foreign western capital are first to be mentioned in the Bank s competitive environment, and leading Ukrainian banks are among Bank s competitors in some banking products and services. The result of 2010 for the Bank is UAH thousand and a seventh place among the successful profitable banks in Ukraine. According to the statement of financial position as at , net assets totalled UAH thousand ( UAH thousand). Bank s assets structure as at 31 December 2009: - highly liquid assets and amounts due from banks 26%; - loans granted by the bank 70%; - accounts receivable and other assets 3%; - property and equipment and intangibles 1%. Specific weight of loan portfolio in the Bank s assets remains considerable and stable 70% ( %). Short-term commercial loans granted for replenishment of circulating assets and corporate investment projects prevail in the loan portfolio structure. Loans are mainly granted to subsidiaries of leading western corporations that has a long credit history with the Bank or with Credit Agricole CIB Group and to leading Ukrainian export and import oriented enterprises. Such loan products are distinguished by means of lending: - revocable lines of credit; - loans without fixed repayment date or on demand; - fixed loans, that is with fixed repayment date; - granting guarantees; - opening of letters of credit; - promissory notes avalization and discounting; 12

8 - lending through overdraft; - lending through forward currency contract. Loan portfolio is diversified per industry and per form of lending which mitigates the loss risk in case of crisis among enterprises of single industry and mitigates the overall credit risk. The largest volumes of corporate loans as at were directed at first-priority economy industries (Note 6, Table 6.4): - agriculture 18%; - wholesale trade and trade brokerage 30%; - production 24%; The financial crunch influence on distinct industries, i.e. drop in production in construction industry, chemical industry, metallurgy, commercial real estate affected the loan portfolio quality. For the first time in Ukraine the Bank in 2009 declared overdue credit debts in current period amounting to UAH thousand, in 2010 they amount to UAH thousand. Overall credit quality of loans in 2010 consists of current and not impaired loans including overdue but not impaired loans amounting to UAH thousand. Retail banking is not a strategic direction of Bank s operations that is not surprising taking into account the acquisition of Index Bank by Credit Agricole CIB Group. Volume of loans granted to individuals at the end of 2010 was UAH thousand ( UAH thousand). The variety of purposes of granting loans to individuals - consumer loans, car loans, mortgage loans with 3 to 10 years maturity. Non-current assets accounts receivable and other assets is an insignificant constant share in net assets. Bank uses operational lever to invest in property and equipment and intangibles in efficient and prudent manner to secure consistent growth in operating profit. In 2010, a building value analysis was conducted by the independent experts of LLC "BGS-Asset" as at under IFRS requirements in order to reflect the fair market value of the Bank's office building in the financial statements. The results of revaluation of property, plant and equipment - office building (decrease of UAH thousand) according to independent expertise are reflected in Note 8 and statement of changes in equity. On the basis of performed analysis and analytical reviews of international companies SV and TOV B.G.S.-Aktiv experts, in autumn of 2009 a conclusion was made that impairment in commercial real estate sector (Bank property) in national currency can be within 10%, in USD %. According to the Bank s accounting policy if fair value fluctuates within 10% range no revaluation is performed. The increase in property and equipment and intangibles value in 2008 took place due to revaluation, write-up amounted to UAH thousand according to TOV B.G.S.-Aktiv expert opinion and was reflected in Bank s equity under 5100 account (see disclosures in Note 9) As at the end of 2010 the Bank made the allowance for loans amounting to UAH thousand (Note 6, tables ). The risk of failure to repay loans granted is moderate because loans are mainly guaranteed by banks with investment ratings (UAH thousand) and are mainly pledged by the collateral in the form of guaranteed deposits. Amounts to guarantee credit risks are UAH thousand. The Bank fully makes the reserves and allowances for receivables, amounts due from banks, the loans granted to customers; the reserve for risk and losses, which are acting a as protector and from one side force the Bank to contribute to above mentioned reserves and from the other side to take measures to improve assets quality and avoid too risky operations. Charges to allowances and provisions in 2010 were UAH thousand (2009 UAH thousand). In 2010 the Bank liabilities have the following structure: - amounts due to banks 10%; - amounts due to customers 81%; - subordinated debt 6%; - other 3%. Amounts due to banks decreased by 56% comparing with 2009 and major specific weight is held by short-term loans and deposits in national and foreign currencies attracted from Ukrainian banks (to manage short-term liquidity). In

9 the major specific weight was held by short-term loans from Credit Agricole CIB UAH thousand or 29% of amounts due to banks. Among the deposited customer funds dominate funds on demand UAH thousand or 52% (at the end f 2009 UAH thousand. (56%)), time deposits amount to UAH thousand or 48% of total customer funds (at the end of 2009 UAH thousand (44%)). (Note 12). Now for the purpose of Bank product position optimization and diversification of making sources of Bank s resources bonds issue is planned (UAH thousand, maturity 5 years) during International rating agency Moody s Investor Service in June 2010 assigned a rating of priority long-term unsecured debt Bà2 in national currency for the planned bonds issue. The national financial stability scale Moody s Investor Service remained Aa1.ua. Bank regulatory capital in 2010 decreased by 7% and reached UAH thousand (2009 UAH thousand) at the end of the year. Bank shareholder Credit Agricole Global Banking at General Shareholders Meeting in March 2011 intends to direct 100% of 2010 profit, that is UAH thousand to pay off dividends. This in turn will not impose adverse effect on regulatory capital volume, because additional capital as a part of subordinated debt and property and equipment revaluation bottom line at the end of the reporting year is 86% of Tier 1 Capital. Regulatory capital build-up during 2010 is intended to be effected by means of additional capital, that is effective profitable operations (Note 28). Bank equity at the end of 2010 was UAH thousand (2009 UAH thousand) with 27% decrease. Main Bank equity components are: shareholder capital, specific weight of which is 34%, reserves and property and equipment revaluation bottom line 47%, retained earnings 19%. Fund capitalization ratio (equity to shareholder capital) is 295% (at the end of %). Contractors segments description Banking industry In 2010 Bank continued working both in internal and external foreign exchange and money markets. Bank s contractors are the largest banking institutions of Ukraine, France, USA, Germany, Austria, Poland, Czech Republic, Russia, Japan, Middle East banking institutions. In total there are 83 contracting banking institutions which are actively cooperating to carry out correspondent business, loan and deposit operations, derivative operations, to grant and receive bank guarantees, letters of credit and to render advisory services. Bank holds a leading position in terms of currency exchange operations and Ukrainian interbank market operations. Non-banking companies Bank is extending the volume of operations with non-banking financial institutions, among which there are famous at Ukrainian market insurance companies that are created with foreign capital and financial institutions carrying out investment and broker operations. Bank offers a variety of services including securities sale / purchase contracts structuring, full advisory and legal support, brokerage, securities depositor services, opening and servicing investment accounts and special support regime accounts escrow accounts, underwriting services for corporate bonds issue, others. Bank ranks third among banks with foreign capital that are securities depositors during Corporate customers Bank - Credit Agricole CIB Relationship bank for corporations, investment companies, financial institutions and diplomatic representative offices. Bank keeps on increasing customers base among its main target group enterprises with foreign investment in Ukraine and a variety of Ukrainian enterprises. The number of corporate customers reaches 887. Foreign embassies, institutional investors, venture funds and others are among Bank s customers. Geographically Bank s customers are all over the world America, Germany, France, Belgium, Italy, Switzerland, Denmark, Great Britain, Korea and Japan. Bank s membership in the transnational group enables rendering diverse and quality services, provide access to various financial products for numerous customers in different countries through Credit Agricole Group subsidiaries structures, that is an indispensable competitive advantage. International financial organizations The Bank performs financing corporate customers, banking institutions, mediation in sales of trade financing products in cooperation with European Bank for Reconstruction and Development and International Finance Corporation. 14

10 Merger, acquisition, division, separation, transformation of banks During the reporting financial year of 2010 no organizational and structural changes in Bank took place, i.e. merger, acquisition, division, separation of individual base units. The strategic development of Credit Agricole Group in Ukraine forecasts the expansion of retail banking with the help of widespread branches network of Credit Agricole Index Bank and extending corporate segment with the help of Credit Agricole CIB. The Group does not plan to create innovative products for sale and intends to fully use the strong position of its business lines in order to adapt them for absolute customers needs satisfaction. In perspective according to Group s strategic plan, upon transitional period for Credit Agricole Index Bank reformation under Group standards merger of two subsidiary banks - Credit Agricole CIB and PJSC Index Bank into a single structure will occur. The new structure will enable the Group to perform successfully all kinds of banking operations thus strengthening universal commercial bank competitive advantage. At the end of March 2011, PJSC "Index Bank" changed its name to JSC "Credit Agricole Bank". Using the name of the parent company in Ukraine Credit Agricole receives the benefit in terms of strong international reputation which together with high level of stability, client orientation, professionalism and practical knowledge of the Ukrainian market will ensure its continuous development. In Ukraine Credit Agricole is a universal bank and provides a full range of modern banking services to individuals and companies in all regions in over 200 outlets private and corporate customers rely on the professionalism of the bank and confirm its reliability and reputation. Credit Agricole in Ukraine has strong positions on the auto and consumer loans market, successfully promotes salary projects, loans on apartments on the primary and secondary markets, attracts deposits, issues and services credit cards, money transfers and other retail banking services including insurance. Credit Agricole in Ukraine provides full range of services for business, focusing on cooperation with agricultural business companies, based on historical experience and knowledge of the Group established over 100 years ago by farmers. Credit Agricole Group in Ukraine provides exceptional value on service quality and customer satisfaction (individual or company) by the bank's services and complies with international standards of servicing. Risk management Banking risk management is one of key elements of the Bank development strategy. Risk management governing principles are based on generally accepted approaches and recommendations of Basel Committee (Basel II) and the National Bank of Ukraine. Risk analysis and management system is established on basis of systematic and integral approach including the solution of the following tasks: - identification and analysis of all risk arising in the process of Bank s operations; - qualitative and quantitative assessment (measurement) of separate risk types; - identification of interdependencies between separate risk types; - carrying out comprehensive analysis of risk exposure for performed and planned bank s operations with the purpose of identification of total banking risk exposure; - appraisal of acceptability and reasonableness of total risk exposure; - tracing risks at the adverse trend emergence as well as quick and adequate response, directed at risk averting or mitigation. Overall control over risk management is performed by the Board of Directors and Supervisory Board of the Bank. Risk management and control system structure consists of ad-hoc committees: - Assets and Liabilities Management Committee; - Business Management Committee; - Credit Committee; - Tariff Committee; - Internal Controls Committee; - Organizational and Policy Support Committee; 15

11 - Market Risks Monitoring and Controlling Committee; - Legislative and Corporate Compliance Committee; - New Operations and Products Approval Committee; - New Relations Approval Committee. The internal regulations covering all risk management procedures are created in the Bank. These are a list of documents that are strictly regulating risk management processes and procedures over such risks as: credit, operational, liquidity and market risks. Credit Agricole CIB Group developed a special software to centrally assess Basel committee demands in respect of credit, market and operational risks. A special risk control and management unit - Risk and Permanent Control (RPC) was formed in the bank, the main tasks of which are monitoring and assessment of risks arising in Bank s operations. Its functioning is a key point in direct risk management in the Bank. The RPC activities are carried out according to the regulations of the National Bank of Ukraine and those of Credit Agricole CIB Group. This unit is directly accountable before the President. But together with that a parent bank exercises control over RPC activities. This unit employees are not members of Bank s collective bodies, yet they are actively participating in their sittings. Although they do not enjoy the right of veto, their stance on particular matters raised on Bank s collective bodies meeting is the basis for decision making. The Bank identifies the following risk types: - Credit risk - Liquidity risk - Market risk - Operational and technological risk - Legal risk - Reputation risk - Strategic risk. In case of emergency conditions the Bank worked out the Action Plan that strictly identifies the means of controls over credit, interest, currency and liquidity risks. Credit risk Credit risk is a present or potential loss risk of credit amounts arising in the Bank because of insolvency of the party undertaking an obligation to execute any financial contract with the Bank or to fulfill the contracted terms and conditions. Credit risk is present in all Bank s operations, which result depends upon the operations of borrowers, issuers, other contractors and arises whenever the Bank borrows funds, undertakes a commitment to borrow them or makes investments. Credit risk management in the Bank is carried out though assessment of and monitoring the borrowers creditworthiness, identification and permanent renewal of loan agreement rating, identification and setting authority limits, monitoring loan portfolio quality, improvement of internal procedures of active operations and methodology of Bank s contractors creditworthiness analysis. The requirements of the National Bank of Ukraine and Basel II are the basis of credit risk management. Credit risk management consists of the following stages: - credit risk appraisal; - credit risk monitoring; - credit risk control; - credit risk minimization. Risk management process is effected at the local level and is monthly consolidated at the central level, that is in the Credit Agricole CIB Group Head office in accordance with Basel II requirements. Credit Agricole CIB Group uses Advanced IRB technique that is based on the borrower financial ratings. 16

12 Advanced IRB technique use is provided by means of the analysis and assessment of the following credit risk components: - Probability of Default - Loss Given Default - Exposure at Default - Maturity. The integrated analysis of the above mentioned indicators and the indicators required by the National Bank of Ukraine regulations is provided by specialized application suites, which in addition to analysis also enable loan portfolio monitoring and promptly reacting at its quality loss. Credit risk is controlled by the parent bank by means of setting respective minimal limits to the Bank s officers for loan agreements conclusion. Under financial crunch the Bank has reassessed the borrowers ratings under pessimistic scenario of the loan agreement. As the Bank s credit policy sets the priority of a borrower quality over an available collateral quality, the decision to grant a loan is initially based on borrower creditworthiness assessment. Contractor s parent bank or parent company guarantee is the most widespread type of collateral. The Bank is an active participant in the interbank resources market. To restrict credit risk when carrying out interbank operations the parent bank sets the limits for contracting banks on the basis of integrated assessment of financial position as well as assessment of non-financial indicators which can influence the contracting bank on the whole. The internal credit risk management regulations include such documents as: - Regulations on credit policy approved by the Board of the Bank decision, minutes No105 dated 18 January 2007; - Regulations on financial position assessment of the borrower of PJSC Credit Agricole CIB Bank Ukraine approved by the Board of the Bank decision, minutes No105 dated 18 January 2007; - Regulations on credit committee approved by the Board of the Bank decision, minutes No121 dated 17 June The Bank has introduced the credit risk limit system by means of setting two types of limits for carrying out credit operations: - external limits i.e. credit risk limits as set by the National Bank of Ukraine (N7, N8, N9, N10, N11, N12 are set by Instruction on the order of regulation of banks operations in Ukraine approved by the NBU Board Resolution dated 28 August 2001 as amended); - internal limits set and controlled by the Credit Agricole CIB parent bank to minimize credit risk in respect of: - approved country limit (total value of loan portfolio, per product, per maximum maturity and per acceptable currencies etc); - borrowers credit limits concerning credit operations with corporate customers and commercial banks that have to be set at the level that is not contradicting external limitations. In case of need to increase the debt of the existing borrower or to establish relations with the new contractor exceeding above mentioned authority limits, the parent bank sets a new limit at its own discretion on the basis of the special Bank application. Interbank credit operations limits are set for every individual bank according to standard procedures of the parent bank and the Group. The decision concerning crediting corporate customers and the Bank employees, credit risks classification, calculation and making allowance, bad debts identification are taken by the Bank Credit committee within set limits. Credit risk concentration control is executed as follows: - daily calculation and control of adherence to guidelines of credit risk per single borrower (single insider) and per group of related borrowers (group of insiders) as well as calculation and control of total debt of large borrowers and insiders is effected; - the Bank compiles and monthly submits to NBU the statements under the form No613 Statement on risk concentration for bank s individual operations with contractors and insiders and under the form N.614 Information about the largest (direct and indirect) participants of bank s contractors, where Bank discloses the information about customers participants, if they enjoy 10% or more ownership; 17

13 - the following management statements forms are submitted for the review of the Board and the Credit Agricole CIB parent bank: - monthly reports on allowance for loans; - monthly report on adherence to country risk limit; - monthly reports on substandard, doubtful and hopeless debts; - daily reports on country risk limit use; - daily reports on large loans. The main principles of the Bank credit policy enabling keeping the appropriate quality of the loan portfolio are: - loans are mainly granted to subsidiaries of leading foreign corporations that has a long credit history with the Bank or with Credit Agricole CIB Group and to leading Ukrainian export and import oriented enterprises; - the main instrument of credit risk mitigation is securing almost all loans by either right of property on cash deposits or by the guarantees of international banks with not lower that investment class rating and of international companies. Liquidity risk Liquidity risk financial loss risk associated with bank s failure to timely and fully meet its liabilities. Liquidity risk source is assets and liabilities maturity mismatch. Liquidity risk policy of the Bank in the reporting period was in prevailing liquidity over profitability. The system approach to balance-sheet (internal) liquidity risk of the bank stipulated: - liquidity risk assessment by means of mandatory liquidity economic normative standards as set by the NBU; - assets liquidity exposure ratio analysis; - high liquid funds volatility assessment; - net and gross liquidity mismatch calculation etc. Existing liquidity risk management system enables efficient Bank s liquidity position management from the viewpoint of both unconditional meeting bank s liabilities and providing customers with needed liquid funds. Bank s liquidity risk is controlled by means of setting limits on long- and short-term liquidity mismatch, high quality funds volume, liquidity risk ratio. Minimal balances are assessed to identify the amount of relatively stable amounts at customers accounts The main documents regulating liquidity risk management processes: - Credit Agricole CIB assets and liabilities management principles, Version 2.0, 2008; - Regulations on Assets and liabilities management committee approved by the Board of the Bank decision, minutes No105 dated 18 January 2007; - Regulations on assets and liabilities management approved by the Board of the Bank decision, minutes No105 dated 18 January 2007; - Regulations on treasury approved by the Board of the Bank decision, minutes No105 dated 18 January 2007; - Action Plan in case of liquidity crunch approved by the Board of the Bank decision, minutes No78 dated 04 November The main document regulating Bank liquidity management processes is Chapter 7 Liquidity risk of Credit Agricole CIB assets and liabilities management principles, Version 2.0, This document describes the organization and the polices applied by Credit Agricole CIB to manage the different aspects of liquidity risk in the most efficient way and to minimize the probability of the Group failure to meet its obligations. The banks shall adhere to both the local regulators requirements and the Group internal rules. Liquidity risk management in Credit Agricole CIB is within the responsibility of the parent bank s Assets and liabilities management department. The latter delegates the coordination and control of short-term liquidity to the Treasury and reports to Assets and Liabilities Management Committee. Credit Agricole CIB Treasurer that is a member of Assets and Liabilities Management Committee is responsible for Group s worldwide short-term liquidity operational management. He sets liquidity limits for every Group bank and for Credit Agricole CIB Group on the whole. These limits are submitted for Assets and liabilities management committee 18

14 review at least annually. Bank treasurer at the local level is responsible for refinancing management. He reports to the Group treasurer and local Assets and liabilities management committee. In addition, local treasurer is responsible for local regulatory requirements compliance that are applied to short-term liquidity (N4, N5 and N6 liquidity normative standards and mandatory reserving for obtained amounts at loro account normative standards as set by the NBU). The parent bank s Assets and Liabilities Management Department is directly responsible for the Credit Agricole CIB medium- and long-term liquidity assessment and management. It coordinates this management throughout the network with local Assets and liabilities management committees. It operates together with Treasury to provide the best access to market at the global level and to have several different financing options not only at short-term but also at mediumand long-term levels. Short-term liquidity management is effected with the help of such indicators as forecasted liquidity mismatch calculated daily by the Treasury and the crunch financing plan. Short-term liquidity mismatch limits are set by the Group Treasurer for all branches and subsidiary structures in every currency. Then these are approved by the local Assets and liabilities management committee and are finally approved by the Group Assets and liabilities management committee for every bank at the general level. The local treasurer is responsible for the strict adherence to short-term liquidity mismatch limits. Limits are also applied for medium- and long-term liquidity mismatches. A single global limit is set for medium- and long-term liquidity mismatches for all liquid currencies together. This limit is set and may be occasionally reviewed by the Assets and liabilities management committee. Contrariwise medium- and long-term liquidity mismatches for every illiquid currency including UAH are subject to management of local Assets and liabilities management committee within own limit. Using maturity mismatch table such indicators are calculated under ordinary terms: 1-year liquidity mismatch (assets with more than 1 year maturity are compared with liabilities with more than 1 year maturity) and 5- years liquidity mismatch (in the same way, but with more than 5 year maturity). International Calyon network member banks that are operating at illiquid markets including Ukraine prepare quarterly medium- and long-term liquidity mismatches analysis in the format mentioned above. Mismatches are calculated per currency (in original currency) and together for the bank (in Euro equivalent), all currencies together. Medium- and long-term target indicators are set at central level in the financing plan that is submitted by the Assets and liabilities management department for review to the Group Assets and liabilities management committee on the basis of monitoring results of medium- and long-term liquidity mismatches. The financing plan includes amounts that are to be obtained differentiating simple and structured financing instruments as well as target obtaining prices. Action Plan in case of liquidity crunch approved by the Board of the Bank decision, minutes No78 dated 04 November 2004 describes the liquidity deficit crisis management strategy and procedures. At first signs of threat of liquidity in the national currency the Head of the Treasury immediately convenes a meeting of the Assets and liabilities management committee with the following agenda: Stage 1: - informing Assets and Liabilities Management Committee concerning the existing situation; - maximal closing of short positions of the securities held for trading; - conversion (where possible) of liabilities on demand to fixed deposits; - limiting lending at the current level and / or defining temporary maturity for commercial loans (within two weeks). Stage 2 (in case if the crisis situation continues and the above stated actions were insufficient): - use of the NBU refinancing limit; - obtaining amounts at the interbank market within set limits on operations against securities. Stage 3 (in case of crisis worsening with acquirement of long-run nature with outflow of liabilities on demand): - sale of securities denominated in the national currency from the Bank portfolio; - informing customers about possible lending reduction from the maturity date under current agreements. Under current financial crunch the Bank has used the following actions on the parent bank demand: - temporary limiting lending at the level of loan portfolio as at 17 October 2008; - no new customer can be approved even within country limits (for international corporations subsidiaries new liabilities can be granted only under full guarantee covering commercial and political risks or money coverage); 19

15 - priority should be given to local currency lending and limits in fixed currencies should possibly converted to Hryvnia debts; - market operations should be possibly limited to simple instruments and be directly connected to appropriate financing (cross-sales); - syndicating limit is temporary frozen. Market risk As a result of an adverse fluctuation at interest market the Bank is exposed to interest rate risk, the source of which is the imbalance in assets and liabilities that are sensitive to movement of the interest rates for revaluation terms. Interest rate risk minimization consists of several components: banking products pricing, control over indicators of net interest margin, net interest spread, interest income share among bank income, limitation of risk ratio calculated on the basis of assessment of difference between assets and liabilities that are sensitive to movement of the interest rates (gap analysis), analysis of net interest income sensitivity to movement of the interest rates. Assessment results and interest rate risk indicator analysis are regularly submitted to ALMC sittings. Besides interest rate risk indicator assessment, the Bank carries out operational monitoring of different indicators characterizing interest rate risk level. The operational and regular monitoring of interest rate risk exposure enables Bank management to take timely and adequate decisions targeted at interest rate risk exposure limitation. Currency risk Currency risk is a result of adverse changes in foreign currencies exchange rates and bank metals rates. The source of risk is the imbalance of balance and off-balance claims and liabilities denominated in a single currency. During 2010 the Bank consistently complied with open currency position as set by the National Bank of Ukraine. In addition to currency risk control within the framework of NBU normative standards, the Bank uses internal system on currency risk indicator assessment and limitation. The internal limits system enables to manage in the integrated and adequate manner currency risk indicator with the help of risk management principles adopted by the Bank. Operational and technological risk Operational and technological risk is the potential risk for Bank s existence deriving from corporate governance deficiencies, internal control deficiencies or inadequacy of information systems and information processing processes from the viewpoint of universality, reliability, controllability and continuous operations. The Bank carries out various operations flow sheet development, exercises Bank s processes control. Internal operational risks management is carried out on the basis of development and implementation of internal rules on banking operations performance, adherence to authority and responsibility segregation principles, support of coordinated limitation system of operations, ensuring subsequent control of banking operations, proper selection and training of qualified personnel, automation of bank processes, technologies and information protection systems, reserve and backup system creation. At the reporting date the Bank is a permanent participant of Individuals' Deposits Guarantee Fund, adheres to the Fund regulatory requirements, complies with economic normative standards concerning capital adequacy and solvency as set by the National Bank of Ukraine, meets its obligations before the depositors and pays the contributions to the Fund on the regular basis as set by the legislation. Creditworthiness As at 31 December 2010 the Bank creditworthiness (coverage of risky assets with regulatory capital) was 138,48% ( ,93%, standard value at least 10%) indicating the regulatory capital adequacy to perform active operations taking into account the risks inherent to various types of banking operations. Bank ability to timely and fully meet its obligations is based on keeping Bank s liquidity at the appropriate level. As at 31 December 2010 Bank had the following indicators (during the reporting year there was not any violation of economic normative standards as set by the National Bank of Ukraine) the data are provided in Table 1. Major economic normative standards dynamics * Table 1. Normative standard Regulatory requirement %

16 Í2 Regulatory capital adequacy Í3 Tier 1 Capital adequacy Í4 Quick liquidity Í5 Current liquidity Í6 Short-term liquidity Í8 Large credit risks Í13 Open currency position *( ratios as set by the Instruction on the order of regulation of banks operations in Ukraine approved by the National Bank of Ukraine Board Resolution dated 28 August 2001 No368 as amended) The table data indicate Bank s ability to timely and fully meet its obligation. One of the important matters remaining for the Bank is to secure profitable operations and to increase its efficiency. For 2010 Bank net profit was UAH thousand ( UAH thousand, income statement). The operating profit reached UAH thousand (2009 UAH thousand). Assets and capital profitability indicators remain at quite high level 2,19% and 18,8% respectively (2009 5,8% and 40%). Discontinued individual banking operations During 2009 the Bank has not discontinued any operation within the available license of the National Bank of Ukraine and permission to carry out individual operations. Assets ownership restrictions As at 31 December 2009 the Bank has no assets ownership restrictions. Corporate governance Bank management structure consists of three levels that is exercised through the following bodies: - General shareholders meeting; - Supervisory Board of the Bank; - Board of the Bank. The supreme management body is the General shareholders meeting that are annually or specially convened by the Supervisory Board of the Bank. Responsibilities and functions of the Supervisory Board and the Board (Board of Directors) of the Bank Supervisory Board of the Bank is the Bank s management body accountable to the General Bank shareholders meeting, that is created to protect Bank s owners interests in the period between the General shareholders meeting. The Supervisory Board manages the Bank and enjoys the powers that do not belong to the General shareholders meeting according to the Bank s Articles of association or will be delegated to it by the General shareholders meeting except those of exclusive competence of the General shareholders meeting within the competence as set by the Articles of association and Ukrainian legislation. The Supervisory Board consists of at least three members. The Supervisory Board members are elected by the General shareholders meeting from among shareholder(s) representatives. The competence of the Supervisory Board is: - to appoint and dismiss the President and the members of the Board; - to approve the terms of remuneration and material incentive of the members of the Board; - to control the Board operations; - to assign external auditor; - to approve financial statements prepared by the Board to be presented at the General shareholders meeting; 21

17 - to prepare suggestions concerning the matters to be raised at the General shareholders meeting including the replenishment of the reserve fund at the expense of the profit and the distribution of profit and payment of dividends, making new funds; - to work out and prepare draft decisions to be presented at the General shareholders meeting; - to take decisions concerning cover for losses; - to take decisions concerning creation, reorganization and liquidation of subsidiaries, branches and representative offices of the Bank, approval of their Articles of association and regulations; - to set up the order of carrying out the revisions and controls over financial and operational activities of the Bank - to execute other powers delegated by the General shareholders meeting. Responsibilities of the Supervisory Board members as public individuals: The Supervisory Board members are the public individuals of the Bank and are responsible for the harm caused by them to the Bank or to the owners of the Bank according to the current Ukrainian legislation and / or foreign country legislation on the case-by-case basis. The Supervisory Board members shall keep the bank secrecy and are liable for its illegal divulgence according to the current Ukrainian legislation. The Head of the Supervisory Board is personally responsible for the organization of the Supervisory Board activities, for the decisions taken by the Supervisory Board and for their timely and full implementation. This rule also applies to the implementation the decisions of the General shareholders meeting by the Supervisory Board. The Board of the Bank is the executive body of the Bank, exercises control over the day-to-day operations of the Bank, is responsible for the making the funds needed for authorized operations of the Bank and for the efficiency of its work according to the principles and the order set up by the Articles of association, the decisions of the General shareholders meeting and the Supervisory Board of the Bank. The Board is particularly entitled according to the Supervisory Board decisions to decide the issues in respect of: - the Bank staff policy introduction; - the Bank employees employment and dismissal; - the Bank organizational structure introduction; - setting up the financial and lending policy including margin levels and control mechanisms; - the responsibility over the credit and other contractual obligations undertaken by the Bank; - the annual budget determination (preparation); - setting up the terms and conditions concerning repayment of medium- and long-term amounts due to the Bank including those that were approved at the General shareholders meeting. The Board acts according to the Bank Articles of association, the laws of Ukraine and the National Bank of Ukraine regulations as well as the internal Regulations on the Board of the bank. The Board structure and liability: The Board consists of three members: the President and one or more Vice-Presidents. Under the Supervisory Board decision the number of the Board members can be extended up to five persons. The Board members, including the President and Vice-Presidents are appointed and recalled by the Supervisory Board on the terms stipulated by the Supervisory Board. The President manages the Board activities and is responsible for its operations. The President acts on the Bank behalf according to the decisions of the Supervisory Board and the General shareholders meeting. He can submit suggestions to the Supervisory Board concerning all questions of Bank operations as well as regularly reports to it about all aspects of Bank operations. The Board is accountable to the Supervisory Board and the General shareholders meeting. Bank corporate governance is executed by the following executive committees: - Assets and liabilities management Committee - Credit Committee 22

18 - Tariff Committee - Internal Controls Committee - New Operations and Products Approval Committee - New Relations Approval Committee - Legislative and Corporate Compliance Committee - Bank Continuous Operation Planning Committee - Business Management Committee Assets and Liabilities Management Committee The President is the Head of the Committee. In addition, the Committee consists of: - Chief Financial Officer / Chief Accountant; - Chief Operating Officer; - Head of the market operations unit of the Treasury. Heads of the departments performing the functions within the Committee competence are entitled to be its participants. If needed, the Head of the Committee invites other participants to certain sittings. The committee sittings take place at least 4 times a year that is evidenced by the respective minutes according to the reviewed agenda. If needed, the special Committee sitting is announced. In addition, on the monthly basis the check briefings of the Head of the Committee with the Head of the market operations unit of the Treasury and other Committee members on demand concerning the cost of liabilities and assets profitability, interest margin policy, assets and liabilities maturity compliance take place. The matters that resulted in operational decisions taken or recommendations made are subject to inclusion in the next quarterly Committee sitting minutes. The Committee takes all the decisions necessary for the best fulfillment of its role. The departments with the functions of assets and liabilities management are responsible for the implementation of these decisions. According to Credit Agricole CIB assets and liabilities management principles dated 03 September 2008 (Version 2.0, 2008) assets and liabilities management is the Committee responsibility. This Committee takes all the decisions it deems appropriate for the tightening of the control over financial risks according to the standards of assets and liabilities management and governing unit instructions. These risks are: Besides: - market risks (interest rate risks and currency risks), - capital liquidity and adequacy risks. - the Committee makes requests, requires comments, written explanations, documents and other data to tighten the control over financial risks; examines the respective recommendations and takes decisions about the necessary measures as well as watches over the quality and reliability of the information (both for internal use and for statements purposes), - sets internal limits in respects of risks that are delegated under the operational management to the Assets and liabilities Manager and to the respective unit. Credit committee Credit Committee is a collective body for the solution of any questions concerning granting loans to Bank corporate customers and Bank employees, current servicing of granted loans, control over the use of the granted loans, credit risks classification, credit risk reserves making and movements, identifying loans as bad and loss ones, writing off loss loans. Credit Committee is created and functions in line with Credit Agricole Group credit risk management guidelines according to the current Ukrainian legislation. The following questions are within Credit Committee competence: - Borrowers credit rating approval; - Bank corporate customers and Bank employees loan applications review; - Decision-making about granting loan or rejection of application; 23

19 - Decision-making about the credit terms and conditions for approved applications; - Decision-making about the changes in credit terms and conditions; - Decision-making about the renewal of the lines of credit for the borrowers; - Decision-making about the acceptability of collateral for the Bank; - Decision-making about the amount of credit risk reserves and the order of changes in the amount of reserves; - Decision-making about identifying the loan as bad one; - Decision-making about identifying the loan as loss one; - Approval or rejection of the action plan for the bad and loss loans handling; - Decision-making about writing off loss loans. Credit Committee consists of three permanent members. Credit Committee includes the persons occupying the following positions: The President of the Bank that is the Head of the Credit Committee, the Vice-President / Chief Commercial Officer (Secretary). Credit Committee meets in weekly sittings. Credit Committee sessions are valid if it is attended by not less than two permanent members of the Committee, and the Committee Secretary presence is required to acknowledge the sessions as valid. Any Credit Committee decision shall be considered as approved if all present-at-the-sitting Committee members voted favourably. The approved Credit Committee decision is signed off by all present-at-the-sitting Committee members and is formalized with the Minutes by the Committee Secretary. If needed the Head of the Committee and in his absence the Vice-President can invite at the sitting other persons that are not Committee members whose presence is important for making the grounded decision in respect of some questions. The invited are entitled to participate in the discussion of questions reviewed at the Committee sitting. The invited shall not participate in the voting undertaken by the Committee members for decision-making. Tariff Committee Tariff Committee is a collective body of the Bank to which that the Board of the Bank delegates the rights and duties in respect of Bank tariff policy execution and ensuring execution of control over its fulfillment. The Tariff Committee decisions shall be mandatory for the implementation by all Bank units. The Tariff Committee sessions are held in accordance with the current Bank needs but at least monthly. Its sessions are valid if it is attended by the Head of the Tariff Committee or his Vice-President and by not less than 1 members of the Tariff Committee. The main principles of the Bank tariff policy: - When executing the tariff policy the Bank is oriented to the need to ensure harmonizing the interests of the Bank, its participants, depositors and corporate customers. - Tariff policy, banking operations regulations and tools determine relations between the Bank and its customers and are based on the National Bank of Ukraine regulations, tax legislation of Ukraine, Laws of Ukraine On the Banks and Banking Activities, On Economic Companies, Bank Articles of association. - Tariff policy is sole for the Bank. - Tariff policy of the Bank is directed at the improvement of customers servicing system, is based on the mutual trust, interest and maximum assistance, diligent, honest work of the bank employees, understanding customers problems. - To secure profits increase the actions of the Bank are to be directed at the customers base increase by means of providing the most advantageous terms and conditions and the widest range of banking products. - Tariff policy is to be commercial, competitive, competent, grounded and loyal. - Tariff policy is designed for each customer of the Bank on the individual basis. Committee members: Chief Commercial Officer the Head of the Committee, the Head of Non-Bank Financial Institutions sector of the Commercial Division, the Head of Correspondent Banking sector of the Treasury. The decisions taken at the Tariff Committee sessions are formalized with the minutes. If needed, Tariff Committee decisions may be taken in the course of work on the Head of the Tariff Committee initiative by signing off the draft decision by at least one member of the Tariff Committee of the Bank. 24

20 The Tariff Committee decisions shall be deemed taken if the proposal is reviewed and approved by the simple majority of votes out of the total number of the Tariff Committee members The President can independently change the approved tariffs in every single case without additional endorsement with the Tariff Committee. These changes are formalized by the addendum to the customer servicing agreement signed off by the President. The Head of the Tariff Committee is entitled to receive reports, explanations and any other information that is required for the fulfillment the entrusted duties from the Tariff Committee members, the Board of the Bank members, other public individuals of the Bank. The Tariff Committee members are responsible for the taken decisions, in case of adverse effects of such decisions to the Bank interests and / or to its customers; bear disciplinary and stipulated by the current Ukrainian legislation responsibility depending on the harm caused. Internal controls Committee Bank Internal controls Committee is responsible for: - bank internal control system assessment and introduction, - appointing people responsible for undertaking correcting actions. Internal controls Committee permanent members are: - The President; - The Vice-President / Chief Commercial Officer; - The Vice-President / Chief Administrative Officer; - Internal Auditor. Internal controls Committee sessions are held once a quarter. Internal controls Committee decisions are valid if it is attended by all permanent members. If needed, the Head of the Committee invites other participants to some sessions. The report covering every Internal controls Committee session shall be prepared and include the description of decisions taken at this session. This report is prepared by the Internal Auditor. The report on Internal controls Committee sessions is distributed to all Internal controls Committee permanent members. New operations and products approval Committee The Committee is created under Credit Agricole CIB Group Program on new operations and products compliance enhancement to the regulatory standards and financial security for the purposes of decision-making concerning new operations and new banking products (introduced not less than 1 year ago) compliance to the regulatory standards, financial security, banking strategy, carrying out new banking products efficiency analysis. The Committee permanent members are: - The President; - The Vice-President / Chief Commercial Officer; - The Vice-President / Chief Administrative Officer; - Regulatory standards and financial security compliance control professional; - Chief Financial Officer. If needed, the Head of the Committee invites other participants to some sessions. New operations and products approval Committee sessions are held when needed but at least once a year. New relations approval Committee The Committee is created under Credit Agricole CIB Group Program on new operations and products compliance enhancement to the regulatory standards and financial security for the purposes of approval of new relations with customers in the event that: - a customer is against financial security professional approval; - financial security business line requires additional endorsement and approval. The Committee permanent members are: 25