Instruction No. 2005-04 of November 21, 2005, on the supplementary supervision of financial conglomerates, as amended

OFFICIAL TEXTS OF THE BANKING COMMISSION
Instruction No. 2005-04 of November 21, 2005 (consolidated version as of 19/06/2009)

Article 1
Financial conglomerates for which the Banking Commission acts as coordinator, in application of Chapter IV of the aforementioned Regulation No. 2000-03, and credit institutions, financial companies, and investment firms, excluding portfolio management companies which, in accordance with the second paragraph of Section II of Article 6 of the aforementioned Regulation No. 90-02, are subject, for the supervision of accounts opened from January 1, 2005, to a supplementary requirement regarding capital adequacy, the calculation elements of which are made available to the Banking Commission upon request by its General Secretariat. They report the calculation elements of the supplementary requirement "on the CONGLOMER table, a model of which is provided in the annex to this instruction."

"The CONGLOMER table is prepared" annually based on figures finalized as of December 31. It is sent by electronic transmission (words deleted by Instruction No. 2007-03 of March 26, 2007) to the General Secretariat of the Banking Commission within three months following the finalization date.

Article 2
For the application of this instruction, the following terms are understood as:
a) entities with banking or investment services activities: the set of financial enterprises defined in f) of Article 1 of the aforementioned Regulation No. 2000-03; b) entities with insurance activities: insurance undertakings, insurance holding companies, mutuals, mutual unions, provident institutions, unions of provident institutions, joint provident groups, reinsurance companies, and any body exercising activities of the same nature and having its registered office in a Member State of the European Union, in a State party to the Agreement on the European Economic Area, or outside the European Economic Area; c) the financial sector is composed of the entirety of these entities.

Article 3
Financial conglomerates for which the Banking Commission acts as coordinator, in application of Chapter IV of the aforementioned Regulation No. 2000-03, send to the General Secretariat of the Banking Commission information regarding intra-group transactions and risk concentration under the conditions specified in Articles 4 to 7 below.

Article 4
Financial conglomerates send to the General Secretariat of the Banking Commission, at the same time as the report on the measurement and supervision of risks provided for in Article 43 of the aforementioned Regulation No. 97-02, which they must establish in accordance with Article 17 of the aforementioned Regulation No. 2000-03, the following information regarding intra-group transactions carried out during the year between entities of the conglomerate having banking or investment services activities on the one hand, and those having insurance activities on the other hand, provided they are at least subject to significant influence.

Intra-group transactions are considered, in particular:
– financial transactions (loans, debt securities, shareholding, guarantees, asset sales, payment of commissions, investments by a company in the funds of a sister company …); – exchange of services (support functions exercised by one company on behalf of another, particularly regarding anti-money laundering, liquidity management, interest rate risk …); – commercial transactions (cross-sales …); – risk transfers (reinsurance, securitization …).

Information on intra-group transactions must in particular include:
a) a description of these transactions, in particular by differentiating the categories above and highlighting the degree of interdependence of activities within the conglomerate; b) for each type of transaction, the direction in which it is carried out in the majority of cases (from an entity with banking or investment services activities to an entity with insurance activities or vice versa), and the objectives pursued; c) the internal pricing methods for these transactions.

Furthermore, financial conglomerates include quantitative information on any intra-group transaction whose amount exceeds 5% of the sum of solvency requirements applicable to the different sectors, calculated based on the previous annual finalization. To this end, financial conglomerates detail:
– provided they exceed the threshold: the cumulative nominal amount of transactions giving rise to financial flows outside market operations (loans, guarantees, asset sales, …), the total amount of commissions paid, and for operations on financial derivative instruments, the global credit risk equivalent (or failing that, the global notional amount); – for each transaction, when it exceeds the threshold, the nominal amount of the transaction and the date of its conclusion. Financial conglomerates also provide a description of the transaction, specifying the identity of the counterparties, the direction in which it is carried out, and the objectives pursued, according to the model below:

Type of transaction	Date of conclusion of the operation	Nominal amount for balance sheet items, notional amount and credit risk equivalent for financial derivative instruments	Description of the operation (counterparties, direction, objectives pursued …)

Article 5
Financial conglomerates report information on the concentration of their risks by beneficiary on "the CONGLOMER table, the model of which is provided in the annex to" this instruction.

Risks on the same beneficiary are declared, in the sense of Article 3 of the aforementioned Regulation No. 93-05, excluding counterparties assigned a zero weighting "under the provisions referred to in Title II of the decree of February 20, 2007, relating to capital requirements applicable to credit institutions and investment firms" (Instruction No. 2007-03 of March 26, 2007), provided that the sum of gross risks incurred due to operations carried out by entities of the financial sector controlled exclusively or jointly within the financial conglomerate for this beneficiary exceeds 10% of the consolidated own funds of the conglomerate or 300 million euros.

For each beneficiary, financial conglomerates distinguish risks borne by entities with banking or investment services activities, on the one hand, and by entities with insurance activities, on the other hand. If applicable, the mixed financial holding company of the conglomerate is considered to belong to the largest financial sector.

For entities with banking or investment services activities, risks are declared according to the rules specified by the aforementioned Instruction No. 2000-07.

For entities with insurance activities, risks are declared based on the aggregated amount of risks per counterparty, originating in particular from financial instruments, loans, guarantees and sureties, insurance or reinsurance contracts, as defined by the corresponding articles of the Insurance Code. However, insurance investments for which the investment risk is fully borne by the insured or for which the counterparty is a Member State of the OECD or an international public body of which one or more Member States of the European Union are part, are excluded.

Article 6
Financial conglomerates report information on the global holdings held in shares and real estate investments on "the CONGLOMER table, the model of which is provided in the annex to" this instruction.

Financial conglomerates declare, for entities with banking or investment services activities, on the one hand, and entities with insurance activities that are controlled exclusively or jointly, on the other hand, a) the book value of the share portfolio, understood as the book value of equity instruments; b) the book value of real estate investments, understood as the book value of held properties (excluding operational use), credits recorded on the balance sheet, and the global amount of participations understood as shares, capital calls, advances from partners in SNCs, SCIIs, real estate companies, or joint ventures.

Financial conglomerates declare, for entities with insurance activities, the book value of participations, securities, and subordinated loans in credit or financial institutions that are not deducted from the own funds of the financial conglomerate, taking into account the rules applicable to these entities.

Article 7
The "CONGLOMER tables" are prepared annually based on figures finalized as of December 31. They are sent by electronic transmission to the General Secretariat of the Banking Commission within three months following the finalization date.

Article 8
Deleted by Instruction No. 2007-03 of March 26, 2007

Article 9
First paragraph deleted by Instruction No. 2007-03 of March 26, 2007 Abrogated

Article 10
The statements and information provided for in Articles 1 to 8 are sent to the General Secretariat of the Banking Commission for financial years opening from January 1, 2006.

Article 11
This instruction enters into force immediately.

OFFICIAL TEXTS OF THE BANKING COMMISSION
Instruction No. 2005-04 of November 21, 2005 (consolidated version as of 19/06/2009)

Annex to Instruction No. 2005-04
Modified by Instructions 2009-01 and 2009-02 of 19/06/2009

Amounts
1
1 BASIC OWN FUNDS
1.1 Capital
1.2 Reserves (consolidated or not) (1)
1.3 Retained earnings (+/-)
1.4 Unrealized capital gains and revaluation differences on equity (consolidated) (2)
1.5 Other basic own funds
1.6 Deductions
2 COMPLEMENTARY OWN FUNDS
3 DEDUCTION OF PARTICIPATIONS IN CREDIT OR FINANCIAL INSTITUTIONS 4 OTHER DEDUCTIONS 5 ADDITION OF SPECIFIC ELEMENTS OF ENTITIES WITH INSURANCE ACTIVITIES 6 TOTAL OWN FUNDS OF THE FINANCIAL CONGLOMERATE 7 BANKING SOLVENCY REQUIREMENT 8 MARGIN NEED OF ENTITIES WITH INSURANCE ACTIVITIES 9 SURPLUS OR SHORTFALL IN OWN FUNDS

(1): consolidated reserves for consolidated CRC and consolidated IFRS documents (2): line concerning only consolidated CRC and consolidated IFRS documents

CONGLOMER – SUPPLEMENTARY SUPERVISION OF FINANCIAL CONGLOMERATES Calculation of the supplementary requirement regarding capital adequacy

Activity | All zones | Scope | Currency | All currencies --- | --- | --- | --- | --- Social | Consolidated CRC | Consolidated IFRS Entities with insurance activities | Entities with banking or investment services activities

12
1 Investments in equity instruments
2 Participations, securities, and subordinated loans not deducted 3 Real estate investments

CONGLOMER – SUPPLEMENTARY SUPERVISION OF FINANCIAL CONGLOMERATES Control of risk concentration by sector

Activity | Currency | All zones | All currencies | Scope | Consolidated CRC | Consolidated IFRS | Evaluation | Value

OFFICIAL TEXTS OF THE BANKING COMMISSION
Instruction No. 2005-04 of November 21, 2005 (consolidated version as of 19/06/2009)

Entities with insurance activities | Entities with banking or investment services activities | TOTAL 1 | 2 | 3

1 Gross Risks
2 Provisions or Depreciations
3 Net risks after provisions or depreciations (= line 1 - line 2) 4 Deductions (a) 5 Risks after deductions (= line 3 - line 4) 6 Net risks (b)

(a): deductions are calculated in accordance with the provisions of Regulation No. 93-05 of the Banking Regulation Committee (b): for risks incurred by entities with insurance activities, the amount of line 6 is equal to the amount of line 3. For risks borne by entities with banking or investment services activities, the net risk is the risk after deduction affected by weightings, in accordance with the provisions of Regulation No. 93-05 of the Banking Regulation Committee.

CONGLOMER – SUPPLEMENTARY SUPERVISION OF FINANCIAL CONGLOMERATES Control of risk concentration by beneficiary

Scope | Consolidated CRC | Activity | Currency | All currencies --- | --- | --- | --- | --- Consolidated IFRS | All zones

ADDRESS
SIREN NUMBER
CIB NUMBER
QUALITY
NAME OF BENEFICIARY
APE CODE
INTERNAL RATING
SURNAME DATE OF BIRTH
INTERNAL NUMBER
EXTERNAL RATING
ORGANISM