COMMISSION BANCAIRE

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Instruction No. 2000-12

amending Instruction No. 94-09 of October 17, 1994, regarding the accounting treatment of treasury shares and variable-income securities held by firms under the Banking and Financial Regulation Committee

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The Banking Commission,

Having regard to Law No. 84-46 of January 24, 1984, as amended, relating to the activity and supervision of credit institutions, particularly Article 40;

Having regard to Law No. 96-597 of July 2, 1996, as amended, on the modernization of financial activities;

Having regard to Law No. 98-261 of April 6, 1998, reforming accounting regulation and adapting the real estate publicity regime, and Decree No. 98-939 of October 14, 1998, relating to the Accounting Regulation Committee, issued for its application;

Having regard to Regulation No. 88-01 of February 22, 1988, of the Banking and Financial Regulation Committee relating to liquidity, as amended by Regulations No. 90-02 of February 23, 1990, No. 90-04 of February 23, 1990, No. 92-06 of July 17, 1992, No. 94-03 of December 8, 1994, No. 96-10 of May 24, 1996, No. 98-03 of December 7, 1998, and No. 98-08 of December 7, 1998;

Having regard to Regulation No. 90-01 of February 23, 1990, of the Banking Regulation Committee relating to the accounting of securities transactions, as amended by Regulation No. 95-04 of July 21, 1995, and by Regulation No. 00-02 of July 4, 2000, of the Accounting Regulation Committee;

Having regard to Regulation No. 90-02 of February 23, 1990, of the Banking Regulation Committee relating to own funds, as amended by Regulations No. 91-05 of February 15, 1991, No. 92-02 of January 27, 1992, No. 93-07 of December 21, 1993, No. 94-03 of December 8, 1994, and No. 98-03 of December 7, 1998;

Having regard to Regulation No. 97-03 of the Banking and Financial Regulation Committee relating to the preparation and publication of accounts of investment firms other than portfolio management companies;

Having regard to Regulation No. 00-02 of July 4, 2000, of the Accounting Regulation Committee relating to the accounting of treasury shares, and the valuation and accounting of variable-income securities held by firms under the Banking and Financial Regulation Committee;

Having regard to Instruction No. 94-07 of March 14, 1994, relating to the accounting of securities transactions;

Having regard to Instruction No. 94-09, as amended, of October 17, 1994, relating to documents submitted to the Banking Commission;

Having regard to Instruction No. 97-04 of June 19, 1997, relating to the transmission by firms of their annual accounts, periodic documents, and various information, as amended by Instructions No. 98-04 of April 10, 1998, No. 98-06 of May 7, 1998, No. 99-03 of June 22, 1999, and No. 99-04 of July 19, 1999;

Having regard to Instruction No. 99-03 of June 22, 1999, relating to the electronic transmission of documents to the Banking Commission;

Decides:

Article 1 - The title of item F10 "Stakes in affiliated companies, participation securities, portfolio activity securities" of the balance sheets - forms 4000 and 4100 - is replaced by the title "Stakes in affiliated companies, participation securities, other financial fixed assets".

The title of item X5A "Income on subordinated loans, stakes in affiliated companies, participation securities, and portfolio activity securities" of the income statement - forms 4080 or 4180 - is replaced by the title "Income on subordinated loans, stakes in affiliated companies, participation securities, and other financial fixed assets".

Article 2 - Sheet 1 of the balance sheets - forms 4000 and 4100 - is supplemented by item C3B titled "Portfolio activity securities".

Sheet 1 of the income statements - forms 4080 and 4180 - is supplemented by item T0V titled "Charges on portfolio activity securities" and by item V8M titled "Provisions for depreciation of portfolio activity securities". The aforementioned item T0V contains two sub-items T0W "Acquisition costs" and T0X "Capital losses".

Sheet 2 of the income statements - forms 4080 and 4180 - is supplemented by item X0V titled "Income on portfolio activity securities" and by item Z8M titled "Reversal of provisions for depreciation of portfolio activity securities". The aforementioned item X0V contains two sub-items X0W "Dividends and similar income" and X0X "Capital gains".

Article 3 - Point 1.4 of Article 1 of the aforementioned Instruction No. 94-07 is replaced by the following point 1.4:

"Other long-term securities as well as participation securities and stakes in affiliated companies mentioned in Article 9 bis of the aforementioned Regulation No. 90-01, are recorded in line F10 of the balance sheet - form 4000 or 4100 - titled 'Stakes in affiliated companies, participation securities, and other financial fixed assets'.

The disposal results of other long-term securities as well as participation securities and stakes in affiliated companies are recorded, according to their nature, on lines Z4R or V6N of the income statement - forms 4080 or 4180 - titled respectively 'Capital gains on financial fixed assets' and 'Capital losses on financial fixed assets'.

Dividends and similar income of other long-term securities as well as participation securities and stakes in affiliated companies are notably recorded on line X5K 'Dividends and similar income'."

Article 4 - Article 1 of the aforementioned Instruction No. 94-07 is supplemented by the following point 1.5:

"1.5 Portfolio activity securities defined in the first paragraph of Article 9 bis of the aforementioned Regulation 90-01, are included in line C3B titled 'Portfolio activity securities' of the territorial balance sheet - forms 4000 or 4100-. They notably include variable-income securities held by financial companies whose main purpose is to provide permanent resources to companies as part of their venture capital activity.

The disposal results of portfolio activity securities are recorded, according to their nature, on lines X0X or T0X of the income statement - forms 4080 or 4180 - titled respectively 'Capital gains' and 'Capital losses'.

Dividends and similar income of portfolio activity securities are recorded on line X0W 'Dividends and similar income'."

Article 5 - Other long-term securities as well as participation securities and stakes in affiliated companies mentioned in Article 9 bis of the aforementioned Regulation No. 90-01, are recorded in line 450 titled "Participation and subsidiary securities" of the balance sheets - forms SB10, SB20, or SB30 - of investment firms referred to in points 2.1 and 2.4 first paragraph of the aforementioned Instruction No. 97-04.

The disposal results of other long-term securities as well as participation securities and stakes in affiliated companies are recorded, according to their nature, on lines 700 or 800 of the income statements - forms SB15, SB25, or SB35 - titled respectively "Income from disposal of participation and subsidiary securities" and "Carrying value of participation and subsidiary securities disposed".

Dividends and similar income of other long-term securities as well as participation securities and stakes in affiliated companies are recorded on line 480 "Income from portfolio of participation and subsidiary securities" of the income statements - forms SB15, SB25, or SB35.

Article 6 - Portfolio activity securities defined in the first paragraph of Article 9 bis of the aforementioned Regulation No. 90-01 are included in line 415 titled "Other securities listed on the official market or second market" or in line 425 "Other securities" according to their nature, of the balance sheets - forms SB10, SB20, or SB30 - of investment firms referred to in points 2.1 and 2.4 first paragraph of the aforementioned Instruction No. 97-04.

The disposal results of portfolio activity securities are recorded, according to their nature, on lines 500 or 450 of the income statements - forms SB15, SB25, or SB35 - titled respectively "Net income on disposal of Treasury Bills, negotiable debt securities, or marketable securities" and "Net charges on disposal of Treasury Bills, negotiable debt securities, or marketable securities".

Dividends and similar income of portfolio activity securities are recorded on line 470 "Income from portfolio of marketable securities" of the income statements - forms SB15, SB25, or SB35.

Article 7 - Point 17.4 of Article 17 of the aforementioned Instruction No. 94-07 is replaced by the following point 17.4:

"17.4. Share buybacks

Treasury shares are recorded as follows when held by a credit institution or an investment firm subject to the same accounting valuation and account preparation rules:

17.4.1. Buyback to stabilize market price or within the framework of index arbitrage operations

The bought-back shares appear in line C2A 'Trading securities' of the balance sheet - forms 4000 or 4100 - and are valued at each accounting closing, according to the rules applicable to this portfolio.

The disposal results of these treasury shares are recorded, according to their nature, on lines X0E or T0E of the income statement - forms 4080 or 4180 - titled respectively 'Gains on trading securities' and 'Losses on trading securities'.

17.4.2. Buyback for employee attribution

The bought-back shares appear in line C3A 'Investment securities' of the balance sheet - forms 4000 or 4100 - and are valued at each accounting closing, according to the rules applicable to this portfolio. At the accounting closing and until the option is exercised, the difference between the acquisition price and the exercise price of the option is subject, if necessary, to a provision for depreciation.

Upon exercise of the option, the difference between the disposal price and the buyback price is recorded, according to their nature, on lines X0R or T0R of the income statement - forms 4080 or 4180 - titled respectively 'Capital gains' and 'Capital losses' on investment securities.

17.4.3. Buyback for cancellation

The bought-back shares appear in line F10 'Stakes in affiliated companies, participation securities, and other financial fixed assets' of the balance sheet - forms 4000 or 4100 - among fixed assets. They are not subject to any depreciation and remain valued at their acquisition cost until their cancellation date.

17.4.4. Other treasury share buybacks in accordance with the provisions of Article 217.2 of the Law of July 24, 1966, as amended

The bought-back shares appear in line F10 'Stakes in affiliated companies, participation securities, and other financial fixed assets' of the balance sheet - forms 4000 or 4100 - among fixed assets. They are valued at the lower of their fair value (represented by their market value) and their acquisition price.

The disposal results of these treasury shares are recorded, according to their nature, on lines Z4R or V6N of the income statement - forms 4080 or 4180 - titled respectively 'Capital gains on financial fixed assets' and 'Capital losses on financial fixed assets'.

Article 8 - Treasury shares classified as fixed assets under Article 20 of the aforementioned Regulation No. 90-01, are recorded in line 450 titled "Participation and subsidiary securities" of the balance sheets - forms SB10, SB20, or SB30 - of investment firms referred to in point 2.1 and 2.4 first paragraph of the aforementioned Instruction No. 97-04.

Article 9 - The chart of accounts for credit institutions is modified in accordance with the provisions set out in Annex 1 to this instruction.

Article 10 - The statements annexed to the aforementioned Instruction No. 94-09 as well as the reconciliation tables with the chart of accounts for credit institutions are, where applicable, modified in accordance with the provisions of Annex 2 to this instruction.

Article 11 - This instruction is applicable as of January 1, 2001.

Done in Paris, December 4, 2000

The President of the Banking Commission,

Hervé HANNOUN

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Annex 1 to Instruction No. 2000-12

30 SECURITIES TRANSACTIONS

303 Investment securities and portfolio activity securities

3031 Investment securities

• 30311 Government securities and similar instruments
• 30312 Bonds and other fixed-income securities
• 30313 Shares and other variable-income securities
• 30314 Treasury shares

3032 Portfolio activity securities

3035 Lent securities

• 30351 Government securities and similar instruments
• 30352 Bonds and other fixed-income securities
• 30353 Shares and other variable-income securities
• 30354 Treasury shares

3036 Payments remaining to be made on investment securities and portfolio activity securities not fully paid

3037 Related receivables

• 30371 Government securities and similar instruments
• 30372 Bonds and other fixed-income securities
• 30373 Shares and other variable-income securities
• 30374 Treasury shares

3039 Provisions for depreciation

• 30391 Government securities and similar instruments
• 30392 Bonds and other fixed-income securities
• 30393 Shares and other variable-income securities
• 30394 Treasury shares

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CONTENT

• 303 Investment securities defined by Article 5 of Regulation No. 90.01 and portfolio activity securities defined in Article 9 bis of Regulation No. 90-01, as amended notably by CRC Regulation No. 00-02
• 3035 Receivables representing lent investment securities and lent portfolio activity securities
• 30353 Receivables representing lent variable-income investment securities and lent portfolio activity securities
• 30373 Related receivables on variable-income investment securities and portfolio activity securities
• 30393 Provisions for depreciation of variable-income investment securities and portfolio activity securities

COMMENTS

3032 Investments made regularly with the sole objective of realizing a capital gain in the medium term, without intention to invest durably in the development of the issuer's business operations, nor to participate actively in its operational management, fall under portfolio activity. Securities can only be allocated to this portfolio if this activity, exercised in a significant and permanent manner within a structured framework, provides the institution with recurring profitability, primarily from realized capital gains.

This category notably includes variable-income securities held by financial companies whose main purpose is to provide permanent resources to companies as part of their venture capital activity.

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41 STAKES IN AFFILIATED COMPANIES, PARTICIPATION SECURITIES, AND OTHER FINANCIAL FIXED ASSETS

412 Participation securities

• 4121 Participation securities of credit institutions
• 4122 Participation securities in other financial companies
• 4123 Participation securities in non-financial companies
  • 41231 Participation securities in real estate development and management civil companies
  • 41239 Other participation securities

CONTENT

• 412 Participation securities are securities - other than stakes in an affiliated company - the long-term possession of which is deemed useful to the credit institution's activity.
• 41231 Notably securities of real estate civil companies held by Real Estate Credit Anonymous Companies (SACI) as part of their indirect development activity.

COMMENTS

Participation securities are, in accordance with Article 9 bis of Regulation No. 90-01, securities the long-term possession of which is deemed useful to the company's activity, notably because it allows exercising influence over the issuer company, or ensuring its control, but without consolidating them globally.

In this context, these are notably securities meeting the following criteria:

• Securities of companies integrated proportionally or issued by companies accounted for using the equity method;
• Securities of companies having common directors or managers with the holding company, under conditions allowing the exercise of influence over the company whose securities are held;
• Securities of companies belonging to the same group controlled by natural or legal persons exercising control over the whole and enforcing a unit of decision;
• Securities representing more than 10% of the rights in the capital issued by a credit institution or by a company whose activity is an extension of that of the holding institution.

The initiative to classify is left to the judgment of the credit institution. The General Secretariat of the Banking Commission reserves, however, the right, after examination of exceptional cases, to require the recording, in this account, of securities that do not meet the conditions listed above.

Do not record | Reference to appropriate item

• 412 Ancillary purchase costs | 6099 Various banking operating charges
• 41231 Direct development activity of Real Estate Credit Anonymous Companies (SACI) | 371 Real estate development

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41 STAKES IN AFFILIATED COMPANIES, PARTICIPATION SECURITIES, AND OTHER FINANCIAL FIXED ASSETS

413 Other financial fixed assets

• 4131 Other long-term securities
• 4132 Treasury shares
• 4133 Other financial fixed assets

CONTENT

• 4131 Other long-term securities are defined in Article 9 bis of Regulation No. 90-01, as amended notably by CRC Regulation No. 00-02. This category includes investments made in the form of securities with the intention of fostering the development of durable professional relationships by creating a privileged link with the issuer company, but without influence over the management of the companies whose securities are held due to the low percentage of voting rights they represent.
• 4132 This item includes treasury shares held in accordance with the provisions of Article 217.2 of the Law of July 24, 1966, as amended, or for the purpose of cancellation.

COMMENTS

Treasury shares are recorded and valued in accordance with the provisions of Regulation No. 90-01, Article 20 of the Banking Regulation Committee. Treasury shares intended to be cancelled are not subject to any depreciation and remain valued at their acquisition cost until their cancellation date. Treasury shares classified in 4132 other than those mentioned in the previous paragraph are valued at the lower of their fair value (represented by their market value) and their acquisition price.

Investment securities are considered financial fixed assets in accordance with Article 35.2 of European Council Directive No. 86/655. However, these securities are recorded in account 304 and must comply with the rules set out in CRB Regulation No. 90-01 of February 23, 1990, and Banking Commission Instruction No. 97-04 of March 14, 1994.

Do not record | Reference to appropriate item

• 413 Portfolio activity securities | 3032 Portfolio activity securities
• 4133 Investment securities | 304 Investment securities

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41 STAKES IN AFFILIATED COMPANIES, PARTICIPATION SECURITIES, AND OTHER FINANCIAL FIXED ASSETS

414 Exchange differences

415 Lent securities

416 Calls for funds and advances in current accounts in SCI (Real Estate Civil Companies)

417 Related receivables

418 Payments remaining to be made on stakes in affiliated companies, participation securities, and other financial fixed assets

419 Provisions for depreciation of stakes in affiliated companies, participation securities, and other financial fixed assets

CONTENT

• 415 Receivables representing stakes in affiliated companies (PCEC 411), participation securities (PCEC 412), and other financial fixed assets (PCEC 413) that have been lent.

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60 BANKING OPERATING CHARGES

603 Charges on securities transactions

• 6031 Interest on securities given in repurchase agreements
• 6032 Losses on trading securities
• 6033 Charges on investment securities and portfolio activity securities
  • 60331 Acquisition costs on investment securities
  • 60332 Amortization of premium on investment securities
  • 60334 Acquisition costs on portfolio activity securities
  • 60336 Capital losses on investment securities
  • 60337 Capital losses on portfolio activity securities
• 6034 Charges on investment securities
  • 60341 Acquisition costs
  • 60342 Amortization of discount

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64 VARIOUS OPERATING CHARGES

641 Retroceded products

642 Share in non-banking operating transactions carried out jointly

643 Share of head office expenses

646 Capital losses on fixed assets

• 6461 Capital losses on intangible and tangible fixed assets
• 6462 Capital losses on financial fixed assets

649 Other various operating charges

COMMENTS

6462 This account is used by institutions to record capital losses on stakes in affiliated companies, participation securities, and other financial fixed assets.

Capital losses on investment securities are also recorded in this account when the disposal is carried out before maturity, under the circumstances provided for in CRB Regulation No. 90-01 of February 23, 1990, relating to the accounting of securities transactions.

Do not record | Reference to appropriate item

• 6462 Capital losses on portfolio activity securities | 60337 Capital losses on portfolio activity securities

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70 BANKING OPERATING INCOME

703 Income on securities transactions

• 7031 Interest on securities received in repurchase agreements
• 7032 Gains on trading securities
• 7033 Income on investment securities and portfolio activity securities
  • 70331 Interest on investment securities
  • 70332 Amortization of discount on investment securities
  • 70333 Dividends and similar income on investment securities
  • 70334 Dividends and similar income on portfolio activity securities
  • 70336 Capital gains on investment securities
  • 70337 Capital gains on portfolio activity securities
• 7034 Income on investment securities
  • 70341 Interest
  • 70342 Amortization of discount

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70 BANKING OPERATING INCOME

705 Income on subordinated loans, stakes in affiliated companies, participation securities, and other financial fixed assets

• 7051 Interest on term subordinated loans
• 7052 Interest on subordinated loans with indefinite duration
• 7053 Dividends and similar income
• 7058 Interest on doubtful receivables

Do not record | Reference to appropriate item

• 7053 Dividends and similar income on portfolio activity securities | 70334 Dividends and similar income on portfolio activity securities