CALYON anglais entier.indd

Transcription

shelf-registration
DOCUMENT
2006
THE CRÉDIT AGRICOLE GROUP
(source : Banque de France)
(source : society)
(source : The Banker)
Calyon - SHELF-registration document 2006
I - II
Calyon - shelf-registration document 2006
Contents
I-II Calyon in the Crédit Agricole Group
1 Presentation of Calyon
3
Messages from the Chairman and the Chief Executive Officer
History
2006 key figures
Significant events in 2006
Business lines
4
6
8
10
11
2
Corporate governance and internal control
17
Chairman’s report to the annual general meeting of shareholders on 14 May 2007 Statutory Auditors’ report
Executive officers’ and directors’compensation
Executive Committee
18
30
31
41
3
Management report
43
Presentation of Calyon’s financial statements
Calyon’s activity and results
Recent trends and outlook
Analysis of Calyon parent company financial statements
Appendix to the management report
44
45
54
56
60
4
Financial statements
77
Consolidated financial statements for the year ended 31 December 2006 approved by the Board of Directors at its meeting of 28 February 2007
Statutory Auditors’ report on the consolidated financial statements
Information on the parent company financial statements
5
General information
Information on the company
Additional information
Statutory auditors’ special report on regulated agreements
Persons responsible for the shelf-registration document and for auditing the accounts
Cross-reference table
78
148
150
157
158
161
162
166
168
PReSENTATION of CALYON
Shelf-registration
document 2006
Calyon
Credit Agricole’s corporate
and investment banking subsidiary
Profile
Calyon was formed from the merger of Crédit Agricole Indosuez and Crédit Lyonnais’s Corporate and Investment
Banking division to become Crédit Agricole’s Corporate and Investment Banking subsidiary.
Backed by the Group’s credit ratings and financial solidity, Calyon is now a leading player in financial markets
and is ranked among Europe’s top ten corporate and investment banks.
With operations in 58 countries, Calyon offers its corporate and financial institution clients a full range of products
and services in capital markets, brokerage, investment banking, structured finance, corporate banking
and international private banking.
Only the French version of the shelf-registration document has been submitted to the Autorité des Marchés Financiers.
It is therefore the only version that is binding in law. The original French version of this shelf-registration document was
registered with the AMF on 1st June 2007 under number R.07-088 in accordance with article 212-13 of the AMF’s Internal
Regulations. It may not be used in support of a financial transaction unless accompanied by a transaction circular approved
by the AMF.
1
Presentation
of Calyon
4Messages from the Chairman 6
History
8
2006 key figures
10
Significant events in 2006
11
Business lines
and the Chief Executive Officer
-
Messages from
the Chairmain and
the Chief Executive Officer
Message from Jean Laurent
Calyon made good progress towards its growth ambitions
in 2006. Significant commercial developments in all
business lines drove a 24% increase in net banking
income at constant scope and exchange rates. Throughout
the year, Calyon took advantage of the positive economic
background. It was involved in a number of high-profile
transactions, extended its customer base and product
range and expanded its international presence. The
various business lines developed their global franchises.
This was particularly the case in interest-rate and credit
derivatives, real estate and international trade financing
and leveraged finance.
The significant growth in capital markets activities led to
a greater balance between this business and investment
banking. The Capital Markets and Investment Banking
business line accounted for 61% of revenues, while
Financing provided 39%.
The development plan put in place by Calyon since
2005 is focused on enhancing commercial impetus and
keeping a firm grip on operating expenses. Calyon has
made steady progress relative to its main rivals in terms
of net banking income, gross operating income and the
cost/income ratio.
Calyon accounted for almost a third of Crédit Agricole
S.A.’s earnings in 2006. It has a central role within
the Crédit Agricole Group, whose recent international
expansion is providing fresh opportunities for Calyon’s
various Corporate and Investment Banking activities.
The dedication of Calyon’s staff and the commitment
of its senior management to increasing market share,
developing new products and improving the organisation
are underpinning Calyon’s ambition of continuing its
rise among the ranks of Europe’s leading corporate and
investment banks.
This collective ambition is founded on our values of
expertise, consistency, dynamism and courage. As a
result, I am confident that Calyon will continue to fulfil
the role assigned to it by the Crédit Agricole group.
Jean Laurent
Chairman of the Board of Directors
Message from Edouard Esparbès
In 2006, Calyon made significant commercial breakthroughs in most of its business lines, due to efforts to
strengthen its base of corporate and institutional clients.
It also carried out targeted recruitment, particularly
outside France, and this has substantially increased our
origination capacity.
Calyon’s international network employs more than
8,600 staff across 58 countries. The network was
extended in 2006 with the opening of several branches
and representative offices (in Algeria, Libya, India with
two new branches and Kazakhstan). More than 70% of
Calyon’s commercial revenues now come from outside
France, and international net banking income is rising
rapidly due to our often long-standing presence in highgrowth regions.
We broadened our product range in 2006 to offer
clients comprehensive and innovative solutions,
particularly in structured financing and capital markets.
We industrialised “flow” products extended the range
of structured and hybrid products and redeployed
our equity derivatives business. We significantly
strengthened our range of Islamic products with the
creation of a Global Islamic Banking product line based
in Dubai. Our brokerage activities put in a remarkable
performance in 2006, and Cheuvreux, CLSA and Calyon
Financial are leaders in their markets. In early 2007,
we started talks with Fimat (Société Générale’s listed
derivatives brokerage subsidiary) with a view to merging
Fimat with Calyon Financial to form one of the world’s
leading players in the execution and clearing of listed
derivatives.
We focused on making our commercial organisation and
infrastructure more efficient. Efforts to increase crossselling have been built into our reporting tools, and we
have been able to industrialise our production platforms
with new IT systems in capital markets, brokerage and
the international network. We have organised our front
office and support staff into teams concentrating on 16
major managerial projects, with the aim of maintaining
progress.
All profitability indicators improved. Gross operating
income was up 35% at constant scope and exchange
rates, the cost/income ratio fell by 3.2 points and ROE
was 17.1%. These results confirm the wisdom of our
strategy of generating balanced, profitable growth, with
the focus on clients and international development.
We have major ambitions for 2007. We will maintain
our commercial momentum and our efforts to maximise
efficiency, with the aim of strengthening our position
among Europe’s best corporate and investment banks.
Edouard Esparbès
Chief Executive Officer
-
History
1863
Creation of Credit Lyonnais
1875
Creation of Banque d’Indochine
1894
Creation of the first “sociétés de Crédit Agricole”,
later termed “Caisses Locales” (“Local Banks”)
1920
Set up of Office National de Credit Agricole,
renamed Caisse Nationale de Credit Agricole
(CNCA) in 1926
1945
Nationalisation of Credit Lyonnais
1959
Creation of Banque de Suez
1975
Merger of Banque de Suez
and Banque d’Indochine
to form Banque Indosuez
1988
CNCA becomes a public limited company owned
by Regional Banks and employees (“mutualisation”)
1996
Acquisition of Banque Indosuez by Credit Agricole,
one of the world’s top 5 banking groups,
to create an international investment banking arm
1997
Caisse Nationale de Credit Agricole consolidates
within Credit Agricole Indosuez its existing
international, capital markets
and corporate banking activities
1999
Privatisation of Credit Lyonnais
2001
CNCA changes its name to Credit Agricole S.A.
and goes public on 14 December 2001
2003
Successful combined takeover bid for Credit Lyonnais
by Credit Agricole
2004
Creation of Calyon, the new brand
and corporate name of the Credit Agricole Group’s
financing and investment banking business,
through a partial transfer of assets from Credit Lyonnais
to Credit Agricole Indosuez
-
2006 key figures
Trends in earnings
Net income - Group share
In millions of euros
Condensed income statements
Net banking income
31.12.2005
31.12.2006
4,938
5,862
1,770*
2,288
Net income
1,716
1,848
Net income - Group share
1,632
1,771
Gross operating income
* in 2005, before integrated-related costs
Activité
In billions of euros
Return on equity (ROE)
31.12.2005
31.12.2006
Total assets
481.3
588.2
Gross loans
90.5
104.0
119.0
146.9
49.7
54.1
Customer deposit
Assets under management
(private banking)
* in 2005, excluding the gain from selling financial
services activities to the Crédit Agricole S.A. group
Financial structure
Ratings
Shareholders’ equity
Short-term
Moody’s
P1
Standard & Poor’s
A1+
FitchRatings
F1+
Long-term
International solvency ratio (CAD/ESR)
Moody’s
Aa1
Standard & Poor’s
AA-
FitchRatings
AA
Headcount (average)
Full-time equivalent
France
2005
2006
4,813
4,474
International
11,553
8,627
Total
16,366
13,101
In 2005, including the staff of international retail banking
activities sold to Crédit Agricole S.A. in the fourth quarter
-
Significant
events in 2006
Strong performance
A powerful international network
Calyon benefited from a positive market environment
and achieved a sharp improvement in operational and
financial performance in 2006. This strong showing
lends credence to its ambition of strengthening its
position among Europe’s top ten corporate and
investment banks by combining steady growth and
profitability.
More than two thirds of Calyon’s corporate and investment
banking business is generated outside France, in 58 other
countries.
In capital markets, Calyon achieved record performance
in interest-rate derivatives, along with strong growth in
credit market activities and continuing progress in
equity derivatives, in line with the business plan.
CASAM, a 50/50 joint venture between Crédit Agricole
Asset Management and Calyon, acquired Ursa Capital LLC,
a US firm specialising in alternative managed accounts.
This strong growth momentum required significant
investment in order to increase processing capacity,
improve production security and enhance execution
quality.
The Commission Bancaire extended its approval of
Calyon’s internal market risk monitoring models to cover
specific interest-rate risks in the credit markets
business.
Brokerage had an exceptional year, with business levels
rising at all three brokerage units, i.e. CA Cheuvreux,
Calyon Financial and CLSA.
In Financing, Calyon made the most of its capacity for
large deals.
The structured financing business capitalised on its solid
existing positions and made further progress.
Calyon worked hard to develop businesses in attractive
niche markets such as Islamic financing and the
management of distressed debt in Europe, in which
Calyon set up a partnership with Pirelli Re.
The international network continued to strengthen and
increase operational efficiency in 2006:
- C orporate and investment banking revenues rose faster
outside France than inside France. The firm pace of expansion was driven in particular by high-growth countries like India, the Gulf states and Brazil;
- Calyon continued to deploy its business lines in these
areas;
- It started to introduce its new international IT system
into several countries, and the system will be gradually
rolled out as part of the streamlining of production
sites.
Other highlights in 2006 included:
- t he obtaining of Financial Holding Company status in
the USA, enabling Calyon to review its US growth
strategy,
- the opening of two new branches in India,
- the creation of representative offices in Libya and
Kazakhstan,
- authorisation to set up a subsidiary in Algeria,
- t he transformation of units in Belgium, Poland and
Slovakia into branches.
Business lines
Calyon is one of Europe’s top ten corporate and investment banks alongside Deutsche Bank,
Union des Banques Suisses, Crédit Suisse, HSBC, Royal Bank of Scotland, Barclays, BNP Paribas,
Société Générale and ABN Amro.
Corporate and investment banking
Calyon oversees and develops its corporate client base
via teams of senior bankers. These senior bankers
manage global commercial relationships by calling on
skills available in the various business lines, backed up
by the Bank’s international network.
In 2006, Calyon continued to implement this coverage
model in its international network and in specific client
sectors where global service is handled centrally.
Similarly, the Financial Institutions Group ensures
worldwide coverage of financial institutions. These
comprise banks, central banks, investment banks,
insurers, reinsurers, asset managers, hedge funds,
pension funds, brokers and other financial intermediaries,
sovereigns, regional and local authorities outside France
and leasing companies, representing a total target client
base of 1,100 groups and counterparties.
In 2006, the system was strengthened in both sector
and geographical terms. Sales forces were reorganised
in France, redeployed in certain European markets and
strengthened with the recruitment of senior bankers in
Asia (including India and Thailand), the USA and the
Middle East.
Capital markets and investment banking
Capital markets
Treasury
Calyon has an active presence in the world’s interbank
money markets in 27 countries, via five liquidity centres:
Paris, London, New York, Tokyo and Hong Kong. This
centralised cash management ensures stable financing
and helps Calyon manage its liquidity and short-term
interest-rate risk in an efficient manner. Calyon also
directly manages Credit Agricole S.A.’s treasury operations,
which are key to the management of short-term fund
flows between Crédit Agricole S.A., its subsidiaries and
the Regional Banks.
Foreign exchange
With its electronic platforms and dedicated sales teams,
Calyon provides customers with a broad range of forex
products: cash transactions, options and structured
currency products.
Business focuses on the main international currencies
(EUR, GBP, JPY, CHF, USD, AUD), but also covers
Scandinavian, Eastern European, Asian, Latin American
and Middle Eastern currencies.
In 2006, Calyon was ranked the number one bank in
France and 10th worldwide for forex (source: FX Week’s
Best Banks Survey 2006).
Commodities
Calyon offers an integrated commodities service. It is a
market-maker for a comprehensive range of energy
commodities and metals. Calyon is a major player in
markets for instruments indexed to oil, refined products,
gas, electricity and CO2 emissions. It is a specialist in OTC
metals derivatives and also trades a large number of
precious and non-precious metals instruments, giving
customers numerous hedging possibilities.
Calyon is an active player in the market for commodityindexed structured placings, which is currently seeing
rapid growth.
Interest rate derivatives
Calyon is an established player in interest rate swaps,
exotic products and interest rate options. It also has a
significant position in structured Euro Medium Term
Notes.
In 2006, business levels hit a new record, driven by firm
growth in all regions. In a highly competitive environment
in which the main players were particularly active,
Calyon maintained its strong market position.
It launched new products and enhanced its forex range.
It also developed and deployed electronic platforms to
meet all client needs.
10 - 11
Debt markets
The new Debt Capital Markets (DCM) business line was set
up in 2006 and offers a comprehensive range of debt
instruments: investment grade and high yield bonds,
hybrid capital instruments and structured ABS (AssetBacked Securities).
The high grade and high yield origination team advises
more than 500 issuers worldwide, including governments, public organisations, financial institutions and
large corporations.
Calyon’s excellent 2006 performance earned it the
following rankings: 10th in euro-denominated bond
issuance (source: Thomson Financial), 7th in eurodenominated ABS issuance (source: Thomson Financial
B16G) and 2nd in euro-denominated ABCP (Asset-Backed
Security Commercial Paper) issuance in the Conduits
business (source: CP Ware).
Credit markets and CDO
Calyon has a global platform for syndicating, structuring,
trading and managing credit instruments.
The credit and CDO (Collateralised Debt Obligations) team
comprises more than 200 professionals.
In 2006, Calyon substantially increased its trading and
distribution capacity for plain-vanilla products in the
secondary market. Structured product business levels
continued to rise. The plain-vanilla products and
structured products businesses were merged to provide
clients with a single point of contact for the whole
range.
The business benefited from increased marketing and
distribution capacity. It also benefited from the
diversification in plain-vanilla products – loans, bonds
and CDSs (Credit Default Swaps) on investment-grade,
high-yield or emerging-market underlyings – and in
structured products, with constant innovation in
synthetic structures and firm growth in the cash CDO
business.
In 2006, Calyon was named CDO Arranger of the Year Europe by ISR. It was also one of the world’s top 10
bookrunners of global structured product CDOs (source:
Asset Backed Alert – November 2006)
Equity derivatives
The equity derivatives team has 11 sites in Europe, the
USA and Asia. It handles the trading, sale and arbitrage
of equity derivatives, index derivatives, simple or
complex structured products, warrants, certificates and
convertible bonds.
After a year of reorganisation in 2005, 2006 was
dedicated to consolidating the global organisation,
particularly through efforts to strengthen the quant,
trading and structuring teams. CASAM, a joint venture
between Calyon and Crédit Agricole Asset Management,
continued its development with the acquisition of Ursa
Capital LLC, a US firm specialising in alternative managed
accounts.
In commercial terms, initiatives launched in new
countries in 2005 started to pay off in 2006. In
particular, Calyon covered more client segments in all
geographical zones and further diversified its offering
across traditional products, exotic structured products
and fund derivatives.
2005’s sharp improvement in performance continued
into 2006 on the back of strong demand from
institutional investors, particularly outside France.
Brokerage
CA Cheuvreux
Cheuvreux is a European equity broker, and is developing
its activities in institutional brokerage in the main
European equity markets. Its range of services also
includes execution in 18 European markets, corporate
brokerage and intermediation on behalf of individual
clients of the Credit Agricole Group.
Cheuvreux’s sales and execution team serves around
1,100 international institutions.
It benefits from independent research of recognised
quality, covering stocks representing 85% of continental
Europe’s market capitalisation.
In 2006, Cheuvreux was ranked number 1 in Europe for
French equities (source: Institutional Investor). SRI
(socially responsible investing) research was fully
integrated with traditional financial analysis in 2005.
Cheuvreux’s SRI research had a top 5 ranking in
continental Europe in 2006 (source: Thomson Extel).
At the start of the year, Cheuvreux expanded its Eastern
European execution capacity in Poland, Hungary and the
Czech Republic.
Calyon Securities’ US electronic equity brokerage platform
was fully integrated with Cheuvreux’s global equity
execution platform. As a result, Cheuvreux will be able
to offer combined Europe/North America execution
services.
Two years after it was set up, the Corporate Brokerage
business saw strong growth in 2006. Cheuvreux leads
the market for management and share buybacks for
French issuers, and also ranks second in liquidity
contracts. (Source: Euronext)
Primary equity
The Global Equity Capital Markets unit focuses on equity
issuance.
CLSA
CLSA is recognised as one of the best brokers in Asia for
the quality of its research, topping the Bloomberg
rankings.
In 2006, Calyon played a key role in the successful
Aéroport de Paris IPO with the support of the Crédit
Agricole group, which placed around 40% of the shares
offered with the public.
It is an acknowledged expert in brokerage, investment
banking and placings. CLSA has more than 900 professionals in 11 Asian markets including Japan, as well as
in London and New York.
Calyon was also joint bookrunner in Banco Espirito
Santo’s capital increase in Portugal.
Calyon Financial
In hybrid securities, Calyon was joint bookrunner for
Artemis Conseil’s issue of a one billion euro bond
exchangeable into PPR shares.
Calyon Financial is one of the world’s leading futures
and options brokers. It offers direct execution services
on the main electronic stock exchanges and on openoutcry markets for futures, options and commodities.
It provides centralised clearing on a global scale.
It also offers quantitative risk management advisory
services and fundamental technical analysis.
Calyon Financial operates in the world’s 16 leading
financial centres, and strengthened its international
coverage in 2006 by opening a new office in Frankfurt
and a representative office in China. It deployed sales
teams in Brazil and the Middle East to increase its
emerging-markets presence.
In 2006, Calyon Financial continued its development in a
fast-growing market, with a 35% year-on-year increase
in trading volumes.
Altura, Calyon Financial’s joint venture with BBVA in
Madrid, was named “Best Spanish Listed Derivatives
Broker” for the second consecutive year (source: Risk
magazine).
Calyon also confirmed its expertise in employee savings,
setting up operations for companies including ASF,
Vallourec, Veolia and Schneider.
Advisory
In the French market, Calyon advised on 17 transactions
with a total value of 71.5 billion euros.
In particular, Calyon advised ASF on its 14 billion euro
privatisation.
In Europe, Calyon advised Arcelor in its defence against
Mittal Steel’s 33 billion euro takeover bid, and advised
Casino on the sale of its Polish business.
It also handled several cross-border mandates, such as
Seb’s acquisition of Chinese company Supor and Crédit
Agricole S.A.’s purchase of Cassa di Risparmio di Parma,
Banca Popolare Friuladria and Banca Intesa branches.
Financing
Investment banking
Global loan syndication
In 2006, Global Investment Banking continued its
geographical expansion into emerging markets in order
to increase its international scale:
In EMEA (Europe, Middle East and Africa), Calyon has an
integrated platform linking London, Paris and Madrid
for origination, structuring, distribution and secondary
market activities.
- in Latin America, it increased staffing, with facilitating
cross-border deals with the USA and Europe one of the
main objectives;
- in the United Arab Emirates, it set up a team in Dubai
covering the Middle East and North Africa;
- in Hong Kong, it put together a primary equity team
specialising in derivatives.
It ranked second among investment banks in France and
Spain (source: Euromoney), 6th in advisory in the French
market (source: Agefi) and 3rd for primary equity
transactions in France (source: Thomson Financial).
In 2006, the syndication market grew by 12% on the
back of acquisition financing deals.
Calyon was lead arranger for a large number of major
transactions, including Louis Delhaize (France), BAA
(Spain), Numericable (France), MTC (Koweit), Gazprom
(Russia) and Grupo IMSA (Mexico).
In EMEA, this gave Calyon third place among bookrunners,
and kept it in the global top 10 (source: Thomson
Financial).
12 - 13
Project finance
Real estate financing
Calyon is a world leader in advising on and arranging
project financing. It has global coverage, through seven
international teams within an integrated business line.
It has specific expertise in natural resources, electricity,
environment,
infrastructure
and
public-private
partnerships.
Calyon’s real estate financing business operates in 15
countries and offers global structured financing solutions
to real estate professionals.
2006 brought strong growth in infrastructure, as well as
in public-private partnerships, which has become the
leading segment of the non-recourse financing market.
Calyon played a leading role in this market, with deals
including Uejongbu (South Korea), North South Bypass
Tunnel (Australia), Optimep (France), Vinci Park (France)
and Birmingham M6 (UK).
The advisory business also made progress, as shown by
mandates from Gazprom, Alcan Aramco and Total.
Calyon was the world’s leading arranger of project
finance in 2006 (source: Dealogic).
Aircraft and rail financing
Calyon is a world leader in this sector, with more than
30 years’ experience.
In 2006, Calyon financed around 100 aircrafts and
organised the creation of one of China’s leading aircraft
leasing companies: Dragon Aviation Leasing Company.
Several of Calyon’s deals won awards in 2006, and
Calyon was named “Aircraft Finance House of the Year
2006” by Jane’s Transport Finance.
The business was also extended into the rail sector, and
Calyon’s activities included the financing of new equipment for Ermewa.
Shipping financing
2006 highlights included deals relating to the Citylife
project in Italy, Colony Capital and Kingdom Hotels
International’s acquisition of Fairmont Hotels & Resorts
Inc in the USA, the acquisition of Hilton International by
Hilton Hotels Corporation in the USA and the acquisition
of Groupe Taittinger by Starwood Capital in France.
In 2006, Calyon was ranked the leading real estate bank
in France and Spain and number four worldwide (source:
Euromoney).
Export, trade and commodity finance
Export finance
Calyon is a world leader in export finance, ranking fourth
among global mandated arrangers (source: Dealogic).
In 2006, it increased its business capacity in New York
and Asia. It led and structured deals worth 3.7 billion
euros and was awarded several Deal of the Year Awards,
by Global Trade Review for the Orascon Telecom Algeria
transaction; by Global Trade Review and Trade Finance
Magazine for the China Oil & Gas Fund transaction; and
by Trade Finance Magazine for the MAV transaction in
Hungary.
Trade finance
The trade finance business achieved a significant
increase in revenues in 2006, with high growth rates in
Europe, Japan and the Middle East. Local sales forces
were set up in the USA and Brazil.
Commodity trade financing
Calyon finances commodity trading by major traders and
producers, securing payment for goods flows in the
energy, metals and soft commodities segments.
Calyon is a world leader in shipping financing.
With gross outstandings of more than 9 billion euros at
end-2006, Calyon finances a modern and diversified
fleet of more than 1,000 ships for an international
shipowner client base.
2006 brought a downturn in the shipping market after
two excellent years. Against this background, the
shipping financing team continued to develop its
activities in a highly competitive market, signing 90 new
deals (three quarters as arranger or sole lender) with a
total arranged value of more than 6.5 billion euros.
In 2006, the business expanded into Singapore,
supporting the Hong Kong unit and strengthening its
international position. It benefited from an extremely
busy and volatile market, which boosted trading and
generated strong growth in business volumes and
revenues.
Structured commodity financing
Structured commodity financing is mainly focused on oil,
gas, non-ferrous metals and certain agricultural
commodities. The service is aimed at commodity producers
and exporters in emerging-market countries.
Calyon is acknowledged as one of the world’s leading
players in this business. It arranged or co-arranged
deals worth 6.6 billion dollars in 2006. It also won a
Deal of the Year Award for the Russal deal in Russia by
Global Trade Review and Trade and Forfaiting Review.
Energy and structured financing advisory
Based on its success and experience in advising on
project financing deals, in 2006 Calyon broadened its
advisory activities to include all structured financing
deals in the oil, gas, electricity, metals and infrastructure
sectors.
In association with Global Investment Banking, this
department is also developing advisory services relating
to financing and pre-financing through debt and/or
capital, using existing expertise in this area.
Telecoms
This business saw further firm growth in 2006, due to
Calyon’s involvement in financing acquisitions such as
Softbank’s purchase of Vodafone Japan and the purchase
of TeleDanmark by investment funds.
Calyon was also involved in consolidation between cable
operators in Europe (NTL in the UK, Ypso-Numéricable in
France) and the USA (Time Warner Cable).
Acquisition financing
The Global Financial Sponsor Group (GFSG) was set up
through a collaboration between the Corporate Relations
and Global Investment Banking units. It is a crossdiscipline unit in charge of Calyon’s relationships with
investment funds worldwide.
Within GFSG, the Leveraged Finance Group handles LBO
acquisition financing deals.
2006 was another record year for the LBO markets, both
in terms of the number of deals and in the amount of
capital raised. Calyon was Mandated Lead Arranger for a
number of major deals: in France (Elior, Pages Jaunes,
Picard, Europcar), Spain (BAA), Italy (Fiat Avio) and the
UK (Iglo-Birds Eye).
Once again, Calyon was ranked among the top 10 European
players of the year by IFR magazine, while Thomson
Financial ranked it no.8 in Western Europe.
Corporate Banking
Corporate Banking & Services (CBS) is in charge of
commercial banking activities in France. Its range of
products and services is supported by the expertise of
Calyon’s specialist business lines and by the capacity of
Credit Agricole’s branch network (regional banks and
LCL) along with its specialist subsidiaries (lease financing,
asset management, factoring).
The French Regions unit has 19 branches, and works with
Crédit Agricole’s Regional Banks in the fields of coverage,
corporate banking and capital markets. It serves a range
of medium-sized companies, local authorities and financial institutions in France.
Banque Saudi Fransi
Calyon owns a 31.1% stake in Banque Saudi Fransi, a
leading universal bank in Saudi Arabia that accounts for
around 11% of lending in the country. BSF put in an
excellent performance in 2006, helped by growth in fee
and commission income and a sharp rise in equity
brokerage revenues.
International private banking
The international private banking provides individual
investors with a comprehensive wealth management
service.
Within Calyon, it provides customers with broad
international coverage through its operations in Brazil
(CA Brasil Private Capital Management), Spain (Calyon
Espagne), Luxembourg (Crédit Agricole Luxembourg and
its Belgian subsidiary CAGP), Monaco (Crédit Foncier de
Monaco) and Switzerland (Crédit Agricole Suisse with its
subsidiaries and branches in the Bahamas, Singapore,
Lebanon, Uruguay and Hong Kong).
2006 brought solid organic growth. Assets under
management increased to 54.1 billion euros at year-end
and new operations were opened in Hong Kong, Lebanon
and Uruguay.
14 - 15
2006 key income statement data for Calyon’s main subsidiaries
(contribution to consolidated net income)
CA Suisse
CLSA
Net banking income
380
433
309
325
167
143
44
126
Net income
121
91
25
85
* Group share accounted for using the equity method
CA Cheuvreux Calyon Financial
Banque Saudi
Fransi
157*
2
Corporate governance
and internal control
18Chairman’s report to the annual general meeting of shareholders on 14 May 2007
18
22
30
Statutory Auditors’ report
31
Executive officers’ and directors’compensation
31
34
41
Internal control procedures
Compensation paid to Executive Officers and Directors
Offices held by Executive Officers and Directors
Executive Committee
16 - 17
Chairman’s report
to the annual general
meeting of shareholders
on 14 May 2007
as required by the “Financial Security Act” 2003-706 of 1 August 2003
(Code de commerce, article L 225-37; Code monétaire et financier, article L 621-18-3)
To the Shareholders,
In accordance with article L. 225-37 of the Code de
Commerce and the principles and standards in force
within Credit Agricole S.A. and the Credit Agricole Group
as a whole as regards corporate governance and internal
control, this report is presented alongside the management report drawn up by the Board of Directors, in order
to provide you with information on the way in which the
work done by the Board of Directors is prepared and
organised, and on the internal control procedures implemented by Calyon.
This report was submitted to the Board of Directors on
28 February 2007, and was prepared on the basis of
work including that done by the heads of Periodic
Control, Permanent Control and Compliance, the office
of the Corporate Secretary and the Finance Department.
By way of reference, this section contains information
about the composition of the Board of Directors and the
Management Board, their terms of office and compensation, as shown on pages 31 to 40 of this “Corporate
governance and internal control” chapter.
The preparation and organisation of work done by the
Board of Directors comply with laws and regulations
currently in force, the Company’s Articles of Association,
the internal rules applying to the Board of Directors and
internal directives.
1 - Board of Directors
1.1 General presentation
At 31 December 2006, Calyon’s Board of Directors was
made up of seventeen voting directors and one nonvoting director, Henri Moulard. Fifteen of these directors
were appointed by shareholders in the general shareholders’ meeting and two were elected by employees.
The company’s Articles of Association state that the
Board of Directors shall be made up of between six and
twenty directors, appointed for three-year terms. At
least six of these directors shall be appointed by
shareholders in the general shareholders’ meeting, and
two elected by employees. Directors must own at least
one share each in the Company. The age limit for
directors is sixty five, although as an exceptional measure
the term of office of a director who has reached the age
limit may be renewed for a maximum of five subsequent
one-year periods, provided the total number of directors
aged sixty five or over does not exceed one-third of the
number of directors in office.
In 2006, Bernard Lolliot was appointed director to
replace Jean-Yves Hocher, who resigned with effect from
1 January 2006.
The functions of the Chairman, Jean Laurent, are separate
from those of the Chief Executive Officer, Edouard
Esparbès. The Management Board also includes deputy
CEOs Yves Perrier and Marc Litzler. The terms of office of
Management Board members were renewed in November
2006.
Jean Laurent and Edouard Esparbès are both responsible
officers in the sense of French banking regulations (CECEI
rules).
1.2 - Modus operandi
of the Board of Directors
1.2.1 - Board meetings
The Articles of Association state that the Board shall
meet whenever the interests of the Company so require,
and that meetings shall be called by the Chairman or by
any person authorised to do so by the Board of Directors.
If the Board has not met for more than two months, the
Chairman may be asked by at least one third of the
Board members to call a meeting in order to consider a
predetermined agenda.
1.2.2 - Powers of the Board of Directors
The powers of the Board, as defined in article L.225-35
of the French Commercial Code, are set out in the Board’s
internal rules, as follows:
Under the duties given to it by law and taking into
account the powers granted to the Management Board,
the Board of Directors defines the Company’s strategies
and general policies, and approves – on the basis of
proposals by the Chief Executive Officer and/or the
Deputy Chief Executive Officers, as applicable - the
means, structures and plans designed to implement the
strategies and general policies it has defined. It makes
decisions on all matters concerning the governance of
the Company referred to it by the Chairman and the
Chief Executive Officer.
In addition to the aforementioned powers and those
conferred upon it by law, the Board of Directors takes
decisions, on the basis of proposals by the Chief Executive
Officer and/or any of the Deputy Chief Executive Officers:
- relating to transactions involving:
• t he creation, acquisition or sale of any subsidiaries or
holdings,
• the opening or closure of any branches abroad,
• the acquisition, sale, exchange or transfer of ongoing
businesses or business assets.
that may result in an investment of over 50 million
euros;
-o
r the provision of security to guarantee the Company’s
commitments (including those not relating to transactions on the financial markets), when the security
concerns Company assets with a value of more than 50
million euros.
The Board approves proposals by the Chief Executive
Officer or Deputy Chief Executive Officers relating to the
purchase or sale of real estate made in the name and on
behalf of the Company, when the amount involved
exceeds 30 million euros.
1.2.3 - R
eferral, information and decision-making procedures
An internal directive describes these procedures and the
conditions under which the Board operates.
The agenda for each Board meeting is drawn up by the
Board Secretary fifteen days before the scheduled date
of the meeting. The Board Secretary sends information
to the Directors in a timely manner, so that they can
make an informed and useful contribution to the
meeting. Head office departments or branches needing to refer
matters to the Board or pass information on, in
compliance with the predefined calendar of Board
meetings, must inform the Secretary of the Board of
Directors of the matters to be discussed, via the head of
the relevant business line and in a timely manner.
Proposals that are essentially legal in nature:
- in view of the issues involved, their complexity or innovative nature,
- or that concern the calling of a general meeting of
shareholders’, a change to the composition of the Board
of Directors or the Management Board, an amendment
to the Memorandum and Articles of Association or a
change in the capital, as well as decisions relating to
authorisations to operate as a credit institution or
investment services provider,
shall be submitted by the relevant departments and
prepared in conjunction with the Central Legal Department
at least one month before the meeting is held.
In accordance with articles L. 225-38 et seq. of the Code
de Commerce, the Board of Directors:
- authorises “regulated” related-party agreements prior
to their signature: the directors and managers concerned by the agreement do not take part in the voting; these agreements are the subject of a special
report drawn up by the independent auditors and
provided to shareholders in the general meeting of
shareholders;
- t akes note of other significant agreements concerning
“day to day business operations entered into under
18 - 19
normal conditions”, the list of which is also sent to the
statutory auditors and made available at the general
meeting of shareholders.
For all other Board activities and decisions that are
essentially operational in nature, including the reports
required by laws and regulations or memoranda prepared
by the Board on specific issues or the implementation of
strategies defined by the Board, the relevant departments
must ask the Board Secretary to include these matters on
the agenda and then forward to the Corporate Secretary,
at least ten days before the Board meeting, the
corresponding referral and information memoranda
together with all necessary related documents.
These memoranda must include a brief, clear description
of the operation, the amount at stake for the Company
and the Group, the advantages and likely outcome
within the framework of the Company or Group strategy,
the timetable for decisions and action, as well as any
legal or tax opinions that may have been requested from
internal or external advisers. They must also contain the
wording of the proposed resolution.
A guide for directors, accompanied by compliance recommendations, has been distributed within the Credit Agricole S.A. group.
1.2.4 - Assessment of the Board’s performance
The Board of Directors met five times according to the
established schedule in 2006: on 17 January, 1 March,
16 May, 31 August and 21 November.
Prior to each meeting, documentation was sent to
Directors as early as possible to ensure that they were
properly informed.
Meetings dealt mainly with the following subjects:
- t he full-year, half-year and quarterly financial statements, after examination by the Audit Committee,
- approval of the annual budget,
-p
resentation of the annual internal control and risk
management and monitoring report, and the report
by the officer responsible for controlling investment
services,
-u
pdates on the risk situation - presentation of global
stress scenarios and developments of the Basel II
project at Calyon,
- information on the internal control and compliance
system,
- compliance updates,
-p
resentation of letters from the Commission Bancaire
and other supervisory authorities,
-m
onitoring reports on the activities of certain subsidiaries, affiliates and business lines,
- list of significant agreements signed or executed in
2005,
- delegations of powers, particularly as regards bond
issues,
- remuneration of the Management Board.
As part of the Board’s performance assessment, a
document was sent to the Board in its January 2007
meeting setting out the main themes covered in Board
meetings in 2006, along with certain Board organisation
information.
Board members were heavily involved in the work done
by the Board. The average attendance rate was more
than 93%.
The average age of directors is fifty-eight.
The Board considers that Mr Alphandery, Mr Comolli, Mr
Dangeard and Mr Martin are independent directors in
accordance with the recommendations of the AFEP/
MEDEF report.
2 - C ompensation Committee and Audit Committee
Members of these committees are appointed by the Board
of Directors in accordance with the Board’s internal
rules.
Compensation Committee
The Compensation Committee consists of three designated
Board members:
-G
eorges Pauget, Chairman, appointed on 17 January
2006,
- Pierre Bru, appointed on 16 November 2004, -a
nd Didier Martin, an independent director, in office
since 4 September 2002.
The Compensation Committee meets whenever necessary
and whenever requested by the Chairman of the Board of
Directors. Its role is to make recommendations to the
Board of Directors concerning the ordinary and special
compensation paid to members of the Board and its
Chairman, as specified in the Articles of Association, as
well as fees, benefits in kind and other pecuniary benefits
granted to the Chief Executive Officer and Deputy Chief
Executive Officers. It is also responsible for the information
in the management report relating to the compensation
received by corporate officers. The Committee met in
March 2006.
On the basis of its proposals, the following principles
and rules have been adopted by the Board of Directors
regarding the compensation of corporate officers:
-a
ttendance fees are distributed among directors on
the basis of their attendance at Board meetings and at
Audit and Compensation Committee meetings, and a
fixed sum is paid to the Chairman of the Board; attendance fees are set according to the following
rules:
• t he amount of attendance fees paid by Calyon to
members of the Board of Directors is calculated according to their attendance at Board meetings (3,000
euros per meeting);
• members of the Compensation Committee and the
Audit Committee receive an annual fee for their
participation in these Committees (4,000 euros and
15,000 euros respectively);
• an annual fee of 20,000 euros is paid to the Chairman
of the Board of Directors;
- compensation of Management Board members consists of a fixed salary and variable remuneration. The
fixed component is determined by reference to market
practices; the variable component is capped and is
based on quantitative and/or qualitative criteria:
• quantitative criteria may relate to:
- the attainment of earnings objectives at Calyon
(gross operating income etc.) and Crédit Agricole
S.A. (net banking income, earnings per share etc.);
-o
r the performance of a Calyon business line;
these quantitative criteria may determine the majority of the variable component, or may have equal
ranking with qualitative criteria.
• pre-determined qualitative criteria relate in particular to efforts to implement Calyon and the Crédit
Agricole Group’s strategic plan.
Compensation of Calyon’s CEO, Edouard Esparbès
The fixed portion of the CEO’s compensation is set with
reference to market practice for CEO compensation.
The variable portion is based on two sets of criteria:
- quantitative criteria (50% weighting in 2006) relating
to Crédit Agricole S.A. financial performance indicators
(20%) and an indicator representing Calyon’s financial
performance (30%);
- qualitative criteria (50% weighting in 2006), based on
the general running of Calyon and the CEO’s
contribution to resolving issues of general interest for
the Group.
Compensation of Calyon’s Deputy CEO in charge of
Structured Finance, International and the following
support functions: Organisation and Processing,
Distressed Assets, Risks and Permanent Controls,
Yves Perrier
The fixed portion of the deputy CEO’s compensation is
set with reference to market practice for deputy CEO
compensation.
The variable portion is based on two sets of criteria:
- quantitative criteria (50% weighting in 2006) relating
to Crédit Agricole S.A. financial performance indicators
(20%) and an indicator representing Calyon’s financial
performance (30%);
- qualitative criteria (50% weighting in 2006) based on
the officer’s supervision of International and ability to
promote teamwork among the Management Board.
Compensation of Calyon’s Deputy CEO in charge
of Capital Markets and Brokerage, Marc Litzler
The fixed portion of the deputy CEO’s compensation is
set with reference to market practice for deputy CEO
compensation.
The variable portion is based on the performance of
capital markets activities.
Details on the components of corporate officers’ compensation are provided in this “Governance and Internal
Control” chapter, on page 31 to 33.
The Group’s key executives are covered by the supplementary pension plan, which cannot be individualised.
Beneficiaries accrue benefits under this plan only if they
remain within the Group until retirement age.
Audit Committee
Internal rules state that the Audit Committee shall consist
of at least four people, designated by the Board of
Directors from among the voting and non-voting directors,
for their full term of office, and shall contain at least two
members without other links to the Credit Agricole Group.
The Chairman of the Committee is responsible for
presenting an overview of works carried out within the
Audit Committee to the Board of Directors.
Its members are:
-H
enri Moulard, non-voting director, member of the
Committee since November 2003, appointed Chairman
on 1 April 2004,
- Edmond Alphandery, independent director, and
Philippe Geslin, both appointed in September 2002,
Jean-Paul Chifflet, appointed on 16 November 2004,
and Bernard Lolliot, appointed in March 2006.
20 - 21
Pursuant to Board rules, the Committee meets as often
as necessary, and at least once every six months.
Meetings shall be convened by its Chairman or by the
Chairman of the Board of Directors.
The Committee’s role is to examine and assess the
internal control system, become acquainted with the
activities of the statutory auditors and Internal Control
officers, review drafts of annual and half-year parentcompany and consolidated financial statements, advise
on the renewal or appointment of the statutory auditors,
and examine any questions of a financial or accounting
nature referred to it by the Chairman of the Board or the
Chief Executive Officer. It can make recommendations on
these matters and can also instruct the Chief Executive
Officer to organise internal or independent audits, after
having informed the Chairman of the Board of
Directors.
The Audit Committee met six times in 2006.
It examined the annual, half-year and quarterly consolidated financial statements before presenting them to
the Board. It monitored movements in credit risk
reserves, market risks and structural interest-rate,
exchange-rate and liquidity risks.
The Committee was involved in the reappointment of
the statutory auditors in 2006.
The operating methods of the internal control system
were discussed regularly:
- review of the Periodic Control audit plan,
- compliance updates,
- implementation of permanent control.
The Committee examined reports relating to 2005: the
report on internal control and the report on risk measurement and surveillance, presented to the Commission
Bancaire, and the report by officer responsible for controls on investment services, presented to the Autorité des
Marchés Financiers.
Detailed presentations were made on certain crossdiscipline themes such as the implementation of Basel II
regulations within the Group, the organisation of
processing and IT systems.
The Committee heard reports by the statutory auditors
whenever they examined financial statements. It also
heard the Executive Committee member in charge of the
Finance Department and the office of the Corporate Secretary, the Chief Financial Officer and the group Financial
Controller, and various internal control officers (periodic
control, risks and permanent control and compliance).
The Chairman of the Audit Committee reported to the
Board at each Board meeting.
3 - L imitations placed on the powers of the Chief Executive Officer by the Board of Directors
The Board rules stipulate that in the performance of his
duties the Chief Executive Officer is required to comply
with the internal control rules that apply within the
Crédit Agricole group, along with the strategies and
decisions conferred by the law or by Board rules on the
Board of Directors or the general meeting of
shareholders.
They also stipulate that the Chief Executive Officer is
required to refer “all significant transactions concerning
the Company’s strategic decisions or that may affect or
alter its financial structure or scope of activity” to the
Board of Directors, requesting instructions.
In addition, as mentioned in point 1.2.2., as a purely
internal limitation that is not binding on third parties,
the Chief Executive Officer is required to obtain prior
authorisation from the Board of Directors or its Chairman
before entering into certain types of transactions.
Internal control procedures
Définition of the internal control system
Within the Credit Agricole Group, the internal control
system is defined as all procedures aimed at controlling
activities and risks of all kinds and enabling transactions
to be carried out properly, securely, and efficiently. This
definition and the resulting principles are consistent
with the work done by the financial market group under
the guidance of the Autorité des Marchés Financiers.
Like any internal control system, however, this system
and these procedures have limits, relating in particular
to inadequacies in procedures or IT systems, technical
problems and staff shortcomings.
Its main objectives are as follows:
-a
financial performance objective, to ensure effective
and proper use of Group assets and resources and to
protect against the risk of loss,
- an information objective, to provide exhaustive,
accurate and timely information for decision-making
and risk management purposes,
- a compliance objective, in respect of internal and
external rules and regulations,
- an objective to prevent and detect fraud and errors,
-a
n objective to compile accurate and exhaustive
accounting records and prepare reliable and timely
accounts and financial statements.
- t he procedures of the various departments within
Calyon and its subsidiaries and branches.
Calyon, which is a wholly owned subsidiary of Credit
Agricole S.A., complies with the rules laid down in French
and international regulations and with the rules and
regulations introduced by its parent company.
2-O
rganisation of the internal control
system
1-R
eference documents relating to internal control
1.1 - Laws and regulations
2.1 - Basic principles
The organisational principles and components of Calyon’s
internal control systems, which are common to all Crédit
Agricole Group entities, are as follows:
The internal control procedures implemented by Calyon
comply with the laws and regulations governing French
credit institutions and investment companies, and namely
with:
-
- the Code Monétaire et Financier,
- regulation 97-02 issued by the French Banking and
Financial Regulatory Committee, which defines internal
control. This regulation requires the implementation of
a risk measurement and control system within institutions covered by the regulation, as well as information
procedures and procedures for assessing the conditions
under which internal control is carried out.
2.2 - Oversight
Calyon’s internal control also takes into account the
following international reference documents:
complete coverage of activities and risks,
responsibility of all persons involved,
clear definition of tasks,
separation of commitment and control functions,
formal and up-to-date delegations of powers,
formal and up-to-date standards and procedures,
especially for accounting and information processing,
- systems for measuring risks and performance,
- systems for monitoring and controlling risk,
- a control system that includes permanent controls
(first and second-degree) and periodic controls (thirddegree: Group Internal Control and internal audits),
as described below.
- the Basel Committee’s recommendations,
- t he applicable laws and regulations in the countries in
which the Group operates.
In order to ensure that the internal control system is consistent and efficient and that the above-mentioned principles are applied by all entities within the scope of Calyon’s
internal control system, three separate persons responsible
for Periodic Control (Control and Audit) Permanent Control
and Compliance Control have been appointed.
1.2 - The main internal reference documents are:
An Internal Control Committee, chaired by a member of
the Management Board, is responsible for:
-p
rocedural memo 2006-11 on “the organisation of internal control within the Credit Agricole S.A. group”,
- all documents issued by Crédit Agricole S.A. that are
permanent, regulatory (external regulations and rules
internal to the group) and mandatory, relating in particular to accounting (Crédit Agricole chart of accounts)
and financial management,
- the Crédit Agricole group’s Code of Conduct,
- a set of procedures (intranet database of governance
texts, maintained by Calyon’s office of the Corporate
Secretary) relating to compliance, risks and permanent
controls, particularly,
- directive 99-01 on internal control within the Calyon
group (currently being updated), along with directives
issued in 2004 concerning internal control committees,
internal control correspondents and operational risk
managers,
- r eviewing internal control procedures and the control
system implemented,
- deciding on corrective action to be taken to remedy
weaknesses identified during audits, either in internal
control reports or as a result of problems that have
occurred,
- monitoring the implementation of action following
internal and external audits,
- t aking any decisions necessary to make up for weaknesses
in internal control. Its members are Credit Agricole S.A.’s Head of Group
Internal Control, Calyon’s Head of Control and Audit, the
Chief Financial Officer, the Head of Risk and Permanent
Control and the Chief Compliance Officer. They may be
joined by the heads of other Calyon departments in view
of the matters under discussion.
22 - 23
The committee met four times in 2006.
Local internal control committees have also been set up
in several subsidiaries and branches, both in France and
abroad.
2.3 - Board of Directors
The Board of Directors is kept informed of the organisation, activities and results of internal control and of the
main risks faced by the Bank.
It approves the general organisation of the Bank and of
its internal control system.
In addition to regular information updates, the following
reports relating to 2006:
-a
report on the conditions under which the internal
control procedures were implemented;
-a
report on the measurement of risks and performance;
-a
report by the head of compliance in investment
services, concerning the organisation of this function,
its tasks and any observations and measures taken;
will be presented in the Board’s May 2007 meeting.
The Audit Committee has the task of examining and
evaluating the internal control system and becoming
acquainted with the internal control work done by internal
control officers. (see section I. 2/ “Audit Committee”).
2.4 - Management Board
The executive body is directly involved in the organisation
and operation of the internal control system. It ensures
that risk strategies and limits are compatible with Calyon’s
financial situation (level of shareholders’ equity, results)
and the strategies defined by the governing body.
The executive body defines the group’s general organisation and ensures that it is implemented in an efficient
way and by competent individuals. In particular, it
clearly assigns roles and responsibilities in the area of
internal control and allocates the appropriate resources
to the system.
It verifies that risk identification and measurement
procedures appropriate to Calyon’s activities and
organisation are adopted. It also verifies that it regularly
receives the key information produced by these systems.
It ensures that the internal control system is continuously
monitored, to verify its suitability and efficiency. It is
informed of the main problems identified by internal
control procedures and the corrective measures
proposed.
2.5 - S cope and global organisation of Calyon’s
internal control systems
In accordance with the principles applied within the
Group, Calyon’s internal control system applies to its
branches and subsidiaries in France and other countries,
irrespective of whether they are under its sole control or
joint control.
Each entity within the Calyon group applies this principle
to its own subsidiaries, thus creating a pyramidal
internal control structure and reinforcing consistency
between different Group entities.
In this way, Calyon ensures that it has an adequate system within each of its risk-bearing subsidiaries, and that
activities, risks and controls are identified and monitored
on a consolidated basis within these subsidiaries, particularly as regards accounting and financial information.
3-B
rief description of internal control and risk management procedures implemented within the group
The internal control system is based on three levels of
controls, which distinguish permanent control from
periodic control:
- Permanent control is carried out:
•a
t the first degree: on an ongoing basis, at the initiation
of a transaction and during the transaction validation
process, by operators themselves, by the unit’s hierarchy
or by automated transaction processing systems,
• at the second degree (first level), by staff separate
from those who initiated the transaction and who
may carry out operational activities,
• at the second degree (second level) by staff exclusively
working in at the final level of specialist permanent
control with no authorisation to make commitments
involving the taking of risk (credit or market risk
control, accounting control, compliance control etc.).
- Periodic control (third-degree) covers occasional onsite
audits of accounting records relating to all of the
company’s activities and functions by Group Control
and Audit.
3.1 - First-degree controls
First-degree controls are carried out by each employee
on the transactions he/she handles, by referring to the
applicable procedures. These controls concern front office units operating within business lines or divisions
(Structured Finance, Capital Markets, Brokerage, Investment Banking, Distressed Assets, Private Banking).
The controls essentially consist of operational checks by
operators or account executives on their positions and
limits.
At the local level, the head of the entity is responsible
for first-degree controls, while the head of the business
line is responsible at central level.
The organisation of risk and permanent control activities
within Calyon is integrated into the Credit Agricole S.A.
group’s Risk and Permanent Control business line. This
business line combines all head office risk functions and
activities, as well as local and regional officers in the
international network.
Operating staff are expected to remain vigilant at all times
with regard to the transactions they handle. This vigilance
should take the form of compliance with all procedures
intended to ensure the procedural compliance, security,
validity and completeness of transactions. Each line
manager must check, for the activities for which he/she
has responsibility, that his/her staff comply with the rules
and internal procedures for processing transactions.
Calyon holds certain powers in managing its risks. Any
cases outside the scope of its powers, as well as certain
significant risk strategies, are validated by the Group
Risk Committee.
3.2 - Second-degree controls - first level
As well as having responsibility for the administrative
processing of all transactions, back offices perform checks
on the activities of the front offices during the recording
and execution of transactions, namely by comparing data
in front office databases with back office data and
information provided by the counterparties.
These controls are coordinated locally by the entity’s
head, via the Chief Operating Officer or the officer
responsible for administration or finance.
3.3 - Second-degree controls - second level
These controls are carried out centrally by specialised
departments:
3.3.1 - Risk and Permanent Control Division
The Risk and Permanent Control Division (RPCD) is
responsible for the management of risks and permanent
controls within Calyon.
The purpose of this division is to control credit risks,
market risks, country risks and operational risks.
However, structural risks are managed by the Finance
Department.
To control these risks, it oversees the Group’s commercial
development in order to minimise risk-related costs
relating to the activities of the different business lines,
entities or units.
In addition, the RPCD is in charge of monitoring the
permanent risk control system for the whole of Calyon.
The RPCD is also in charge of implementing Basel II for
all of Calyon.
Calyon’s Head of Risk and Permanent Control reports to
the Crédit Agricole S.A. group’s Head of Risk and Permanent
Control and to Calyon’s Management Board. He is a
member of the Bank’s Management Committee. The Head
of Risk and Permanent Control is also responsible for
permanent control within the meaning of regulation
97-02 as amended.
Corporate governance is structured primarily around the
following bodies:
-a
Counterparty Risk Committee, which decides on individual risks,
- a Market Risk Committee, which defines applicable
limits and supervises positions taken,
- t he Strategy and Portfolio Committee which, for each
business line and each geographical unit, defines and
decides the main guidelines concerning the business
development framework from the risk point of view,
- the Sensitive Cases Committee, which decides on the
classification of sensitive cases and doubtful customers,
and proposes reserves that are validated by the
Management Board.
Credit risk is subject to a decision-making, monitoring
and reserve-allocation process, in accordance with the
internal rules of the Credit Agricole S.A. Group.
Credit risk
Any counterparty or group of counterparties is subject to
limitations within the framework of specific procedures.
The decision-making process requires two authorised
front-office signatures (one relating to analysis of
commitments, the other being that of the Chairman of
the relevant Committee), as well as the independent
opinion of the RPCD.
If the RPCD’s opinion is negative, the decision-making
power is passed on to the Chairman of the Committee
immediately above.
24 - 25
Calyon has an internal rating system based on a fifteenpoint scale and methodologies adapted to each major
type of counterparty.
Credit decisions are subject to risk strategies that set the
main guidelines (target customer base, types of approved
products, total budgets and expected unit values etc.),
which each geographical unit or business line must apply
to its activities.
When a case is considered to be outside the framework of
the risk strategy in force, intermediary authorisations do
not apply and a decision can only be made at Management
Board level (CRC).
The RPCD is responsible for monitoring commitments. It
identifies, as soon as possible, assets that may deteriorate
and initiates the most suitable measures to protect the
Bank’s interests.
The process for monitoring receivables is enhanced by a
system of portfolio and sub-portfolio analyses on groupwide business line, geographical or sector basis. Analysing
concentrations and, if applicable, recommendations for
the reorganisation of the portfolio are an integral part of
this exercise.
In addition, portfolio reviews are organised periodically
for each profit centre in order to verify that the portfolio
complies with the risk strategy in force. The rating of
certain counterparties under review may be adjusted at
this time.
Sensitive cases and major risks are monitored every
quarter. For other risks, commitments and authorisations
are reviewed annually.
The adequacy of the level of reserves in relation to risk
is assessed every quarter by the Management Board, on
the proposal of the RPCD.
Country risk
Country risks are subject to an assessment and monitoring
system based on a specific ratings methodology. Country
ratings are updated quarterly. Each country with a rating
below the threshold set in the Bank’s procedures is
subject to limitations that are reviewed yearly.
This approach also involves stress tests, with the aim of
assessing the impact of unfavourable macroeconomic
assumptions and quantifying the risks to which the
Bank may be exposed in an unfavourable climate.
Market risks
Market risks are monitored using several approaches,
including the Value at Risk (VaR) or one-day potential
loss method with a confidence interval of 99%, as well
as specific indicators for each market.
The VaR-based market risk analysis is enhanced by
looking at three types of aggregate stress scenarios:
historical stress, hypothetical stress and adverse stress.
Requests for market limits are examined to allow the
setting of aggregate and operational limits (decisionmaking processes), quantitative limits (risk levels),
qualitative limits (authorised instruments) and limits
based on acceptable loss levels (alert thresholds).
Operational risks
Operational risk management relies mainly on a network
of Permanent Control correspondents coordinated by the
RPCD.
Operational risks are monitored for each business line
and each region, which ensures the reporting of losses
and incidents, as well as their analysis by Internal
Control Committees.
Each quarter, the RPCD produces an operational risk
scorecard showing movements in operational riskrelated costs and associated key events.
The mapping process that began in 2004 continued in
2006. Mapping now covers all business lines at head
office, the international network and brokerage and
private banking subsidiaries.
As regards the management of “essential” outsourced
services, outsourcing contracts are being updated and
control procedures are being improved.
Implementation of Basel II
Calyon continued to prepare for the implementation of
the new Basel II regulations through a project structure
defined in 2005 and spearheaded by the RPCD.
Corporate governance is the responsibility of Steering
Committees chaired by a member of the Management
Board, and of Banking and Systems Project Committees,
in concert with Credit Agricole S.A. through specific
committees.
Based on an audit of the whole Group system, Calyon
implemented an action plan in 2006 covering all aspects
of the project:
-a
s regards credit risk, the action plan covered methods, data quality and the standardisation of infor-
mation systems in preparation for the adoption of the
advanced Internal Ratings-Based approach (IRB) for
the most significant portfolios;
- as regards operational risk, the aim of the action plan
is to use the advanced risk measurement approach
(AMA).
These two systems will be examined by the Commission
Bancaire with a view to their validation in 2007.
3.3.2 - Finance Department
Internal control system for accounting and financial
information
Roles and responsibilities related to the preparation
and processing of accounting and financial information
Calyon’s Finance Department is responsible for preparing
the accounting and financial information of the Crédit
Agricole group’s corporate and investment banking
business.
Within the Finance Department, Group Financial Control
prepares Calyon’s parent-company and consolidated
financial statements and sends to Crédit Agricole S.A.’s
Accounting and Consolidation Department the information
needed to prepare the Crédit Agricole Group’s accounting
and financial information.
The Finance Departments of consolidated entities are
also responsible for preparing their financial statements
and sending them to Group Financial Control.
A number of people working within entities have
responsibilities for preparing accounting and financial
information. These responsibilities include the
following:
-A
ctivity Monitoring Teams produce management results
independently from front office teams;
- back office teams check the validity of transactions and
related accounting entries, and monitor payments;
- Finance Departments (and decentralised accounting
teams) reconcile management results with accounting
results.
An accounts control charter defines the roles of the
various players and the permanent controls for which
they are responsible.
Procedures for the preparation and processing of accounting and financial information
The Calyon group applies the Crédit Agricole Group’s
accounting policies. The accounting treatment of complex
instruments and transactions is subject to prior analysis
by the Finance Department’s accounting standards team.
Published financial information is based on accounting
data and management data produced by two separate
systems.
Accounting data
Each Calyon group entity produces a quarterly consolidation package, which feeds into the accounting consolidation system. The accounting consolidation system is
common to the Crédit Agricole group, and is owned
by Crédit Agricole S.A. Instructions are disseminated by
Group Financial Control to entities’ finance departments,
specifying the type of information to be collected,
particularly with a view to preparing the notes to the
consolidated financial statements. In 2006, as part of the
Crédit Agricole Group’s 2006-2008 accounting project,
Group Financial Control took steps to improve consolidation processes. Calyon also started to roll out a new
accounting platform in certain international entities,
allowing the standardisation of processes for preparing
and processing financial information. This roll-out will
continue in 2007.
Management data
Each entity reconciles the main items of its management
results with the intermediate income statement balances
produced from accounting data. Group Financial Control
checks that the sum of business-line results equals the
sum of entity results, which must in turn be equal to the
Calyon group’s consolidated results. This check is made
easier by the fact that the analytical unit (profit centre)
is integrated within the entities’ accounting information
system. Management data are prepared using calculation
methods that ensure they are comparable over time.
If reported information is not taken directly from the
accounting information system, its sources and calculation
methods are generally mentioned to make it easier to
understand.
Description of the accounting permanent control
system
Accounting permanent control is intended to provide
adequate protection against the major risks that may
damage the quality of accounting and financial information, presented below:
- c ompliance of data with laws, regulations and Crédit
Agricole group standards;
- reliability and accuracy of data, allowing a true and
fair view of the results and financial position of Calyon
and entities within its scope of consolidation;
- security of data preparation and processing methods,
limiting operational risks with respect to Calyon’s
commitments regarding published information;
- prevention of fraud and accounting irregularities.
26 - 27
In 2006, Calyon reorganised its accounting permanent
control system. The aim was to ensure that controls
involved in managing accounting and financial
information risks were well designed and worked as
required.
3.3.4 – Compliance
Calyon’s CEO receives periodical progress updates on the
work being done to set up the accounting permanent
control system.
Compliance activities are carried out systematically at
the business line, branch and subsidiary levels in France
and abroad.
Relations with statutory auditors
The Chief Compliance Officer reports hierarchically to the
Chief Executive Officer of Calyon and functionally to
Credit Agricole S.A.’s compliance department. Assisted
by a Head of Compliance and a Head of Financial Security,
the Chief Compliance Officer also supervises the heads of
compliance in the group’s various branches and
subsidiaries. In 2006, new compliance manuals were
distributed to staff, further training sessions were held
and the product listing project was completed.
In accordance with professional standards, the Statutory
Auditors carry out the audit work on published accounting
and financial information that they deem appropriate:
-a
udits of individual financial statements and consolidated financial statements,
- limited review of half-year consolidated financial
statements,
- r eview of financial information released.
As part of their statutory assignment, the Statutory
Auditors present Calyon’s Board of Directors with the
conclusions of their work.
3.3.3 - Information Security and Continuity Division
The Information Security and Continuity Division (ISEC) is
independent of the IT Processing Department. It has the
resources to carry out permanent controls on information
security and business continuity.
As regards the security of IT systems, ISEC defines the
rules and co-ordinates the security system, which
involves a complete annual assessment of the system in
terms of compliance with rules. It co-ordinates efforts
to maintain an adequate level of security both in France
and abroad. Internet systems are covered by large-scale
specific controls.
ISEC also carries out global co-ordination of business
continuity plans across the group as a whole. Business
continuity plans are evaluated and enhanced on an
ongoing basis. A number of tests were carried out in
2006, both in France and abroad. Substantial resources
are allocated to maintaining business continuity capacity
in France and abroad, as closely as possible to business
line needs.
ISEC uses a network of correspondents and reports on
Calyon’s security levels to a bimonthly committee formed
to examine the security of information and business
continuity plans, chaired by a member of the Executive
Committee.
Calyon’s Compliance organisation helps ensure that its
operations and staff comply with laws and regulations,
professional standards and practices and instructions
given by the supervisory or executive body.
Calyon’s compliance work was affected by several
regulatory and legislative texts published in 2006. New
procedural memos were issued and organisational
measures were prepared to meet these new regulatory
requirements. A monitoring system is being set up to
meet regulatory requirements relating to market abuse.
2006 also saw the start of work to prepare for MIFID
(Markets in Financial Instruments Directive), which is
scheduled to come into force on 1 November 2007.
3.4 - Third-degree controls
Group Internal Control and the internal audit teams that
report to it have the responsibility for periodic controls
on all Group entities.
They do not have any responsibility for or authority over
the units they audit.
3.4.1 - Group Internal Control
Calyon’s Group Control and Audit, which comprises 50
inspectors, is an integral part of the Group’s Control and
Audit division. Calyon’s Head of Group Control and Audit,
who is in charge of periodic control at Calyon, reports
hierarchically to the Head of Group Control and Audit at
Credit Agricole S.A. and functionally to the Chief Executive
Officer of Calyon.
Group Control and Audit is responsible for ensuring that
the internal control system within Calyon and its
subsidiaries is consistent and efficient. Its assignments
within audited entities include ensuring compliance
with external and internal rules, ensuring the suitability
of all types of systems for risk measurement and
monitoring, and checking the reliability of accounting
information, the quality of risk management, and the
reliability and completeness of risk measurement
information and systems. It carries out onsite checks of
records concerning all business lines and the support
functions of Calyon Group entities in France and
abroad.
In doing this, it:
- performs global audits of Group entities;
- c arries out thematic audits with the aim of evaluating
the risk control and monitoring system;
- carries out specific checks on activities organised in
the form of international product lines.
These audits form part of the annual audit plan,
approved by Calyon’s Management Board and Credit
Agricole S.A. Group Control and Audit. The conclusions
and recommendations resulting from studies conducted
by Group Control and Audit are communicated to Calyon’s
Management Board, Credit Agricole S.A.’s Management
Board and Credit Agricole S.A. Group Control and Audit.
Half-yearly formal follow-ups are carried out by internal
audit teams on audits carried out by internal and external
internal control bodies (supervisory authorities or audit
firms). For each recommendation made as a result of an
audit, this system ensures that the planned corrective
action is taken in accordance with a predetermined
timetable, established according to priority.
In addition, representatives from Group Control and Audit
regularly attend local internal control committee meetings. These committees deal with permanent controls,
the implementation of the enhanced compliance control
programme, audits carried out and audit’s monitoring of
recommendations made by Group Control and Audit and
the supervisory authorities.
3.4.2 – Internal audit teams
130 people worked in the group’s internal audit units at
end-2006.
Regional or subsidiary audit managers are responsible
for coordinating the audit teams in their area. The
activities of these managers have been coordinated by a
colleague of the Head of Group Control and Audit.
The local audit units’ duties consist of:
-a
uditing the quality of internal control, processes and
the regulatory compliance of operations throughout
the entity, according to a three-year audit cycle;
- carrying out occasional audits when requested by the
Head of the entity and/or by Group Control and Audit;
- checking that its recommendations and those made by
Group Control and Audit or external audit bodies,
particularly supervisory bodies, are implemented;
- r eporting to Group Control and Audit on their
activities.
Each audit unit regularly identifies risk areas, on the
basis of which it prepares an annual audit plan as part
of a multi-year cycle, which must be approved by Group
Internal Control.
The Chairman of the Board of Directors
28 - 29
Statutory Auditors’
report
Prepared in accordance with article L. 225-235 of the French Commercial Code (Code de commerce) on the report
prepared by the Chairman of Calyon’s Board of Directors on the internal control procedures used for the preparation
and processing of financial and accounting information
Year ended 31 December 2006
In our capacity as Statutory Auditors of Calyon and in
accordance with article L. 225-235 of the French Commercial Code (Code de commerce), we hereby report to
you on the report of the Chairman of your Company in
accordance with article L. 225-37 of the French Commercial Code (Code de commerce) for the year ended
31 December 2006.
In his report, the Chairman is notably required to give
an account of the conditions under which the duties of
the Board of Directors are prepared and organised and
on the control procedures in place within the Company.
It is our responsibility to report to you on our observations
on the information set out in the Chairman’s report on
the internal control procedures relating to the
preparation and processing of financial and accounting
information.
We performed our work in accordance with the
professional guidelines applicable in France. These require
us to perform procedures to assess the fairness of the
information set out in the Chairman’s report on the
internal control procedures relating to the preparation
and processing of financial and accounting information.
These procedures included:
-o
btaining an understanding of the objectives and
general organisation of internal control, as well as the
internal control procedures relating to the preparation
and processing of financial and accounting information, as described in the Chairman’s report;
- obtaining an understanding of the work performed to
support the information given in the report.
On the basis of these procedures, we have nothing to
report in connection with the information on the internal
control procedures relating to the preparation and
processing of financial and accounting information, as
set out in the Chairman’s report, prepared in accordance
with article L. 225-37 of the French Commercial Code
(Code de commerce).
Neuilly-sur-Seine, 5 April 2007
The Statutory Auditors
PriceWaterhouseCoopers Audit Gérard Hautefeuille
Ernst & Young et Autres
Valérie Meeus
Executive officers’
and directors’ compensation
Compensation paid to Executive
Officers and Directors
1 - Board of Directors
The following attendance fees were paid to Calyon’s Board
members in 2006 for serving as Directors of Calyon, Credit
Agricole S.A. and Credit Foncier de Monaco:
Directors’ attendance fees in 2006
(in euros)
Calyon Directors
Attendance fees
paid by Crédit
Agricole S.A.(1)
Attendance fees
paid by Calyon
Attendance fees
paid by Crédit
Foncier de Monaco
Total
2006
Total
2005
Jean Laurent, Chairman
35,000
35,000
38,000
Edmond Alphandéry
30,000
30,000
33,000
15,000
15,000
15,000
16,000
43,000
44,500
Jean-Paul Chifflet
24,000
24,000
30,000
Jean-Dominique Comolli
12,000
12,000
3,000
15,000
50,000
50,500
Pierre Bastide
Pierre Bru
Yves Couturier
27,000
35,000
Franck E. Dangeard
12,000
Philippe Geslin
27,000
12,000
3,000
42,245
48,245
15,000
48,000
46,500
François Imbault
15,000
15,000
12,000
Bernard Lolliot
21,000
21,000
Didier Martin
19,000
19,000
22,000
Georges Pauget
19,000
19,000
18,000
Roger Gobin
33,000
15,245
Jean-Marie Sander
40,000
15,000
55,000
53,500
Henri Moulard, Non-voting director
34,500
30,000
64,500
65,000
(1) M
eetings of the Credit Agricole S.A. Board of Directors give rise to the payment of a fee of 3,000 euros per meeting for each Director and 2,500 euros
per meeting for the non-voting director, allocated according to their actual attendance at meetings. Additional fees were paid to members of the
Committees according to their attendance at meetings of these Committees and to the Chairmen of these Committees. Mr Moulard received a fee of
15,000 euros in his capacity as Chairman of the Board’s Audit and Risk Committee.
30 - 31
Attendance fees paid to members of Calyon’s
Board of Directors
- the amount of attendance fees paid by Calyon to
Members of the Board of Directors is calculated
according to their attendance at Board meetings
(3,000 euros per meeting);
-m
embers of the Compensation Committee and the
Audit Committee receive an annual fee for their
participation in these Committees (4,000 euros and
15,000 euros respectively);
- an annual fee of 20,000 euros is paid to the Chairman
of the Board of Directors.
The Ordinary General Shareholders’ Meeting has set a
cap of 500,000 euros on the total amount of directors’
attendance fees to be paid annually.
Attendance fees are set according to the following
rules:
2. Management Board
2006
Amount in euros
Executive Officers
Compensation(1)
Fixed
Variable
Edouard Esparbès(4)
Deputy Chief
Executive Officer,
700,000
Credit Agricole S.A.
CEO, Calyon
850,000
Yves Perrier
Deputy Chief
Executive Officer
600,000
800,000
Marc Litzler
Deputy Chief
Executive Officer
600,000 3,500,000
2005
Compensation(1)
Directors’
attendance Benefits(2)
fees
403,817
2006
Stock options(3)
Existing plans
Directors’
attendance Benefits(2)
fees
Variable
Fixed
600,000 500,000
500,000 600,000
600,000
Plan
Number
Exercice
price
2004
70,000
20.48
2006
70,000
33.61
2004
50,000
20.48
2006
55,000
33.61
2006
55,000
33.61
254,500
(1) Fixed compensation corresponds to salaries paid in year N and variable compensation to normal bonuses, exceptional bonuses and additional compensation relating to time spent outside France, paid in year N with respect to year N-1 (gross annual amounts);
(2) Benefits consist almost entirely of the payment of sums to provide for retirement.
(3) No stock options relating to shares in Calyon or a controlled company were granted during 2004, 2005 or 2006, as Credit Agricole S.A. decided to set up
a single system at parent company-level to cover all group companies. No options were allocated in 2005 to members of Calyon’s Management Board
by Credit Agricole S.A.;
(4) The Chief Executive Officer is covered by the supplemental pension plan, which cannot be individualised, established for the Group’s key executives.
Beneficiaries accrue benefits under this plan only if they remain within the Group until retirement age. The plan is a differential scheme that supplements the pensions acquired through general schemes and mandatory supplemental schemes during their career inside or outside the Credit Agricole
Group. Provisions are booked on a global basis each year (without specific calculations for corporate officers), on the basis of profiles established as a
function of the beneficiaries’ characteristics (average age, average pay and typical career, in order to recreate the pension rights of general schemes).
Calyon’s Board of Directors decided the structure and level of compensation for Calyon’s Chief Executive Officer and
Deputy Chief Executive Officers following a proposal from the Compensation Committee.
Compensation principles
Compensation comprises a fixed component and a
variable component.
Edouard Esparbes, Chief Executive Officer, Calyon
- The fixed component is determined by reference to
market practices;
- The variable component, which consists of two parts,
has been set as follows:
•h
alf based on quantitative financial performance indicators relating to the Crédit Agricole group and
Calyon;
-3
0% based on Calyon’s results (GOI, GOI after riskrelated costs),
- 20% based on Crédit Agricole S.A.’s net income
(Group share),
• half based on an assessment of cost control and staff
efforts to implement Calyon’s strategic plan.
Yves Perrier, Deputy CEO, Calyon
market practices;
- The variable component is determined as follows:
• half based on quantitative criteria:
-3
0% based on Calyon’s results (GOI, GOI after riskrelated costs),
-2
0% based on Credit Agricole S.A. results,
• half based on a qualitative assessment involving predefined objectives such as supervision of international activities and the ability to promote teamwork
within the Management Board.
Marc Litzler, Deputy CEO, Calyon
market practices;
- The variable component based on the performance of
capital markets activities. Under Mr Litzler’s contract,
he has been guaranteed a minimum bonus of
3,400,000 euros with respect to 2006 only.
3. O
ther compensation (paid by Crédit Agricole S.A. for duties performed within that
company)
2006
Executive Officers
amount in euros
Compensation(1)
Fixed
Benefits(2)(5)
Variable
Stock options(3) - Existing plans
Plan
Jean Laurent(3)
Chairman, Calyon
Adviser to the CEO of Crédit
Agricole S.A.
650,000
1,020,000
575,132
Georges Pauget(4)
Director, Calyon
CEO,
Credit Agricole S.A.
800,000
650,000
263,030
Number
2003
2004
2006
Exercice price
40,164
70,000
100,000
14.59
20.48
33.61
2005
Executive Officers
amount in euros
Compensation
Benefits(2)
(1)
Fixed
Variable
Stock options - Existing plans
Plan
Jean Laurent
Chairman, Calyon
CEO, Credit Agricole S.A.
until 12/09/2005
650,000
700,000
542,700
Georges Pauget
Director, Calyon
CEO,
Crédit Agricole S.A.
since 12/09/2005
495,500
405,000
212,900
Number
2003
2004
40,164
70,000
Exercice price
14.59
20.48
(1) F ixed compensation corresponds to salaries paid in year N and variable compensation to bonuses paid in year N with respect to year N-1 (annual gross
amounts).
(2) Provision of accommodation and provision for retirement; since 1 January 2006, the CEO is no longer provided with accommodation.
(3) C ompensation of Jean Laurent:
-o
n 7 March 2006, Crédit Agricole S.A.’s Board of Directors set Jean Laurent’s total 2006 compensation at 1,670,000 euros including a bonus of
1,020,000 paid in 2006 with respect to 2005. This decision was disclosed to the general meeting of shareholders of 17 May 2006 under regulated
related-party agreements.
- Jean Laurent’s benefits in kind correspond to the provision of accommodation and provision for retirement.
(4) Compensation of Georges Pauget:
- the fixed compensation of Georges Pauget, CEO of Crédit Agricole S.A., was set by the Board of Directors on 7 March 2006 with reference to market
practices;
- the variable component of Mr Pauget’s compensation is capped, and consists of two parts: the first is based on Group financial performance indicators
and the results of the business lines for which he had responsibility (particularly the earnings per share of Crédit Agricole S.A. and the net income of
Crédit Lyonnais and the Insurance and Private Banking business line); the second is determined by a qualitative assessment based on predefined
targets;
- Mr Pauget’s variable compensation was set at 650,000 euros, corresponding to the maximum bonus calculated over the two periods from 1 January
to 12 September 2005 (with respect to his position as Deputy CEO in charge of Crédit Lyonnais and the Insurance and Private Banking business line)
and from 12 September to 31 December 2005 (with respect to his position as CEO of Crédit Agricole S.A.). This amount was based on performance
criteria defined by the Board of Directors in March 2005:
• 40% based on Crédit Agricole S.A.’s earnings per share and the results of Crédit Lyonnais and the Insurance and Private Banking business line,
• 60% based on the assessment of Mr Pauget’s preparation and implementation, as CEO, of the Crédit Agricole S.A. group’s development plan.
(5) The Crédit Agricole group’s key executives are covered by the supplemental pension plan, which cannot be individualised. Beneficiaries accrue benefits
under this plan only if they remain within the Group until retirement age. The plan is a differential scheme that supplements the pensions acquired
through general schemes and mandatory supplemental schemes during their career inside or outside the Credit Agricole Group. Provisions are booked
on a global basis each year (without individual calculations for corporate officers), on the basis of profiles established as a function of the beneficiaries’
characteristics (average age, average pay and typical career, in order to recreate the pension rights of general schemes).
32 - 33
Offices held by Executive Officers and Directors
Management Board
Last name,
first name,
business address
and number of
shares held
Main office
within the
company
Main offices outside the company /
other significant offices
Other professional details
and professional activities
in the last five years
2004
CEO
and member
of the Executive
Committee,
Calyon
- Deputy CEO and member of the
Executive Committee, Crédit Agricole S.A.
- Director of Banque Saudi Fransi
- Director of CA Cheuvreux S.A.
- Director of Coface S.A.
- Director of LCL
- Director of Paris Ile de France, capital
économique
- C hairman of Sicav Marianne (until 2004)
- Chairman and director of Synergie (GIE)
(until 2004)
- Vice-Chairman of Euro Securities Partners
SAS (until 2004)
- CEO of Caisse Régionale Paris Ile de France
(until 2004)
- CEO of Domaine de la Sablonnière SARL
(until 2004)
- Director and Vice-Chairman of Cedicam (GIE)
(until 2004)
- Director of Sacam SAS (until 2002)
- Director of Sapacam (until 2002)
- Director of Sci Cam S.A. (until 2002)
- Director of Sacam Consommation 1 SAS
(until 2002)
- Director of Cirecam (GIE) (until 2004)
- Director of Europay France S.A. (until 2004)
- Director of Gecam (GIE) (until 2004)
- Director of Holding Eurocard S.A. (until
2004)
- Director of Sofinco S.A. (until 2004)
- Member of the Executive Committee,
TLJ SAS (until 2004)
- Member of the Strategy Committee,
Fireca (until 2004)
- Deputy Corporate Secretary and member
of the development committee,
FNCA (until 2004)
- Permanent representative of Caisse
Régionale Paris Ile de France,
director of Thomas Collet et Cie (until 2002)
- Permanent representative of Caisse
Régionale Paris Ile de France, director of
Banque de Financement et de Trésorerie
(until July 2004)
- Manager of CA Titres CNS (until 2004)
- Manager of Espace Diderot SARL (until 2004)
2004
Deputy CEO,
Calyon
- Director of CA Cheuvreux
- Director of CLSA BV
- Director of Stichting CLSA Foundation
- Director of CCMA BV
2004
Deputy CEO
of Calyon
- Chairman of CA Cheuvreux
- Chairman of Calyon Financial Inc
- Chairman of CASAM
- Chairman of CLSA BV
- Chairman of Stichting CLSA
- Manager of: Kepler, Copernic, Brahe
- Co-manager of MLFG
Date first
appointed
Term
of office
ends
Edouard ESPARBES
9, quai du
Président
Paul Doumer
92920 Paris
La Défense Cedex
Yves PERRIER
9, quai du
Président
Paul Doumer
92920 Paris
La Défense cedex
Marc LITZLER
9, quai du
Président
Paul Doumer
92920 Paris
La Défense cedex
Board of Directors
Last name,
first name,
business address
and number of
shares held
Date first
appointed
Term
of office
ends
Main office
within the
company
27/11/1997
2008
Chairman
of the Board
of Directors
Jean LAURENT
9, quai du
Président
Paul Doumer
92920 Paris
La Défense Cedex
Chairman of Institut Europlace
de Finance
- Vice-Chairman of Banco Espirito Santo
(Portugal)
- Director and member of the
Appointment and Compensation
Committee, Danone group
- Director of Crédit Agricole Egypt S.A.E.
- Member of the Supervisory Board and
Member of the Financial Committee,
Eurazeo
- Member of the Supervisory Board,
M6 Télévision
-
Member of the
Audit Committee
Chairman of the Supervisory Board,
CNP Assurances
- Director of Caixa Seguros
- Director of CNP Capitalia Vita
- Director of Icade
- Director of Suez
-D
irector of Les Affiches Parisiennes
- Director of GT Finances
- Director of Polco S.A.
Holds 1 share
-
C hief Executive Officer of Crédit Agricole S.A.
Chairman of Crédit Lyonnais
Chairman of Segespar
Chairman of Union d’Etudes &
d’Investissements
Vice-Chairman of Banca Intesa (Italy)
Director of Amacam
Director of BGPI
Director of Crédit Agricole Asset
Management
Director of S.A. Rue Impériale
Member of the Executive Committee, FBF
Member of the Board, AFB
Member of the Board, Paris Europlace
Member of Conseil National du Crédit et
du Titre
Edmond ALPHANDERY
4, place
Raoul Dautry
75015 Paris
15/05/2002
2008
Director
Holds 1 share
Pierre BASTIDE
n/a
14/03/2000
2007
Director
- Director of LCL
Manager of SNC Alli Domes
Director of Credit Agricole S.A.
- Chairman of SAS Sacam Developpement
- Director of Banque Chalus
- Director of Fondation du CA Pays de France
- Director of Predi Retraites
- Director of Predica
- Director of Sacam Centre
- Director of Sacam SAS
- Director of Sapacam
- Director of SCI CAM
- Corporate Secretary of Gecam (GIE)
- Corporate Secretary of SAS Rue La Boétie
- Member the Management Committee,
Adicam
16/05/2001
2008
Director
Chairman of CRCAM Nord Midi-Pyrenées
- Chairman of Sodagri
- Director and member of the
Compensation Committee, Crédit
Agricole S.A.
- Director of Chabrillac
- Director of Inforsud Gestion
- Director of Scicam
- Director of Sacam
- Director of Sacam Participations
- Director of Idia Participation
- Director of Sofipar
- Director of Caisse Locale de Pont-deSalars
- Chairman of the Institut Universitaire
Technologique of Rodez
- Chairman of NMP Développement SAS
- Manager of G.F.A. du Pont des Rives
- Manager of GAEC Recoules d’Arques
- Non-voting Director of Grand Sud-Ouest
Capital S.A.
- C hairman of Caisse Régionale QuercyRouergue (absorbed by Caisse Régionale
Nord Midi-Pyrénées in May 2004)
- Chairman and CEO of Inforsud Gestion S.A.
(until December 2004)
- Chairman of Commission Nationale de
Négociation and of Commission des
Relations sociales, FNCA (until December
2004)
- Office Member and Treasurer, FNCA
- Chairman of Agrica (from January 1999
to December 2000)
- Director of Sociétés des Caves de Roquefort
(until 2003)
- Vice-Chairman of Association des présidents
de Caisses Régionales (until April 2001)
- Director of Camarca
- Director of CRCCA (Caisse de Retraite
Complémentaire du Crédit Agricole)
Holds 1 share
Pierre BRU
Causse Comtal
12033 RODEZ
Cedex 9
Holds 1 share
34 - 35
Board of Directors
Last name,
first name,
business address
and number of
shares held
Date first
appointed
Term
of office
ends
Main office
within the
company
2007
Director
Chief Executive Officer of CRCAM Centre-Est
- Corporate Secretary and Office Member, FNCA
- Director of Fédération Rhône- Alpes du Crédit
Agricole
- Chairman of Comité des Banques de la région
Rhône-Alpes
- Chairman of Sacam Développement SAS
- Chairman of Pacifica S.A.
- Chairman of Carvest representing CRCAM
Centre-Est
- Founding chairman of IMS, entreprendre
pour la cité (Rhône-Alpes)
- Vice-Chairman of SAS Rue La Béotie
- Director of Attica GIE
- Director of BGPI
- Director of Crédit Agricole Capital
Investissement et Finance (CACIF)
- Director of Credit Agricole Financements
(Switzerland)
- Director of Deltager
- Director of Predica S.A.
- Director of Sacam Participations SAS
- Director of Sacam SAS
- Director of SCI Cam
- Director and member of the Audit Committee,
Suparex Associés
- Director of Apis, Calixte Investissement, CA
Création, GIE AMT, Greencam and Lyon Place
Financière representing CRCAM Centre-Est
- CEO of Sacam International SAS
- Member of the Executive Committee, Sacam
Santeffi SAS
- Corporate Secretary of the Management
Committee, Gecam GIE
- Deputy Corporate Secretary of FNCA
Jean-Paul CHIFFLET
1, rue Pierre
30/04/2004
de Truchis de Lays
69410
Champagne
au Mont d’Or
Member of the
Audit Committee
Holds 1 share
Jean-Dominique COMOLLI
182-188,
31/08/2005
avenue de France
75639 Paris
cedex 13
2008
Director
Chairman of Altadis and Seita
- Chairman of the Supervisory Board,
Régie des Tabacs
- Director of Aldeasa
- Director of Logista
- Director of Pernod-Ricard
2008
Director
- Director of Predica, Permanent
CEO of CRCAM Sud Rhône-Alpes
representative of Sacam
- Vice-Chairman of the Board of Directors,
(until April 2004)
- Member of the Strategy Committee and
- Director of Sapacam S.A.
of the Appointments and Governance
(until June 2006)
Committee, Crédit Agricole S.A.
- Member of the Management
Committee, GIE Pratica
- Vice-Chairman of SAS Rue La Boétie
(until March 2005)
- Corporate Secretary of FNCA
- Chairman of SAS Sacam Développement,
director and permanent representative
- Member of the Board of Directors, SCI CAM
- Director of Sacam Participations SAS
- Director of LCL
- Member of the Partner Committee,
SAS Ariane Crédit
- Legal representative of manager CR SRA,
manager at: Sarl Simcad, SNC Foncière du
Vivarais, SCI du Vivarais, SCI Hautes Faventines,
SCI 3 Rivières, SCI Le Grand Bleu, SCI Actipole,
SCI Guerlande Un
Holds 1 share
Yves COUTURIER
48 rue La Boetie
75008 PARIS
Holds 1 share
15/11/2000
Board of Directors
Last name,
first name,
business address
and number of
shares held
Term
of office
ends
Main office
within the
company
2008
Director
Chairman and CEO of Thomson
- Director of EDF
- Director of Eutelsat
- Director of Orange
- Assistant CEO, France Telecom
- Assistant CEO, Vice-Chairman of
the Board of Directors, Thomson
Multimédia
13/04/1999
2008
Director
representing
employees
15/05/2002
2007
Director
Date first
appointed
Frank E. DANGEARD
46, quai
31/08/2005
Alphonse Le Gallo
92648 Boulogne
Holds 1 share
Jean-Frédéric DREYFUS
9, quai du
Président
Paul Doumer
92920 Paris
La Défense cedex
-M
ember of the Conseil National
de la Comptabilité, the Conseil
Consultatif du Secteur Financier,
the Board of Directors of the
Université Paris Dauphine and the
Conseil National du Développement
durable
Holds 1 share
Philippe GESLIN
Holds 1 share
Member
of the Audit
Committee
Chairman of the Supervisory Board, Etam
Développement
- Director of Crédit Foncier de Monaco
- Director of Union Financière de France-Banque
- Director of Gecina
- Member of the Supervisory Board of Société
Vermandoise de sucreries, representing
Invelios Capital
- Director of Société Sucrière de Pithiviers le Vieil,
representing Invelios Capital
- Non-voting director of Invelios Capital
- Manager of Gestion Financière Conseil SARL
- Chairman of Banque Française
de l’Orient
-D
irector of Banque LibanoFrançaise S.A. Liban
- Director of CAAM
Arc International S.A. France
Roger GOBIN
La Garde
Route de Paris
44300 Nantes
16/05/2001
2008
Director
Chairman of CRCAM Atlantique-Vendée
- Chairman of Fédération des
Caisses Régionales Pays de Loire /
- Director and Member of the Audit and Risks
Committee, Crédit Agricole S.A.
Association (2001-2005)
- Director of Pacifica S.A.
- Director of Crédit Agricole Leasing
- Director of Caisse Locale de Crédit Agricole de
Pornic
- Chairman of SAS Fireca
- FNCA: Member of the Agriculture Financing
Committee, of the Regional Banks Development
Committee and the Companies and International
Committee, Director of the association of
chairmen
30/04/2004
2007
Director
Chairman of CRCAM d’Ile de France
- Chairman of SAS Domaine de la Sablonnière
- Director of Socadif representing CRCAM Ile de
France
- Manager of SCI Bercy Villiot representing CRCAM
Ile de France
- Manager of SCI Agricole de l’Ile de France
representing CRCAM Ile de France
Holds 1 share
François IMBAULT
26, quai
de la Rapée
75596 Paris
cedex 12
Holds 1 share
- Director of Foncaris
36 - 37
Board of Directors
Last name,
first name,
business address
and number of
shares held
Date first
appointed
Term
of office
ends
Main office
within the
company
01/03/2006
2007
Director
Bernard Lolliot
Holds 1 share
Member
of the Audit
Committee
- C EO of CRCAM Centre-France
- Chairman and CEO of Banque
Chalus
- Chairman of CACF Développement
- Chairman of CACF Immobilier
- Director of CA Solidarité et
Développement
- Director of CA Titres
- Director of Cacif
- Director of Fireca
- Director of Pleinchamp S.A.
- Director of Sofinco
- Director of Synergie GIE
- Manager of SNC Alli Domes
representing CRCAM Ile de France
- Manager of SCI Jaude
-D
irector of Cirecam GIE
- Director of GPF
Didier MARTIN
130, rue
du Faubourg
Saint-Honoré
75008 Paris
15/05/2002
2008
Director
Member
of the
Compensation
Committee
Holds 1 share
Lawyer and Partner, Cabinet Bredin
Prat
- Director of Europacorp S.A.
Georges PAUGET
91-93, boulevard 30/04/2004
Pasteur
75015 Paris
Holds 1 share
2007
Director
Member of the
Compensation
Committee
CEO of Crédit Agricole S.A.
- Chairman of LCL
- Director of Fondation de France
- Member of the Executive Committee
of the Fédération Bancaire
Française and Chairman of the
FBF’s retail banking and remote
banking commission
- Member of the Commission
Advisory Council, Paris-Europlace
- Permanent representative, Crédit
Lyonnais
- C hairman of Cedicam (2003-2006)
- Director of Banque de Gestion Privée Indosuez
S.A. (2003-2006)
- Director of Europay France (2003-2006)
- Director of Holding Eurocard (2004-2006)
- Director and Deputy-Chairman of Pacifica S.A.
(2003-2006)
- Director and Deputy -Chairman of Predica S.A.
(2003-2006)
-A
ssistant CEO and then Deputy CEO of Crédit
Agricole S.A.
- CEO of Crédit Lyonnais
- Chairman of TLJ SAS and Member of the
Executive Committee (2003-2006)
- Chairman of Uni-Editions SAS (2003-2006)
- Director of Predi-Retraite (2003-2005)
- Chairman of Servicam SAS (until 2003)
- CEO of LCL (until 03/11/2005)
- Deputy CEO of Crédit Agricole S.A.,
- Head of Regional Banks, Insurance and Private
Banking business lines (December 2003 September 2005)
- Deputy CEO of Crédit Agricole S.A.,
- Head of Regional Banks and insurance business
lines (January- December 2003)
- CEO of Caisse Régionale Pyrénées Gascogne
(until 2002)
- Director of Bankoa S.A. (2005)
- Director of Gecam (GIE)
- Director of Crédit Agricole Indosuez S.A.
(until 2003)
- Director of Crédit Agricole Indosuez Cheuvreux
S.A. (until 2003)
- Director of Crédit Agricole Indosuez Cheuvreux
Gestions S.A. (until 2003)
- Director of Crédit Lyonnais (until 2003)
- Director of Foncaris S.A. (until 2003)
- Director of Mercagentes S.A., SVB (until 2003)
- Director of Sacam SAS (until 2003)
- Director of Sapacam SAS (until 2003)
- Director of SCI CAM (until 2003)
- Office of the Board FNCA (until 2003)
- Crédit Agricole S.A. permanent representative,
member of the supervisory board, Fonds de
Garantie des Dépôts (until 2004)
Board of Directors
Last name,
first name,
business address
and number of
shares held
Term
of office
ends
Main office
within the
company
30/04/2004
2007
Director
Chairman of CRCAM Alsace-Vosges
- Director of Predica (until April 2004)
Chairman of FNCA
-D
irector of Sapacam S.A.
Chairman of SAS Rue La Boëtie
(until 27/06/2002)
- V ice-Chairman of the Board, Crédit Agricole
- Director of SAS Sapacam
S.A., representing SAS Rue La Boétie
(until 30/12/2003)
- Member of the Strategy Committee,
the Appointments and Governance
Committee and the Compensation Committee,
- Director of LCL
- Deputy-Chairman of SAS Sacam Développement
- Chairman of Conseil Economique et Social
d’Alsace
- Chairman of CNMCCA
- Chairman of the Executive Committee, Gecam
(GIE) (since le 30/04/2003)
- Chairman of Sacam Participations
(SAS with variable capital) since 30/04/2003
- Director of Sacam since 07/09/2000
- Director of Scicam (non-trading property
company) since 07/09/2000
- Legal representative of SAS Sacam
Participations as Chairman of the following
companies: SAS Segur, SAS Miromesnil, SAS
Sacam Santeffi, SAS Sacam Assurance Caution,
SAS Sacam Pleinchamp, SAS Sacam Expansion,
SAS Sacam Fireca, SAS Sacam Progica, GIE
Cirecam
9, quai
12/10/2005
du Président
Paul Doumer
92920 Courbevoie
2008
Director
Employee
representative
2009
Non-voting
director
Date first
appointed
Jean-Marie SANDER
48 rue
de la Boétie
75008 PARIS
Holds 1 share
Dominique TOUNSI
Holds 1 share
Henri MOULARD
Truffle Venture
25, rue Marbeuf
75008 Paris
18/11/2003
Chairman
of the Audit
Committee
Chairman of HM et Associés SAS
Chairman of Invest in Europe SAS
Chairman of the Supervisory Board
of Dixence SAS
- Chairman of Attijariwaffa Bank Europe
- Non-voting director, Chairman of the Audit
and Risks Committee, Crédit Agricole S.A.
- Non-voting director on the Board of
Directors, Chairman of the Risks and Accounts
Committee, LCL
- Director of Elf Aquitaine
- Director of Burelle S.A.
- Director and Member of the Audit Committee,
Foncia
- Director and Chairman of the Compensation
Committee, Unibail S.A
- Director and member of the Audit Committee,
Attijariwaffa Bank (Morocco)
- Director and Chairman of the Audit Committee,
Banque du Sud (Tunisia)
- Member of Supervisory Board and Member of
the Audit Committee, Financière Centuria SAS
- Member of the Governance Committee and
Chairman of the Compensation Committee,
La Française de Placement Investissement SAS
- Non-voting director of Gerpro (SAS)
- Non-voting director, Chairman of the
Appointments Committee and member
of the Audit Committee, GFI Informatique S.A.
- Office Member and Treasurer, Fondation
de France
- Chairman of the Executive Board,
ABN Amro France (until 2001)
- Chairman and CEO of Generali France
Holding, GFA Vie, GFA Iard, France
Vie, France IARD, la Fédération
Continentale (until 2002)
- Director of l’Equité, Europ Assistance
(until 2002)
- Director of Corifrance (until 2003)
DIL France (until 2003)
- Director of GFI Informatique
(until 2002)
- Director of Isis (IFP subsidiary)
(until 2001)
- Non-voting director, Dietswell
Engineering
- Member of the Audit Committee,
Unibail
38 - 39
The next Meeting of Shareholders in May 2007 will be
asked to ratify the co-optation as Director of Jean Le
Vourch, co-opted by the Board of Directors on 28 February
2007 to replace Roger Gobin.
Other proposals to be put to this Meeting of Shareholders:
- t he reappointment of directors whose terms of office
are due to expire at the end of this Meeting: Jean-Paul
Chifflet, Philippe Geslin, François Imbault, Bernard
Lolliot, Georges Pauget and Jean-Marie Sander;
- the appointment of Jean Philippe to replace Pierre
Bastide.
In accordance with laws and regulations in force, Marc
Kyriacou has replaced Mrs Tounsi, who died on 19 April
2007, as director for the remaining term of office
applying to directors elected by employees, which will
end in 2008.
Finally, Georges Pauget was appointed Chairman of
Calyon by the Board of Directors on 14 May 2007,
replacing Jean Laurent.
Potential conflicts of interest among
members of the Board of Directors and
Management Board between their private
interests or other duties and their duties
with respect to Calyon
To Calyon’s knowledge, there is no potential conflict of
interest between the duties of members of the Board of
Directors and Management Board with respect to Calyon
and their private interests.
Calyon’s Board of Directors and Management Board
include corporate officers of companies (including Crédit
Agricole Group companies) with which Calyon has
commercial relationships. This may be a source of
potential conflicts of interest between these officers’
duties with respect to Calyon and their duties with
respect to these other companies.
The directors’ charter is distributed to members of the
Board of Directors to remind them in particular of their
obligation to:
-e
nsure that their participation on the Board does not
cause a fundamental conflict of interest at professional or private level,
-a
bstain from voting on any resolution involving a
transaction that might result in a conflict of interests.
Trading in the Company’s shares
by Executive officers
Calyon’s executives had no dealings in the Company’s
shares in 2006 with a cumulative value of more than
5,000 euros (in accordance with article L. 621-18-2 of
the Code Monétaire et Financier and article 223-26 of
the Autorité des Marchés Financiers’ General Regulations
as amended by the order of 4 January 2007).
Executive Committee
The composition of Calyon’s Executive Committee
is as follows:
Edouard Esparbès,
Chief Executive Officer, chairman of the Executive
Committee
Yves Perrier,
Deputy Chief Executive Officer
Marc Litzler,
Deputy Chief Executive Officer
Jérôme Grivet,
Head of Finance and Corporate Secretary
Gilles de Dumast,
Head of Investment Banking
Ishan Kapur,
Head of the Financial Institutionals Group
Guy Laffineur,
Head of Fixed Income Markets
Bernard Mignucci,
Head of International
Pascal Poupelle,
Head of Corporate Relations
François Simon,
Head of CA Cheuvreux
Marc Tabouis,
Head of Structured Finance
40 - 41
management report
3
Management
report
44
Presentation of Calyon’s financial statements
44
44
C hanges to accounting principles and methods
Changes in the scope of consolidation
45
45
47
48
51
52
54
54
55
Calyon’s activity and results
Economic and financial environment
Consolidated results
Results by business line
Calyon consolidated balance sheet
Prudential ratios
Recent trends and outlook
2007 outlook
Recent events
56Analysis of Calyon parent company financial statements
57
58
59
59
60
60
60
61
61
71
Five-year financial summary
Recent changes in the share capital
Authorisations to effect capital increases
Information about the corporate officers
Appendix to the management report
Internal control
Compliance
Financial security
Risk factors
Social and environmental information
42 - 43
management report
Presentation of Calyon’s
financial statements
Change to accounting principles
and methods
accounting principles and methods used by the Group
and their mode of application.
Application of IAS/IFRS accounting
standards
They did not have a significant impact on the financial
statements during the period.
The introductory note to the 2006 consolidated financial
statements sets out the regulatory framework and
highlights comparability issues with the figures for
2005.
The Group did not apply optional standards and interpretations in 2006.
Since 1 January 2005, Calyon’s consolidated financial
statements have been prepared in accordance with
International Financial Reporting Statements (IFRS) as
adopted by the European Union at the balance sheet
date.
The IFRSs applicable to the annual financial statements
and reporting information at the 31 December 2006
include new standards and new interpretations adopted
by the International Financial Reporting Interpretations
Committee (IFRIC) that were mandatory at 31 December
2006 and approved by the European Union. The
standards consist of those used to prepare the
consolidated financial statements at 31 December 2005,
plus those that became mandatory for the first time in
2006.
The differences relate to:
- t he revision of IAS 19 (employee benefits) regarding
actuarial gains and losses and group plans;
- the revision of IAS 39 (financial instruments) regarding
cash flow hedges on future intra-group transactions
and the conditions for using the fair value option;
- the revision of IAS 39 (financial instruments) and IFRS
4 (insurance contracts) relating to financial guarantee
contracts;
- IFRIC 4 (determining whether an arrangement contains
a lease);
- the amendment of IAS 21 regarding the net investment
in a foreign entity.
These new arrangements are described in Note 1 to the
financial statements, « Principles and methods applicable
in the Group », which provides a descrption of the main
Changes in the scope of consolidation
Changes in the scope of consolidation in 2006 had a
limited impact on the financial statements.
The most significant change was the sale of the 75%
stake in Calyon Bank Egypt SAE in the third quarter of the
year. This entity absorbed Egyptian American Bank to
form Crédit Agricole Egypt SAE, in which Calyon now
owns a 13% stake.
Details of changes to Calyon’s scope of consolidation are
presented in note 3.1 to the consolidated financial
statements.
For the purpose of comparing the results set out below,
it should be noted that Calyon acquired LCL’s stake in
Union de Banques Arabes et Françaises in mid-2005 and
sold its international retail banking division to the Crédit
Agricole S.A. group in the fourth quarter of 2005.
Calyon’s activity
and results
Economic and financial environment
2006: global growth impetus confirmed
For the third consecutive year, the world economy grew
by around 5% in 2006, well above its historical growth
rate. All zones put in a good performance, not just China
and the USA but also Europe. Oil prices peaked in mid2006 and then fell significantly, easing fears of inflation.
Against this background of firm growth and limited
inflation, risk aversion was low and financial markets
continued to benefit from abundant liquidity, which
monetary tightening in the USA, Europe and Asia failed
to stern.
The US economy proved resilient again in 2006. In
addition to higher oil prices and interest rates, there
were problems in the US residential property market.
The correction that began in 2005 was substantial in
terms of both market activity and prices. This had a
direct negative impact on growth, with a sharp decline
in residential investment. However, consumer spending
remained firm, due to rising disposable incomes. GDP
growth was 3.4% in 2006, slightly higher than the 3.2%
seen in 2005. In June, the Federal Reserve, under its
new chairman Ben Bernanke, brought to an end the
monetary tightening that had begun two years earlier.
The Fed funds rate has since been steady at 5.25%.
Inflation remains the number one risk according to the
Fed. However, the Fed is taking into account the current
slowdown in economic activity and its moderating effect
on inflation. A surge in inflation is not a concern for the
bond markets, and 10-year interest rates ended the year
at 4.6%, only slightly higher than a year previously. The
imbalances that characterise the US economy’s recent
expansion (low consumer savings rate and a large
current-account deficit) showed signs of stabilising. The
public deficit even shrank. The dollar lost ground in
2006. The support provided by Fed rate hikes was taken
away just as several central banks (in Asia and oilproducing countries) stated their intention to diversify
their foreign exchange reserves away from the dollar.
In the eurozone, the economy was surprisingly strong,
beating even the most optimistic forecasts. Growth was
2.7%, twice the annual average in the previous five
years. The expansion was fairly even across the zone. It
was driven by higher exports (particularly in Germany)
and renewed investment, which finally filtered through
into higher employment and consumer spending.
Although there is still plenty of progress to be made, the
European labour market is improving. The jobless total
fell by almost a million and the unemployment rate is at
its lowest since the early 1990s. Improved labour market
conditions are partly due to demographics, with the
retirement of the baby boom generation, and stricter
controls over unemployment benefit. However, it is also
the result of certain reforms and an upturn in job
creation. In fiscal terms, economic expansion has
allowed a rapid reduction in public deficits. It has also
allowed the European Central Bank to carry out regular
rate hikes without affecting the confidence of economic
agents, which remains high. The ECB’s refinancing rate
ended the year at 3.50%, up from 2.25% at end-2005.
Long-term interest rates also rose, although to a lesser
extent, and they remain low in absolute terms with 10year rates under 4%. The drag on growth caused by
higher interest rates remains limited, although signs of
a slowdown are visible in mortgage and property price
trends.
France achieved economic growth of 2.0% in 2006.
Activity was underpinned mainly by domestic demand,
particularly consumer spending, resulting from the
increased purchasing power of incomes. The recovery in
business investment that started in late 2005 continued.
As a result, employment continued to rise, although only
slowly. Exports benefited from the buoyant global
economic environment, and particularly from stronger
growth in other European countries. However, the foreign
trade balance remained negative due to structural
competitiveness factors.
Asia remained a major growth driver, and particularly
China where growth remained above 10%. 2006 was a
good year in Japan, with a 2.2% increase in GDP. However,
there remain some doubts about how sustainable this
growth is, and particularly about the solidity of consumer
spending. Another highlight was the end of Japanese
44 - 45
deflation, which prompted the central bank to abandon
the zero interest rate policy it had followed for five
years.
management report
Emerging markets:
further strong growth
Growth in the ten new European Union countries
accelerated in 2006, with GDP rising by 5.8% as opposed
to 5.4% in 2005. This growth was driven both by exports
to the eurozone and domestic demand. Together with
these countries’ sensitivity to oil prices, this pushed up
inflation and led to a cycle of monetary tightening in
most countries (Hungary: +200bp, Slovakia: +175bp,
Czech Republic: +50bp) alongside the rate hikes carried
out by the ECB. The exception was Poland, which
combined the lowest inflation in the European Union
with strong growth (GDP up 5.8% in 2006), and left
interest rates unchanged. At the same time, ongoing
budget deficits and the abandonment of official
objectives relating to eurozone entry led to a temporary
increase in risk premiums in Poland and Hungary. These
countries’ 10-year yield spreads with respect to Germany
widened by 50bp and 130bp respectively between May
and June 2006. In Hungary, the government elected in
April 2006 adopted a fiscal tightening package to address
the deterioration in the public finances. Hungary’s
budget deficit rose to 10% of GDP in 2006.
Emerging Asia’s very strong growth became even stronger
in 2006, with GDP in the 10 main countries rising by
8.4% after 7.8% in 2005, mainly due to firm external
demand. India continued to make progress, based on a
rapid expansion in the private sector and in investment.
China sought to maintain the quality of its growth by
adopting a series of measures to rein in bank lending and
curb excess investment in certain sectors. The Chinese
renminbi appreciated in 2006, rising by 3.5% against the
dollar, on the back of: a sharp rise in the trade surplus
(+70% relative to 2005); a 4.5% rise in foreign direct
investment. In most Asian economies, inflation – arising
mainly from commodity price movements – was controlled
through higher exchange rates in addition to domestic
interest rate hikes. However, fears of an excessively rapid
rise in the exchange rate and problems with managing
domestic liquidity resulting from capital inflows prompted
Thailand to impose capital controls in December 2006.
Latin America benefited fully from surging commodity
prices, which enabled countries to maintain external
balances and firm growth. In Brazil, Lula was elected for
a second term, and there was impressive macroeconomic
stability. The trade surplus hit a record 50 billion dollars,
inflation fell to a 7-year low of 3.1% late in the year and
domestic interest rates continued to move independently
of US rates, falling by 475bp. Mexico achieved GDP growth
of 4.6%. It benefited from US growth, along with firm
domestic demand resulting from historically low interest
rates and investor optimism following the election of
President Calderon. Risks were concentrated in a few
countries that responded badly to positive global
conditions, such as Argentina, where inflation rose, and
Venezuela, where high oil prices opened the way for
populist measures.
In the Middle East, petrodollars continued to build up,
with current-account surpluses reaching a cumulative
900 billion dollars since 2000. This money has been used
to reduce debt, build up external assets and meet
domestic investment needs. It has also been invested in
regional stockmarkets, which consolidated in 2006 after
sharp rises in previous years, and real estate. There was
upward pressure on regional currencies, such as the Saudi
Arabian riyal. However, these countries need to ensure
long-term economic diversification and are using fiscal
measures such as grants to limit the inflationary impact
of the weak dollar. As a result, they are maintaining their
dollar pegs until monetary union (involving the six
countries of the Gulf Cooperation Council) takes place.
This is due to happen in 2010 but will probably be
delayed.
Consolidated results
Summary consolidated income statement - main items
Net banking income
Operating expenses
Gross operating income*
Risk-related costs
Income from equity affiliates
2006
2005
2005
excl disposal
gain on
financial
services
business
Change
2006/2005
Change at
constant
scope and
exchange
rates
5,862
4,938
4,938
19%
24%
(3,574)
(3,168)
(3,168)
13%
18%
2,288
1,770
1,770
29%
35%
9
87
87
(90%)
166
125
125
33%
Net gains/(losses) on disposal of other assets
5
203
Integration-related costs
0
(86)
2,468
2,099
Pre-tax income
Disposal gain
on financial
services
business
202
1
ns
(86)
ns
202
1,897
30%
Tax
(620)
(383)
(383)
62%
Net income
1,848
1,716 202
1,514
22%
Net income (group share)
1,771
1,632 202
1,430
24%
* In 2005, before integration-related costs
In 2006, this category of expenses no longer exists, since the integration is complete
Net banking income rose by 24% at constant scope and
exchange rates to 5,862 million euros. This strong
performance resulted from good momentum in all
business lines, particularly capital markets and investment
banking, where the pace of growth remained high.
Income from equity affiliates consists almost entirely of
the contribution from Banque Saudi Fransi. It rose by
33% due to improved performance at BSF in a region
benefiting from the positive economic consequences of
high oil prices.
Calyon’s dense international network is being strengthened
all the time. It significantly increased its revenues in 2006,
particularly in high-growth regions.
The tax charge rose by 62% due to the use of all remaining
tax-loss carryforwards, following strong performance by
all Group entities.
Operating expenses increased by 18% at constant scope
and exchange rates to 3,574 million euros.
Fixed costs rose only half as fast as net banking income.
The rise in expenses reflects growth in Calyon’s workforce
and greater investment in the international network’s IT
systems, along with projects to develop capital markets
and brokerage infrastructure.
After minority interests, net income (Group share) was
1,771 million euros, up 24% relative to 2005 excluding
disposal gains on financial services activities.
Gross operating income rose by 35% at constant scope
and exchange rates, to 2,288 million euros.
For the third consecutive year, risk-related costs were
negative, with the amount of reserve releases exceeding
additions by 9 million euros in 2006. This reflects the
ongoing positive risk environment.
Collective reserves were stable, totalling 1,125 million
euros at 31 December 2006.
46 - 47
Results by business line
The organisation of Calyon’s business lines is described on page 127 of this document in note 6 to the financial
statements, “Segment reporting”.
Financing
2006
2005
Change
2006/2005
Change at
constant scope
and exchange
rates
Net banking income
2,091
1,778
18%
18%
Operating expenses
(843)
(753)
12%
12%
1,248
1,025
22%
23%
5
(12)
ns
158
120
32%
(5)
(6)
ns
Pre-tax income*
1,406
1,127
25%
Tax
(337)
(252)
34%
Net income*
1,069
875
22%
management report
Risk-related costs
Operational and financial performance in the financing
business improved further in 2006: The operating
environment was positive overall, although there was
constant pressure on margins. The return on risk-weighted
assets remained firm due to increased business levels
and faster portfolio turnover through active balancesheet management. The cost/income ratio improved by
two points, falling to 40.3%, reflecting a very high level
of operational efficiency.
Net banking income rose by 18% to 2,091 million euros.
The structured financing business has leading global
positions, and benefited from excellent commercial
momentum in leveraged financing, real estate financing
and international trade financing.
The syndication business consolidated its top 10 position,
arranging an increasing number of large deals.
Net banking income in commercial banking increased at
a more moderate pace, reflecting the Group’s policy of
allocating capital to high-value-added businesses.
With operating expense growth limited to 12%, gross
operating income rose by 22% to 1,248 million euros.
Risk-related costs were negative, with a net release of
5 million euros.
Net income increased by 22% to 1,069 million euros.
Capital markets and investment banking
2006
2005
Change
2006/2005
Change at
constant scope
and exchange
rates
3,306
2,556
29%
30%
(2,406)
(1,972)
22%
23%
900
584
54%
56%
Risk-related costs
0
(7)
ns
1
0
ns
0
20
ns
901
597
51%
(243)
(146)
66%
658
451
46%
Net banking income
Operating expenses
Pre-tax income*
Tax
Net income*
Net banking income in the capital markets and investment
banking business continued to grow strongly, rising by
29% to 3,306 million euros. In accordance with planned
changes to Calyon’s business mix, this segment’s
contribution to total corporate and investment banking
revenues is increasing steadily, and was 61.3% in 2006.
In capital markets, there was excellent performance in
interest-rate derivatives, strong growth in credit
derivatives and CDOs and further steady growth in equity
derivatives, in line with the 2006-2008 development
plan.
2006 was a record year in brokerage. CA Cheuvreux and
CLSA’s equities businesses and Calyon Financial’s listed
derivatives business performed excellently. Revenues
rose by 33% to record levels in 2006.
Investment banking completed some major deals, particularly in Europe, as well as strengthening its network
by extending it further outside France.
Operating expenses increased by 22% to 2,406 million
euros. In addition to higher variable remuneration arising
from strong business levels, this rise was due to significant
investment aimed at enhancing capital markets IT systems
and bolstering the workforce in all business areas.
Gross operating income increased by 54% to 900 million
euros, while the cost/income ratio fell by 4.4 percentage
points to 72.8%.
Net income surged by 46% to 658 million euros.
48 - 49
International private banking
2006
2005
Change
2006/2005
Change at
constant scope
and exchange
rates
474
415
14%
15%
(322)
(315)
2%
2%
152
100
52%
54%
Risk-related costs
4
7
7
5
20
1
Pre-tax income*
183
113
Tax
(42)
(27)
Net income*
141
86
Net banking income
Operating expenses
management report
Net banking income rose by 14% to 474 million euros in
2006, with contributions from all geographical markets,
i.e. Switzerland, Luxembourg, Monaco, Spain and Brazil.
Expenses rose by a mere 2% to 322 million euros. This
firm grip on costs allowed an 8-point improvement in
the cost/income ratio to 67.9%.
Together with strong financial market performance, these
units benefited from positive commercial momentum
and active promotion of higher-value-added products.
Revenues from brokerage activities and from the design
and sale of structured products were particularly impressive. Net new money was another major performance
driver, taking total assets under management to 54.1 billion at 31 December 2006.
Gross operating income was 152 million euros in 2006,
up 52% relative to 2005.
Proprietary asset management and other activities
2006
2005
Change
2006 / 2005
Net banking income
(9)
14
ns
Operating expenses
(3)
(19)
(84%)
(12)
(5)
ns
Risk-related costs
0
108
ns
0
0
ns
(10)
188
ns
0
(86)
ns
(22)
205
ns
2
56
ns
(20)
261
ns
Pre-tax income
Tax
Net income
This business line did not generate any significant earnings in 2006.
Calyon consolidated balance sheet
At 31 December 2006, Calyon had total assets of 588 billion euros, up 107 billion euros or 22% relative to 31 December
2005. Most of the increase came from the rise in outstanding book positions in the capital markets business (securities
held for trading, derivatives and repo transactions). The decline in the dollar against the euro in 2006 dragged down
total assets by 9.7 billion euros.
Assets
31.12.2006
31.12.2005
30.9
37.2
260.5
200.8
Financial assets available for sale
24.6
23.1
Loans and advances to customers (excluding repos)
89.1
84.1
142.6
106.1
39.2
28.8
1.3
1.2
588.2
481.3
31.12.2006
31.12.2005
60.1
58.1
192.9
158.1
80.8
68.4
132.1
99.9
Debt securities in issue
62.8
47.3
Accruals, deferred income and sundry liabilities
46.3
37.3
0.8
0.7
12.4
11.5
588.2
481.3
Cash, due from central banks, French postal system and banks (excluding repos)
Financial assets at fair value (excluding repos)
Repos
Accruals, prepayments and sundry assets
Goodwill
Total
Liabilities and shareholders’ equity
Due to central banks, current accounts with French postal system and banks
(excluding repos)
Financial liabilities at fair value (excluding repos)
Customer accounts (excluding repos)
Repos
Minority interests
Total
Interbank transactions
Calyon has access to all the world’s major liquidity
centres, with a particular focus on the larger markets of
Paris, New York, London, Hong Kong and Tokyo. This
optimises the uses and sources of interbank funds within
the group.
Financial assets and liabilities at fair value
through profit or loss (excluding repos)
Financial assets at fair value through profit or loss (excluding repos) rose by 59.7 billion euros, while financial
liabilities at fair value through profit or loss (excluding
repos) rose by 34.8 billion euros. Financial assets consist
mainly of the positive fair value of derivative financial
instruments and the portfolio of securities held for trading. Financial liabilities consist mainly of the negative
fair value of derivatives and securities sold short. The
increase in these items arose mainly from derivative
instruments. Although Calyon generally has netting
agreements with its counterparties that reduce the
credit risk relating to these instruments, IFRS rules allow
limited netting of positive and negative fair values on
derivatives with the same counterparty. As a result, the
rapid growth in capital markets activities involving this
50 - 51
kind of financial instrument automatically increased the
book balances of these items.
Securities purchased or sold under
repurchase agreements
Repo activities are mainly focused on Paris, which
accounted for 79% of securities purchased and 94% of
securities sold under repo agreements. The increase in
these items reflects growth in trading and arbitrage
activities, which make heavy use of repos.
management report
Loans and advances to customers
Outstanding customer loans increased by 6% or 5 billion
euros. International lending continued to account for
most of the total.
Apart from traditional refinancing via interbank
borrowings, Calyon raises liquidity via issuing paper in
the main financial markets (particularly in the US, via
Calyon North America and Calyon’s US branch, the UK,
via Calyon’s UK branch, and France).
Shareholders’ equity (Group share)
Shareholders’ equity (Group share) totalled 12.4 billion
euros, up by almost 1 billion euros relative to 31 December
2005.
Movements in shareholders’ equity (Group share) arose
mainly from:
- net income for 2006: + 1.77 billion euros
-d
istribution of dividends with respect to 2005:
-0.5 billion euros
- r eduction in translation adjustments (-0.2 billion
euros) due to the fall in the dollar.
Prudential ratios
European solvency ratio
In accordance with regulations, Calyon has calculated its
European solvency ratio on a half-yearly basis.
This calculation is shown in the table below, which
details the risks of Calyon measured in credit risk
equivalents (after counterparty weighting) and the
regulatory capital levels on the dates indicated,
calculated in accordance with the French CRBF regulations
on solvency ratios (91-05 and 95-02) and capital (90-02).
31.12.2006
31.12.2005
Credit risk
113,715
116,382
Market risk
12,072
21,482
8,406
17,490
Equity risk
351
244
Foreign exchange risk
273
312
12
18
3,030
3,417
125,787
137,864
Tier 1
12,080
12,143
Tier 2
4,115
1,793
Tier 3
258
175
Deductions
(2,165)
(1,166)
Total available capital
14,288
12,945
Tier 1 solvency ratio
9.6 %
8.8 %
Total solvency ratio
11.4 %
9.4 %
Risk
Interest rate risk
Commodity risk
isks calculated by internal
R
model
Total weighted risks
(denominator)
Available capital
At 31 December 2006, Calyon’s total solvency ratio was
11.4%, as opposed to 9.4% at 31 December 2005. Its Tier
1 solvency ratio was 9.6%, up from 8.8% at 31 December
2005.
At year-end, the main components of shareholders’
equity were as follows:
- Tier 1 capital was 12,080 million euros, after deducting a total of 1,329 million euros mainly for intangible
assets and first-time consolidation differences. Tier 1
capital included 630 million dollars of preferred shares
and 2,535 million dollars of super-subordinated notes
taken up by Credit Agricole S.A., which help protect
solvency ratios against movements in the dollar;
- Tier 2 capital of 4,115 million euros included 3,864
million euros of redeemable subordinated notes, the
balance being made up of participating securities and
unrealised capital gains. The 2,322 million euro increase
in 2006 resulted from issuance totalling 1,700 million
dollars and 1,100 million euros with a view to obtaining
Financial Holding Company status in the USA;
- The 2,165 million euros of deductions included
915 million euros of non-consolidated investments in
affiliates and other items of capital in credit institutions;
- Tier 3 capital was 258 million euros.
Risk-weighted assets stood at 125.8 billion euros at
31 December 2006, down 12.1 billion compared with
31 December 2005 (-8.8%). Credit risks fell by 2.7 billion euros. Balance-sheet downsizing operations limited
the growth in outstandings generated by the Bank’s robust commercial development. Market risks fell by
9.4 billion euros with respect to 31 December 2005. This
decrease resulted mainly from the use of an internal
Value at Risk model to measure issuer risk on interestrate instruments.
Solvency ratio reform
The proposed transposition of the European CRD system
(2006-48-EC and 2006-49-EC) into French law was
adopted on 20 February 2007, in the form of two
decrees, one on “capital requirements applicable to
credit institutions and investment companies”, the
other amending CRB and CRBF regulations.
Until 1 January 2008, all financial institutions may continue to report their ratios in CAD/ESR format (European
solvency ratio).
Since the period ended 30 September 2005, Calyon has
produced a consolidated table of its CRD risk-weighted
assets on a quarterly basis.
As from the period ended 30 June 2007, during the
parallel calculation phase preceding application of the
new ratio, Calyon will report its CRD ratio to the Banking
Commission at the different reporting levels required, in
the requisite COREP regulatory format.
52 - 53
Recent trends
and outlook
2007 outlook
management report
2007: global yet moderate slowdown
In 2007, the main uncertainty lies with the US economy.
A continued slowdown in growth would probably spread
to all other regions. World economic numerous imbalances
would increase financial market volatility, fostering a
climate of turbulence for the dollar and the equity
markets. However, in the central scenario, the slowdown
will not degenerate into recession.
In the US, growth prospects are clouded by uncertainties.
The inversion of the interest rate curve suggests that
there is a risk of recession, but at the same time, the
labour market is showing resilience and is consolidating
foundations for growth. The anticipated dip in economic
activity, with projected average growth of 2.3% in 2007,
appears to reflect a loss of momentum in the middle of
the cycle rather than the end of a cycle. In response, the
US Federal Reserve could start to lower key rates before
the end of the year, as investors are anticipating. Once
concerns over growth have been mitigated, long rates
and the dollar are expected to resume on an uptrend
during the second half.
In 2007, the euro zone could be adversely affected by a
number of shocks. In addition to slower growth in the
US, Europe will be exposed to domestic shocks, including
tighter fiscal policies in countries such as Germany and
Italy and a continued downturn in the property markets.
However, these shocks will be cushioned by a brighter
job outlook and by persistently favourable financial
conditions. The business climate remains sound,
suggesting that the slowdown in growth will be shortlived. Average growth over the full year is projected to
be about 2%. In this climate, the European Central Bank
is likely to continue its policy of raising interest rates
during the first half, but not excessively, so as to curtail
the rise in the euro, which is foreseeable in the short
term. Likewise, while long rates are expected to edge
up, the movement will probably be modest and is not
likely to adversely affect the equity markets.
In 2007, growth in the French economy looks set to
continue to be near its potential, i.e. 2.1%. Domestic
demand will continue to serve as the main growth
driver. The measures adopted to protect purchasing
power (increase in the “prime pour l’emploi” earned
income tax credit, the income tax cut and the “Bouclier
Fiscal”, maximum income tax rate) will serve as a
stimulus for persistently robust consumer spending,
providing that there are no major reversals in fiscal
policy direction following the spring 2007 elections.
In Japan, GDP growth is projected to remain close to its
potential of 1.8% in 2007. It will be driven by business
investment. The Central Bank is expected to continue
cautiously to fine-tune its monetary policy, with the key
rate to reach 0.75% by the end of 2007. China will
continue to act as a driver, as the government continues
to achieve more balanced sources of growth through
increased domestic demand.
Calyon
In 2007, Calyon intends to play its part in pursuing the
Crédit Agricole S.A. group’s 2006-2008 development
plan and to consolidate its position as one of Europe’s
top ten corporate and investment banks.
The financing business will make extensive use of the
international network to support expected growth in its
commercial activity. It will also step up efforts to win
new business in order to expand the customer base and
increase business volumes.
In capital markets and investment banking, the capital
markets business intends to bolster its strong international
position in interest-rate derivatives, pursue its existing
growth plan in equity derivatives, strengthen its business
base through greater diversification of revenue sources
and types, and become more operationally robust.
The brokerage business will seek to maintain its high
profitability levels after an exceptional 2006.
Recent events
Press release dated 26 March 2007
Press release dated 9 January 2007
Citic East China and Calyon Financial Announce Joint
Venture Agreement to Form Chinese Futures Brokerage
Calyon and Société Générale plan to merge their brokerage
activities currently carried out by Calyon Financial and
Fimat
Calyon and Société Générale have entered into exclusive
negotiations regarding a possible merger of their brokerage activities, currently carried out by Calyon Financial
and Fimat respectively.
The newly formed entity would be a world leader in
execution and clearing of listed financial futures and
options (number 3 in the US in particular)1. This combined
group would provide access to more than 70 derivatives
exchanges to an international base of institutional
clients.
It would also be a major player in interdealer brokerage
of listed or OTC derivatives and cash products such as
prime brokerage services.
The combination of both parties’ customer base, as well
as their respective products and services, would ensure
the new group’s competitiveness in the coming years as
well as creating a strong potential for cross-selling.
The considered merger would be jointly controlled by
Société Générale and Calyon, with headquarters located
in Paris.
The two groups will commence mutual due-diligence
processes, with the aim of signing a definitive agreement.
Prospects for the newly created group would be presented
at the time of signing of the definitive agreement. The
project will be subject to a consultation of employee
representatives.
Ranking based on customer segregated funds on US markets and customer
amounts required on foreign markets as of 31/10/2006 (source: Commodity
Futures Trading Commission)
1
Citic East China (Group) Corp., Ltd and Calyon Financial
Hong Kong Ltd. today announced the signing of a joint
venture agreement, forming a new futures brokerage
entity established under the Closer Economic Partnership
Arrangement (referred as CEPA).
If all approvals are obtained as per schedule, the joint
venture may become the first futures brokerage in Shangai
and second futures brokerage in China that is jointly
owned by a Chinese firm and a Hong Kong brokerage
firm. Citic East China will be the majority shareholder.
Citic Futures is part of China’s top State-Owned Enterprise,
namely Citic Group. Citic Futures currently has memberships
on the Shangai Futures Exchange, Dalian Commodity
Exchange and Zhengzhou Commodity Exchange.
Calyon Financial Hong Kong is a part of Calyon Financial
Group, which is wholly owned by Calyon Credit Agricole
CIB and part of the Credit Agricole Group in France.
Calyon Financial is a leading global futures brokerage
firm and has access to more than 70 global financial
and commodity exchanges.
After signing the agreement, the joint venture will seek
regulatory approval from the China Securities Regulatory
Commission (CSRC) and relevant required regulatory
bodies. The overall approval process is anticipated to
conclude within three to six months.
News release of 16 May 2007
on Crédit Agricole S.A.’s
first-quarter 2007 results
In its news release concerning its first-quarter 2007
results, Crédit Agricole S.A. reported record earnings in
Calyon’s corporate and investment banking activities,
which benefited from strong commercial momentum in
all areas and generated record quarterly revenues.
54 - 55
management report
Analysis of Calyon
parent company
The Calyon parent company operates in all Group business
lines except brokerage and international private banking,
which are handled by subsidiaries.
Gross operating income amounted to 1,878 million
euros in 2006, an increase of 596 million euros or 46%
relative to 2005.
Calyon’s total assets were 486.8 billion euros at yearend, substantially higher than a year previously (363.4
billion euros). The increase in total assets resulted
mainly from growth in securities activities (repo transactions with interbank customers, fixed- and variableincome securities held on own account for trading). This
was driven by a rapid advance in market transaction
volumes. At 31 December 2006, Calyon accounted for
82.7% of the Calyon group’s total assets, up from 75.5%
at 31 December 2005.
The risk environment was positive in 2006, resulting in
a net release of 5 million euros from risk reserves, as
opposed to a net release of 206 million in 2005.
Following the decisions taken by the General Meeting of
16 May 2006, the payment of some dividends in shares
led to a 316 million euro capital increase and a share
premium of 692 million euros. After dividend payments
during 2006 and net income for the year, shareholders’
equity totalled 9.9 billion euros, up 10.9% relative to
the end-2005 figure of 8.9 billion euros.
In 2006, Calyon generated net banking income of 4,175
million euros, an increase of 910 million euros (27.9%)
compared with the 2005 figure of 3,264 million euros.
Calyon’s net banking income accounted for 71.2% of the
Calyon group’s total.
This sharp rise in net banking income was driven by
trading portfolio operations (securities, interest-rate
derivatives and forex trading). Growth in capital markets transactions accounted for a large portion of
Calyon’s performance in 2006, particularly structured
credit, equity derivatives and interest-rate derivatives
transactions.
General operating expenses totalled 2,231 million euros,
an increase of 308 million euros or 16% relative to
2005. The rise reflects variable remuneration, which
increased in line with strong business growth, while
growth in fixed personnel costs was limited. Personnel
costs rose by 17.2% to 1,364 million euros.
The tax charge was 399 million euros, substantially
higher than the 137 million euros in 2005. The increase
was due to higher taxable income and the fact that tax
loss carryforwards had been used up completely both in
France and abroad.
Overall, Calyon’s net income was 1,531 million euros, up
181 million euros or 13.4% relative to 2005. Calyon
Paris generated net income of 851 million euros, while
branches contributed 680 million euros. As a result,
Calyon accounted for 86% of the Calyon group’s consolidated income.
Five-year financial summary
2002
2003
2004
992,250,432
1,142,480,673
3,119,771,484
36,750,016
42,314,099
115,547,092
115,547,092
127,257,523
125,494
121,991
465,813
497,286
382,645
332
640
37
704
1,790
31
35
135
120
318
Income after tax, depreciation,
amortisation and provisions
271
562
745
1,350
1,531
Dividends paid
240
432
250
1,551
2,049
Share capital at year-end
Number of shares issued
2005
2006
3,119,771,484 3,435,953,121
Results and transactions for the year
(in millions of euros)
Gross revenues
Income before tax, depreciation,
Corporate income tax
Per share data (in euros)
Income after tax but before depreciation,
(1)
8.19
(2)
14.36
Income after tax, depreciation,
(1)
7.36
(2)
13.32
Dividend per share
6.57
(3)
(0.85)
(3)
10.25
6.45
5.05
(5)
11.57
11.68
(5)
12.03
(4)
(4)
2.16
13.42
16.10
Personnel
Number of employees
(6)
5,340
(6)
4,905
(6)
6,562
(6)
7,782
(6)
7,735
Wages and salaries paid during
the financial year
494
534
756
869
962
Employee benefits and social contributions
153
166
257
289
337
(1)
(2)
(3)
(4)
(5)
(6)
Calculation based on
Average headcount.
number
number
number
number
number
of
of
of
of
of
shares in issue
shares in issue
shares in issue
shares in issue
shares in issue
excluding treasury
excluding treasury
excluding treasury
excluding treasury
excluding treasury
stock
stock
stock
stock
stock
at end-2002, i.e.
at end-2003, i.e.
at end-2004, i.e.
at end-2005, i.e.
at end-2006, i.e.
36,513,824.
42,179,533.
115,547,092.
115,547,092.
127,257,523.
56 - 57
Recent changes in share capital
The table below shows changes in Calyon’s share capital
over the last five years.
Date and type of transaction
Share capital at 31 December 2001
15/05/2002
Capital increase following CPR merger
management report
05/06/2002
Scrip dividend payment
Amount of share
capital
(in euros)
Number of shares
937,997,523
34,740,649
+ 6,377,184
+ 236,192
+ 45,440,325
+ 1,682,975
Exercise of options
+ 2,435,400
+ 90,200
992,250,432
36,750,016
30/06/2003
Cancellation of treasury shares
18/11/2003
Capital increase following transfer of CAIC shares to Crédit Agricole S.A.
Exercise of options
30/04/2004
+ 68,712,435
+ 2,544,905
(2,743,902)
(101,626)
+ 82,522,908
+3,056,404
+ 1,738,800
+ 64,400
1,142,480,673
42,314,099
Capital increase following Crédit Agricole S.A.’s
transfer of a portfolio of debt instruments to Calyon
+ 163,974,240
+ 6,073,120
Share issue for cash
+ 297,000,000
+ 11,000,000
01/05/2004
Capital increase following transfer of Crédit Lyonnais’ corporate
and investment banking activities to Calyon
27/05/2004
Cancellation of treasury shares
+ 1,380,335,229
+ 51,123,527
(3,633,282)
(134 566)
+ 139,614,624
+ 5,170,912
Share capital at 31 December 2004 3,119,771,484
115,547,092
3,119,771,484
115,547,092
316,181,637
11,710,431
3,435,953,121
127,257,523
Authorisations to effect capital
increases
Information required by Order 2004-604 of 24 June
2004, reforming the system applicable to negotiable
securities.
Table summarising authorisations in force granted by
the General Meeting of Shareholders to the Board of
Directors to effect capital increases (article L 225-100 of
the Code de Commerce).
Authorisation valid at 31 December 2006
Meeting
of shareholders’
(resolution)
Duration
Purpose, extent and limits of grants
Use made of grants
during 2006
Grant of authorisation to the Board of Directors to increase
the capital by a nominal amount of up to 400,000,000 euros
16 May 2006
(12th resolution)
26 months, i.e.
until 16 July 2008
- t hrough the issue of shares for cash, with preferential subscription None
rights maintained,
- and/or through the capitalisation of reserves, earnings or share
premiums
Authorisation expired in 2006
Meeting
of shareholders’
(resolution)
Duration of
authorisation
Purpose, extent and limits of the authorisation
30 April 2004
(24th and 25th
resolutions)
2 years, i.e. until
30 April 2006
Grant of authorisation to the Board of Directors to increase
the capital by issuing shares for cash up to a nominal amount of up None
to 400,000,000 euros with preferential subscription rights waived
in favour of Crédit Agricole S.A.
Use made of
authorisations in 2006
Information about the corporate
officers
Information relating to the compensation, terms of
office and functions of corporate officers as required by
article L.225-102-1 of the Code de Commerce, the new
economic regulations act of 15 May 2001, the financial
security act of 1 August 2003 and order 2004-604 of 24
June 2004, is provided in the “Governance and internal
control” chapter on pages 31-40 of this document.
Information relating to trading in the Company’s shares
by Calyon’s executives in 2006, required by article L.62118-2 of the Code Monétaire et Financier, and article
223-26 of the Autorité des Marchés Financiers’ general
regulations as amended by the order of 4 January 2007,
is provided in the “Governance and internal control”
chapter on page 40 of this document.
58 - 59
Appendix
to the management report
management report
Internal control
Under the French financial security act (Loi de Securité
Financière or LSF) of 1 August 2003, the Chairman of the
Board of Directors must submit a report to the General
Meeting of Shareholders, in conjunction with the annual
management report, detailing how the Board prepares
and organises its work and describing internal control
procedures implemented by the company.
This report includes information on the procedures and
organisation of the internal control system applied
throughout the company.
Control and Audit
Group Control and Audit forms an integral part of the
Credit Agricole S.A. Group’s control and audit business
line. It is responsible for conducting periodic controls
covering the entire range of activities specified by
Banking and Financial Regulation Committee regulation
97-02 as amended, and for ensuring compliance with
the Group’s internal regulations across all Calyon units.
It also analyses the hedging of all types of risks incurred
by the Group, and is the final level of control for assessing
the effectiveness of the control and audit system.
reported to the Head of Group Control and Audit in his
previous capacity as head of Control and Audit, has
become part of the Risk and Permanent Control Division.
Compliance
Calyon’s Compliance organisation helps ensure that
Calyon’s operations and staff comply with laws and
regulations, professional standards and practices and
instructions given by the supervisory or executive body.
Compliance activities are carried out systematically at
the business line, branch and subsidiary levels in France
and abroad. Overall, the Calyon group has 200 staff
(full-time equivalent) dedicated to compliance, with a
significant proportion working in international private
banking.
The Chief Compliance Officer reports hierarchically to the
Chief Executive Officer of Calyon and functionally to
Credit Agricole S.A.’s compliance services. Assisted by a
Head of Compliance and a Head of Financial Security, he
also supervises the heads of compliance in the group’s
various branches and subsidiaries.
Several major compliance projects took place in 2006:
The departmental head reports to the Credit Agricole
group’s Head of Group Control and Audit and Calyon’s
Chief Executive Officer on the work and investigations in
hand. Group Control and Audit operates independently
of the various business units and therefore has neither
responsibility for nor authority over the activities it
monitors.
To this end, Group Control and Audit and the local
internal audit units of the various branches and
subsidiaries carry out checks on all aspects of group
entities’ activities and operations. Local audit teams
monitor implementation of recommendations made by
the various internal and external control bodies on a
twice-yearly basis.
In 2006, Group Control and Audit refocused on periodic
control in accordance with the aforementioned regulation.
The internal control co-ordination team, which previously
-n
ew compliance manuals were distributed to Calyon
staff,
- a new system for monitoring the personal transactions
of staff carrying out sensitive activities was introduced,
- a market abuse monitoring system was selected and
the resulting project began its operational phase,
- FIDES training continued and specific compliance
training was introduced for front office sales teams,
- a product database was created for Calyon France and
the international network,
- the MIFID project reached its operational phase, in line
with the European MIFID directive,
- s econd-level compliance checks continued, with nine
new assignments carried out,
- most internal and external recommendations
concerning the securities reporting system were
implemented,
- the suitability monitoring system for market transactions
was finalised, covering the transactions of the capital
markets department (France and international) and
those of the French Regions department,
- the system for reporting non-compliance incidents to
Crédit Agricole S.A.’s compliance department operated
normally, with 16 incidents reported in 2006.
Financial security
The financial security department’s work was affected
by several regulatory and legislative texts published in
2006. New procedural memos were issued and organisational measures were prepared to meet these new
regulatory requirements.
Risk factors
The organisation of the Group’s risk management
operations is presented in Note 4 to the financial
statements on page 106. The note describes the risk
monitoring and consolidation system, risk factors and
the methods used to identify and measure risk.
Calyon’s risk exposure
and management
Basel II
For Calyon, the reform of the international solvency ratio
poses three main challenges:
Internal control systems and methods:
- integration of Singapore and the Gulf countries into the
“Fircosoft” prior transaction filtering system, which
now covers almost all Calyon entities,
- implementation in October 2006 of a new customer
relationship tool for all Calyon entities (except private
banking), which will be the sole basis for identifying
customers,
- selection of an automated transaction and account
movement surveillance tool (handling monitoring and
profiling activities as part of anti-money laundering
efforts) and start of the project.
In 2006, the Financial Security unit continued to oversee
risks falling within its scope. There was a significant
increase in issues referred to it by operational staff for
its opinion. Anti-money laundering training was given
to more than 3,500 staff either in training sessions or
through e-learning. Financial Security’s supervision of
KYC (know your customer) forms for new customer
relationships ceased in October 2006. This was a
temporary arrangement pending the introduction of the
Kiwis tool, which now classifies customers by money
laundering risk. Financial Security looked at 4,688 new
customer relationships in the first ten months of the
year.
-p
roviding the Credit Agricole group with the specific
expertise of Calyon’s business lines in applying of
Basel II reforms,
- ensuring that Calyon’s shareholders’ equity covers its
portfolio risks,
- improving and standardising day-to-day risk management.
Since mid-2004, the implementation of the reform has
been co-ordinated by the Risk and Permanent Control
Division (RPCD), with the assistance of all of Calyon’s
business lines and support functions. The work is
organised into assignments covering banking and IT
systems.
Governance is provided by:
- s teering committees chaired by the Management
Board,
- banking and IT Project Committees chaired by the RPCD
and the Organisation and Processing Division respectively,
- and specific Crédit Agricole S.A. group-level committees,
with the involvement of subsidiaries and the Regional
Banks.
In 2006, governance was strengthened by two additional
committees. The first focused on preparing the authorisation file and was chaired by a representative of the
60 - 61
Management Board, while the other was dedicated to
data quality.
As in 2005, the Management Board, the Board of
Directors and the Control and Audit Committee were
regularly informed of the project’s progress.
management report
In line with the conclusions of an audit covering the
entire system conducted by Crédit Agricole S.A.’s Group
Control and Audit, work in 2006 focused on:
-d
eveloping additional methods,
- improving documentation and ensuring that all methods
are documented,
- improving data quality,
- introducing more formal processes for default management,
- f inalising the collation of loss histories,
- industrialising certain aspects of the IT system.
Calyon aims to gain authorisation from the Commission
Bancaire to use the IRB (Internal Ratings Based) method
in 2007.
Credit risk
given default. These models have been implemented in
tools for granting loans and quantifying credit risk.
Overall, Calyon has ensured that the risk parameters
that are required by Basel II and allow the calculation of
capital requirements are implemented as part of the
Bank’s internal management. They are used by all people
involved in the process of granting loans and measuring
and monitoring credit risks. When a loan is granted, the
projected returns on the loan are calculated using these
risk parameters defined in accordance with Basel II.
Credit policy and risk strategies
Credit decisions depend on upstream risk strategies that
define the boundaries within which each business line
or geographical entity must conduct its activities: industrial sectors included (or excluded), type of counterparty,
nature and duration of transactions and products
authorised, category or intensity of risks incurred, existence and value of guarantees, overall portfolio volume,
definition of individual and overall risk level, diversification criteria.
Portfolio risks
Internal rating system
The internal rating system covers all methods, procedures
and controls allowing credit risk and loss given default
measurements and borrower ratings for all of our
exposures.
Calyon uses an internal ratings system that assesses the
quality of risks taken on all counterparties on which it
bears risk. Methods used cover all types of counterparty
and combine quantitative and qualitative criteria. They
are devised using the expertise of the various financing
activities within Calyon or the Crédit Agricole group if
they cover customers shared by the whole Group. The
rating scale has 15 positions.
The internal rating of corporate customers is conducted
under a system deployed across the Credit Agricole
group, known as “FRANE” (corporate rating regulatory
support functions), which ensures that uniform ratings
are applied throughout the group.
Within Calyon, the internal rating of counterparties
forms the basis for the approval of commitments and is
one of the fundamental aspects of the process for
granting, monitoring and quantifying credit risks.
Calyon has opted for the advanced internal ratings
approach with respect to the Basel II reforms. As a result,
in addition to borrower rating methods, Calyon has
defined and implemented methods to estimate loss
Decision-making and individual risk monitoring within
Calyon are backed up by a portfolio risk monitoring
system that enables the group to assess counterparty
risks for its overall portfolio and for each of the
constituent sub-portfolios, according to a breakdown by
business line, sector, geographic zone, or any delineation
that brings out specific risk characteristics in the overall
portfolio.
Portfolio reviews are conducted periodically at each
profit centre in order to check that the portfolio adheres
to the risk strategy in force, to assess the various
segments of the portfolio against one another and
against any aspects of the operating environment or
external impacts that may be influencing them, and
finally to reassess the internal rating of the counterparties
under review.
A concentration analysis is carried out in order to detect
any concentration deemed to be excessive for both the
overall portfolio and the constituent sub-portfolios.
Calyon employs credit risk modelling tools to implement
this portfolio approach. In particular, it uses an internal
portfolio model that enables it to calculate expected
loss, volatility and unexpected loss indicators, while
factoring in the positive impact of the protection
purchased (credit default swaps, securitisations), and to
measure the effects of diversification via a correlation
model.
Sector risks
Calyon’s portfolio is analysed by major industrial sector
at regular intervals, at least once a quarter. The RPCD
reviews the risks within each sector in terms of
commitments, level of risk (expected loss, economic
capital) and concentration. The latter is assessed on two
levels: the sector’s weighting within Calyon’s overall
portfolio and the level of diversification within each
sector.
At the same time, the economic and financial risks of
each significant sector are analysed and leading
indicators of deterioration are monitored.
Stress scenarios are also prepared where necessary.
In the light of these various analyses, the RPCD recommends measures to diversify or protect sectors at risk of
deterioration.
Country risk
Country risk is the risk that economic, financial, political
or social conditions in a foreign country will affect the
bank’s financial interests. It does not differ in nature
from “elementary” risks (credit, market and operational
risks). It constitutes a set of risks resulting from the
bank’s vulnerability to a specific political, macroeconomic
and financial environment.
The group manages and controls its country risks
according to the following principles:
-a
ctivities exposed to country risk are defined and
identified through the development and monitoring
of analytical country risk management tools;
- acceptable country risk exposure limits are determined
through annual reviews of country strategies,
depending on the portfolio’s vulnerability to country
risk. This degree of vulnerability is determined by the
type and structure of transactions, the quality of
counterparties and the term of commitments. Exposure
limits may be reviewed more frequently if developments
in a particular country make this necessary. These
strategies and limits are validated by Calyon’s Strategy
and Portfolio Committee or Country Risk Committee
and Credit Agricole S.A.’s Group Risk Management
Committee;
- country risk is evaluated on a regular basis. Ratings on
each country to which the group is exposed are
updated quarterly. These ratings are based on various
criteria (economic, financial, political, crisis scenarios)
developed according to the bank’s own methodology.
Specific events may cause ratings to be adjusted
outside of the quarterly schedule;
- the Country and Portfolio Risk department validates
transactions whose size, maturity and exposure may
potentially affect the quality of the portfolio;
- c ountry risk exposure is monitored and controlled both
quantitatively (amount and term of exposure) and
qualitatively (portfolio vulnerability) through specific
and regular reports on all country risk exposures.
Country risk policy
Calyon’s exposure to risk in emerging-market and nonOECD countries increased substantially in 2006 (+33.7%
in dollar at end-December 2006). At the same time,
Calyon prioritised transactions in the least risky countries
and endeavoured to improve its overall risk profile.
The increase resulted from exposure to risk at local
entities and offshore operations.
The quality of the portfolio continued to improve in
2006, aided by the ongoing healthy market environment
in emerging-market countries. Ratings on 8 countries
were upgraded, while four were downgraded in 2006.
The increase in assets was concentrated in the least risky
emerging market countries.
Countries in which economic, financial or political
developments are deemed to be a potential cause for
concern are monitored closely in terms of both ratings
and management of the group’s exposure limits and
levels.
Collective reserves
The method for calculating collective reserves has been
applied since 2005 with the aim of complying with IAS
39. Collective reserves are booked whenever objective
impairment indicators are identified for one or more
homogenous portfolio subsets. Such subsets requiring
collective reserves are identified by listing assets whose
risk level has already deteriorated and by analysing
industrial sectors and countries as described above.
Stress scenarios
Credit stress scenarios are devised to assess Calyon’s risk
of loss in the event of a serious deterioration in the
economic and financial environment. There are two
types of stress scenario: the first aims to reflect the
equity and revenue impact of a macroeconomic
deterioration affecting the whole portfolio. The second
focuses on a section of the portfolio that constitutes a
homogeneous set of risks. Scenarios are devised either
as part of risk strategies to support decisions, or for
occasional enhanced surveillance requirements.
62 - 63
Use of credit derivatives
The Bank uses credit derivatives and a range of risk transfer instruments, including securitisation, in managing its
banking book.
Outstanding amounts of protection purchased in the
form of credit derivatives came to 12.5 billion euros in
nominal value at end-2006. The notional amount of sell
positions totalled 2.6 billion euros.
2006 trends
Portfolio analysis
management report
Net values on Calyon’s consolidated balance sheet
At 31 December 2006
Net exposure
(1)
Lending to customers
% change
As %
of total
In millions
of euros
As %
of total
101,466
63%
87,415
65%
16%
59,519
37%
47,085
35%
26%
Lending to banks
Leasing
Total
At 31 December 2005
In millions
of euros
476
0%
505
0%
(6%)
161,461
100%
135,005
100%
20%
Source: financial statements
(1)
Figures entered on the balance sheet are net of reserves
Net lending to customers represented almost two thirds
of loans and advances on the balance sheet at 31 December 2006.
The increase of 14 billion euros (or 16%) includes the
impact of the dollar’s decline against the euro.
Changes in the “due from banks” item resulted mainly
from an increase in securities purchased under repo
agreements.
Breakdown of Calyon’s gross outstandings by geographical region
Gross outstandings (1)
31 December
2006
31 December
2005
% of total
2006
France (including overseas departments & territories)
28,803
31,629
18%
Other European Union countries
64,103
40,311
40%
Rest of Europe
8,679
7,766
5%
North America
24,727
14,543
15%
8,008
8,653
5%
Central & South America
Africa & Middle East
Asia/Pacific (excluding Japan)
Japan
Total (balance sheet)
9,424
9,961
6%
12,864
12,779
8%
5,139
10,493
3%
161,747
136,135
100%
(1)
Including leasing, but excluding receivables from subsidiaries.
With no reallocation of guarantees or credit insurance that shift risk for the group.
Excluding repos, which rose by 24 billion euros, Calyon’s
consolidated gross outstandings were near-flat in 2006.
Outstandings are highly diversified, reflecting the predominance of international activities, which account for
more than 80% of total loans and receivables. The
breakdown also reflects Calyon’s strong positions in
Europe, and not just France. Europe accounts for 45% of
Calyon’s total outstandings.
Breakdown of Calyon’s gross outstandings by customer type
Gross outstandings (1)
31 December
2006
Central government, government agencies and local authorities
Financial institutions
Personal customers and small businesses
Corporate customers and other, including insurance companies
Total (balance sheet)
31 December
2005
% of total
2006
3,743
7,018
2%
81,359
56,338
51%
3,505
4,409
2%
73,140
68,370
45%
161,747
136,135
100%
(1) Including leasing, but excluding receivables from subsidiaries.
The breakdown of outstandings by customer type shows a
balance between corporate and financial institution customers. Most repo transactions involve financial institutions.
Personal customer outstandings relate to Calyon’s international private banking activity.
Breakdown of Calyon’s exposure by economic sector
Sector
Exposure at
31/12/2006
%
Exposure at
31/12/2005
%
Energy
49,144
17%
38,109
18%
Other, securitisation vehicles
47,915
16%
36,947
17%
Heavy industry
22,154
8%
13,444
6%
Telecoms
22,096
8%
13,971
7%
Production and distribution of consumer goods
20,049
7%
14,271
7%
Property
16,497
6%
10,656
5%
Automotive
15,329
5%
11,229
5%
Aerospace
13,176
4%
11,836
6%
Shipping
12,295
4%
9,440
4%
Media and publishing
10,668
4%
5,723
3%
Food
9,700
3%
7,325
3%
Other industries
9,097
3%
7,532
4%
IT and technology
8,728
3%
5,942
3%
Tourism, hotels and restaurants
7,458
3%
4,965
2%
Construction
6,845
2%
6,518
3%
Healthcare and pharmaceuticals
6,107
2%
5,164
2%
Other transport
6,085
2%
4,013
2%
Wood, paper and packaging
4,394
1%
1,851
1%
Utilities
2,929
1%
2,622
1%
Other
2,825
1%
931
0%
Total
293,491
100%
212,491
100%
Source: Risk and Permanent Control Division
Scope: Gross on - and off-balance sheet outstanding loans to industrial and commercial companies and potential future risk, including securities
transactions and derivatives. Potential risk consists of the additional coefficient on future risk of market transactions and undrawn confirmed credit
facilities.
64 - 65
management report
The proportion of outstandings concerning the energy
sector, including the upstream, downstream, production
and trading segments, was relatively stable at 17%,
which is similar to the sector’s share of the broad
economy. Calyon lends to integrated oil majors and large
European electricity companies. It also provides trade
finance to specialist energy traders. To a lesser extent, it
lends to independent producers and carries out project
financing. As a result, the cumulative credit risk is
mitigated by the diversity of activities financed. High
energy prices are also having an impact on the scale of
outstandings.
Outstandings in the “other” category include those
relating to holding companies with diversified activities,
which cannot be classified in any one sector, and
securitisations (8%) whose risks relate to customers that
also have a range of activities.
Heavy industry (8% of total exposure) includes sectors
benefiting from strong global growth, i.e. chemicals,
steel and building materials. The portfolio consists of
major multinational companies.
The telecoms portfolio (8% of total exposure) is focused
on incumbent operators and leading mobile players in
countries where mobile telephony is the main vehicle
for development (i.e. emerging-market countries). We
are continuing to monitor this sector closely given rapid
technological developments and the declining market
shares of incumbent operators.
Consumer goods companies (7% of total exposure)
mainly consist of leading French retailers with extensive
operations outside France, and few manufacturers.
Real estate (6% of total exposure) maintained a relatively
stable position in the portfolio. The amount of risk
genuinely related to real estate development is low, and
the portfolio is mainly European. The USA accounts for
less than 15% of the real estate portfolio, with risks
concentrated on the main homebuilders.
We have a cautious approach to the automotive sector,
which accounts for 5% of total exposure. Risks associated
with automotive equipment makers are low. Exposure to
North American carmakers is no more than 15% of the
total.
In the shipping and aircraft sectors (4% of exposure
each), Calyon mainly provides financing secured on assets,
structured finance or loans to leading companies.
No other sector accounts for more than 4% of total
exposure.
Impairment and risk coverage policy
Loan loss risks are covered by two types of impairment
charges, which were adapted to meet new accounting
standards in 2005:
- individual impairment to cover probable losses on impaired loans;
- collective impairment to cover the risk of deteriorating
credit profiles affecting certain countries, industry
sectors and counterparties that are not in default, due
to the decline in their credit ratings.
The impairment policy applies to all impaired and
sensitive loans:
- either after an individual examination of the counterparty’s situation and of the Bank’s security, depending
on various scenarios;
- or through collective impairment in the case of loans
not in default, country risks and sensitive sectors.
Doubtful loans and advances to banks and customers
amounted to 2,059 million euros, or 1.27% of gross
receivables on the balance sheet at 31 December 2006.
The apparent coverage rate of doubtful loans with
individual impairment charges was 42%. However, in
reality the figure was stable with respect to 2005 at
59%, taking into account not just impairment charges
but also partial transfers to profit and loss and purchase
discounts on new investments.
In addition to the 865 million euros of individual
impairment on doubtful and non-performing loans,
Calyon had 1,125 million euros of collective impairment
Bad and doubtful debts and impairment by geographical zone
31.12.2006
Gross Doubtful debts
outstandings
outstanding
Impairment
on doubtful
debts
Bad debts
outstanding
Impairment
on bad
debts
Total
France (including overseas departments
& territories)
28,803
109
(50)
184
(92)
28,661
64,103
61
(23)
809
(111)
63,969
Rest of Europe
8,679
5
59
(59)
8,620
North America
24,727
155
(26)
137
(74)
24,627
8,008
31
(21)
168
(127)
7,860
9,424
1
150
(138)
9,286
12,864
11
170
(137)
12,722
5,139
7
2
(2)
5,137
161,747
380
1,679
(740)
160,882
Asia/Pacific (excluding Japan)
Japan
Total
The geographical breakdown of doubtful debts and
impairment shows:
- an above-average impairment rate for Africa, the
Middle East and Asia, where doubtful loans mainly relate to old arrangements on which a high level of impairment has been booked;
(5)
(125)
- a lower impairment rate in the USA (due to the writeoff of unrecoverable losses and the genuine prospects
of recovery on these loans), the European Union and
Japan.
Bad and doubtful debts and impairment by type of customer
31.12.2006
Central government, government agencies
and local authorities
Gross Doubtful debts
outstandings
outstanding
Impairment
on doubtful
debts
3,743
Bad debts
outstanding
Impairment
on bad
debts
Total
101
(90)
3,653
81,359
9
(3)
185
(184)
81,172
Personal customers and small businesses
3,505
24
(14)
117
(85)
3,406
Corporate customers and other, including
insurance companies
73,140
347
(108)
1,276
(381)
72,651
161,747
380
(125)
1,679
(740)
160,882
Total
Counterparty risks on capital market activities
The tables below set out Calyon’s exposure to counterparty
risks resulting from forward and options transactions on
interest rates, currencies, commodities and precious
metals.
At 31 December 2006, the market replacement cost (or
positive market value) of these instruments, after
factoring in the impact of netting and collateralisation,
was 13.66 billion euros, 12.27 billion euros of which
related to the trading portfolio. This amount breaks
down by counterparty type as follows:
66 - 67
Market value
Before netting and
collateralisation
Impact
After netting and
collateralisation
0.78
(0.30)
0.48
85.18
(79.31)
5.87
9.84
(2.53)
7.31
Before netting and
collateralisation
Impact
After netting and
collateralisation
0.51
(0.16)
0.35
OECD financial institutions and similar bodies
75.83
(50.39)
25.44
Other counterparties
11.39
(2.70)
8.69
OECD governments and central banks
and similar bodies
OECD financial institutions and similar bodies
management report
Potential credit risk, estimated on the basis of regulatory
add-ons, amounted to 34.48 billion euros, 33.71 billion
euros of which related to the trading portfolio. This
amount breaks down by counterparty type as follows:
Potential credit risk
OECD governments and central banks
and similar bodies
Market risk
Almost all (99%) transactions are concluded in order to
manage positions. The balance may be considered as
hedging in accordance with accounting standards.
The definition of market risks, risk measurement and
management methods and the organisation of the risk
management system at Calyon are described in note 4.2
to the financial statements.
The counterparty risk on OTC equity and index derivatives
can be estimated at:
Value at Risk (VaR)
-m
arket value, which amounted to 2.87 billion euros,
of which 0.22 billion euros related to OECD financial
institutions (or equivalent) and 2.65 billion euros to
other counterparties;
-p
otential risk estimated on the basis of regulatory
add-ons, totalling 8.07 billion euros, of which 3.91
billion related to OECD financial institutions (or equivalent) and 4.16 billion euros to other counterparties.
VaR is the central plank of the risk measurement
system.
Calyon has set an overall risk limit, expressed in VaR
terms, for all its capital markets activities which stood at
35 million euros at 29 December 2006.
The table below shows changes in the VaR of activities
grouped according to their principal risk factor:
Commodities
Forex
Interest
rate
Credit
Equities
Netting
Calyon
Max 2006
7
3
18
16
12
(10)
29
Min 2006
2
1
7
6
5
(23)
12
Average 2006
4
2
11
10
8
(17)
18
At 29 December 2006:
- Credit VaR was 11 million euros, based on the scope of
credit market activities.
- Equity VaR was 8 million euros, covering the equity
derivatives, equity funds and brokerage activities
(mainly CLSA and Cheuvreux).
- Fixed-income VaR was 9 million euros, relating to the
treasury and interest-rate derivatives activities.
- Forex VaR was 2 million euros, relating to cash forex
and forex options activities.
- Commodities VaR was 3 million euros.
In 2006, average VaR was 18 million euros, with a maximum of 29 million euros. The significant level of netting
reflects healthy risk diversification.
The overall VaR trend for capital markets activities in
2006 was as follows: VaR Calyon 30/12/2005 - 29/12/2006 (in millions of euros)
Equity risk
Calyon’s equity risk results mainly from trading and
arbitrage transactions involving equities, carried out as
part of capital markets activities involving equity
derivatives and funds. It also results, to a lesser extent,
from CA Cheuvreux and CLSA’s equity brokerage activities.
These activities are described in the description of
Calyon’s business lines in the “Presentation of Calyon”
section.
As mentioned in note 7.18, neither the Calyon parent
company nor any of its subsidiaries hold any own shares.
Equity risk arising from trading and arbitrage activities
is monitored using a 99% “Value at Risk” (VaR) method.
This measures the greatest risk, based on a number of
parameters and scenarios, once the most adverse 1% of
occurrences have been eliminated.
Average, minimum and maximum VaR figures and the
VaR figure on 29 December 2006 are analysed by risk
factor – and equity risk in particular – in the management
report on p 68.
The scope and organisation of the market risk management system are described in note 4.2 to the financial
statements.
68 - 69
Global interest rate risk
Legal risks
Assessment
To Calyon’s knowledge, on the date this document was
registered, there were no exceptional events, litigation
or arbitration proceedings, other than those mentioned
below, that have recently had or may in future have a
significant impact on the group’s financial position,
activity, assets or results, and that are not reflected in
the financial statements at 31 December 2006.
management report
Calyon uses the gap method to measure its overall
interest-rate risk. This consists of determining maturity
schedules and interest rates for all assets, liabilities and
hedging derivatives at fixed, adjustable and inflationlinked interest rates, until the adjustment date for
adjustable-rate items, until the contractual date for
fixed-rate items and using model-based conventions for
items without a contractual maturity.
The results of these measurements at 31 December
2006, based on entities fully consolidated by Calyon, are
as follows:
Average gaps
(on all currencies)
0-1 year
1-5 years
5-10 years
0.2
1.0
0.7
Based on these gaps, the sensitivity of net banking
income in the first year (2007) is a loss of less than 2
million euros in the event of an adverse 100-basis-point
movement in all interest rates.
The cumulative discounted risk for the next ten years,
based on the same assumptions, represents less than
0.5% of regulatory capital.
Calyon’s exposure to interest-rate risk in its customer
transactions is limited through interest-rate matching
carried out on customer assets by its market teams, and
due to the low level of non-remunerated deposits.
Liquidity risk
Like all credit institutions, Calyon is exposed to liquidity
risk, i.e. the risk of lacking sufficient funds to meet its
commitments at their maturity, particularly in the event
of a general shortage of liquidity, either in the market or
in a given currency. Calyon’s Treasury department manages
this risk.
Each month a regulatory liquidity ratio is calculated.
This ratio compares cash and assets with a low residual
term against similarly short-term liabilities. This ratio
must equal at least 100%.
Calyon’s liquidity ratio was 107% on 31 December
2006.
In the normal course of its business, Calyon is involved
in a number of litigation and arbitration proceedings in
several countries.
Provisions are booked in respect of these litigation and
arbitration proceedings when it is likely that they will
result in an outflow of cash.
The main ongoing legal proceedings corresponding with
the above criteria and involving Calyon group entities
are described in the 2004 and 2005 management
reports.
The cases presented below are those in which there were
some changes in 2006:
- FONDS CLARIDEN - A settlement was negotiated in 2006,
and the matter is now closed.
-M
ONTLAUR - Calyon is a defendant in a wrongful action
suit filed against several financial institutions in March
1995. The lower court’s dismissal of the claims made
by plaintiffs was confirmed on appeal. The plaintiffs
have lodged a further appeal.
-O
TOR - A settlement has been reached, putting an end
to this dispute.
- S AN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEM - Investors
that acquired shares in a listed company as part of a
public offering in 2001 have initiated a class action suit
against the company, its directors, the sellers of the
shares and the members of the placing syndicate,
including Calyon. The members of the placing syndicate
requested that the suit be rejected, and the request
was accepted by the judge, although the plaintiffs still
have the option to appeal.
Binding agreements
Calyon is not bound to any patent or licence, nor to any
industrial, commercial or financial supply contract.
Industrial and environmental risks
Off-balance sheet commitments
Calyon does not have any measurements of the impact
of industrial and environmental risks.
Calyon confirms that no material off-balance sheet commitments have been omitted from its financial statements, in accordance with current accounting standards.
Employee, social and environmental information
Information on the workforce and employee relations
Calyon’s headcount
Breakdown by business line
at 31 December 2006
Breakdown by region
at 31 December 2006
Calyon employees in France
Breakdown by type of contract
at 31 December 2006
Training contracts
Number of contracts signed in 2006
308
Student interns
272
Professionalisation contracts
(qualification, orientation, adaptation contracts)
Apprenticeship contracts
32
4
70 - 71
Breakdown of the active permanent workforce at end-2006
management report
Breakdown by gender and category
Age structure
Age and length of service
The average age and length of service did not change in
2006, and remained at 43 years and 15 years respectively.
Working time
Contractual working time
Breakdown of active permanent employees
at 31 December 2006 by contractual working time
Management
Hourly
Daily
93
3%
925
2,882
97%
Other
0
Total
2,975
Part-time staff
Number of part-time
permanent staff
by working time in 2005
< 70%
≥ 70% and < 90%
≥ 90%
Total
% of permanent
part-time staff
Non% management
100%
%
%
1,018
26%
0
2,882
74%
0
0
925
100%
Total
100%
3,900
100%
Breakdown of part-time staff by working time 2006
NonManagement management
Total
12
32
44
159
152
311
12
19
31
183
203
386
6.2%
21.9%
9.9%
Employment management
New permanent employees
Permanent staff departures (final departures)
2006
Management
Resignation
Nonmanagement
104
2005
Total
%
Total
%
3
107
39%
106
19%
Voluntary departure (external transfer)
25
3
28
10%
281
50%
Retirement and early retirement
53
23
76
29%
103
18%
Redundancy
44
3
47
17%
61
11%
Death
4
4
8
3%
3
1%
Other (departure during trial period etc.)
4
1
5
2%
6
1%
234
37
271
100%
560
100%
Total
Promotions
2006
2005
Men
Women
Promotion within non-managerial
category
40
106
Promotion from non-managerial to
managerial
21
190
Promotion within managerial category
Total
%
Total
Men
Women
Total
146
23
102
125
52
73
15
36
51
118
308
215
137
352
251
276
527
253
275
528
48%
52%
100%
48%
52%
100%
72 - 73
Compensation
Individual salaries
Average base monthly basic salaries for active permanent employees in 2006
(in euros)
Men
Women
Total
Managers
5,681
4,170
5,091
Non-managers
2,369
2,410
2,399
Total
5,294
3,515
4,450
management report
Collective incentive plans
Total variable compensation paid in 2006 (in euros)
Number of
beneficiaries
Gross amount paid
Average amount
Profit sharing
Incentive plan
Employee savings plan top-up
37,139,953
5,008
7,416
6,174,265
4,183
1,476
Company-wide agreements
Company-wide agreements signed during the year
Topic of agreement
Number
Salary and related
4
Staff representation bodies
0
Training
0
Total
4
Absenteeism / reason / status
Absenteeism (number of working days)
2006
Reason for absence
Managerial
Men
2005
Non-managerial
Women
Men
Total
Women
Number
Total
%
Number
%
Illness – less than 3 days
519
566
148
690
1,923
2%
1,116
1%
Illness – 3 days and over
5,460
7,663
2,350
9,069
24,542
25%
58,744
39%
219
165
647
365
1,396
1%
798
Travel accidents
Workplace accidents
Maternity/paternity leave
Strikes
357
278
1
110
746
1%
914
1%
1,180
16,944
164
2,070
20,358
21%
24,585
16%
1
2
8
17
28
51
1%
Authorised leave
1,622
5,919
225
4,515
12,281
13%
23,807
16%
Other reasons
9,084
20,253
1,091
5,238
35,666
37%
39,454
26%
18,442
51,790
4,634
22,074
96,940
100%
149,469
100%
Total
Training
Number of employees trained
Management Non-management
Women
Total
925
521
1,446
Men
1,403
205
1,608
Total
2,328
726
3,054
Number of hours of training
Total
74,184
21,360
95,544
2006
Knowledge area
No. of
hours
2005
%
No. of
hours
%
Knowledge of Crédit Agricole S.A. group
1,216
1%
392
1%
Personnel and business management
7,900
9%
9,521
13%
88
0%
Insurance
Banking, law, economics
Financial management (accounting, management control, tax etc.)
39,947
47%
34,056
48%
Purchasing, marketing, distribution
3,544
4%
1,439
2%
IT, networks, telecommunications
7,610
9%
6,164
9%
Office systems, business-specific software, new technology
7,328
9%
3,604
5%
12,000
14%
10,992
15%
88
0%
40
0%
Personal development, communication
4,864
6%
5,089
8%
Human resources
1,159
1%
85,744
100%
Risk
Languages
Health and safety
Human rights and environment (sustainable development)
Total
71,296
100%
74 - 75
Environmental information
Calyon and the “Equator Principles »
management report
Since 2003, Calyon has integrated social and environmental risks into its project financing decisions and is
currently the only French bank to have adopted the
Equator Principles, which are based on International
Finance Corporation (IFC) directives.
To meet this commitment, Calyon has set up a unit in
charge of implementing the Equator Principles worldwide.
This unit, consisting of operational staff from the project
financing business, co-ordinates the practical aspects of
implementing the Principles. It manages the network of
local correspondents and provides special training for
staff concerned. As well as acting as an internal interface,
the co-ordination unit represents Calyon with respect to
the IFC, other Equator Principles signatory banks and
non-governmental organisations (NGOs).
In addition, the Equator Principles Committee monitors
the assessment and management of environmental and
social risks. It is the authority in charge of ensuring
compliance with rules. The Equator Principles Committee
was set up in 2006 and meets several times per year. It
rates projects as A, B or C based on the risks involved and
their environmental impact, with A representing the
largest risks and C the smallest. Specific consultations
are held for all issues likely to be rated A and for any
urgent matters.
Since Calyon signed up to the Equator Principles, it has
held special training sessions devised with the help of
external consultants. More than 150 staff from the
Project Financing business and internal departments
(legal, compliance, industry and sector research etc.)
have received training, specifically relating to tools for
assessing and analysing environmental and social risks.
Equator Principles awareness-raising initiatives have
been organised within the group.
In applying the Equator Principles, Calyon has developed
a method for classifying projects according to identified
risks. It was also behind the creation of a standardised
assessment tool, developed by a company called
Sustainable Finance, which is now used by several
signatory banks.
The method involves an assessment matrix, and makes
the process of rating projects – by business sector (oil,
chemicals, telecoms, healthcare etc.) and by area of
influence – more consistent, more uniform and, most
importantly, easier. An alert system complements the
analysis, taking into account the political context in
order to reduce financial risk further.
Calyon is also part of the testing group that is helping to
make practical improvements to this tool, ensuring that
it adapts to changes in the market and in customer
requirements. Version 3 has been in use since 1
November 2006. The new version allows more detailed
assessment and analysis of transaction risks. Most
discrepancies resulting from incorrect assessment of risk
criteria in previous versions have been corrected. A
project’s final rating is now given directly by the expert
system, which also carries out consistency checks
between the various answers.
All new projects have to be evaluated using this
procedure. In addition, Calyon is also classifying projects
financed before these principles were adopted. All
outstanding projects initiated before 2003 are also
being categorised.
Between 1 January 2005 and December 2006, Calyon
assessed 312 projects:
- 21 were given an A rating
- 257 were given a B rating
- 34 were given a C rating
In collaboration with the IFC and other banks, Calyon
has been involved in improving the Equator Principles
through dialogue with NGOs representing civil society. As
a result, a revised version of the Equator Principles was
introduced in July 2006.
The “EP2” principles now apply to all projects with a
total cost of 10 million dollars or more (as opposed to 50
million dollars previously) and have been extended to
project finance advisory activities. Each signatory bank
now has to make public the number of projects financed
and their categorisation.
These principles are recognised as a world standard and
as the expression of best environmental and social
practice in the field of project finance.
4
Financial
information
78Consolidated financial statements for the year
ended 31 December 2006 approved by the Board of Directors at its meeting of 28 February 2007
78
79
82
83
84
85
87
Foreword
General background
Income statement
Consolidated balance sheet
Changes in shareholders’ equity
Cash flow statement
Notes to the consolidated financial statements
148 Statutory Auditors’ report on the consolidated financial statements
150Information on the parent company financial statements
151 Balance sheet
152
152
153
154
155
Off-balance sheet items
Income statement
Changes in accounting methods
Changes in share capital and share premiums
Investments in subsidiaries and associates
76 - 77
Consolidated financial
statements for the year ended
31 December 2006 approved
by the Board of Directors at
its meeting of 28 February 2007
The financial statements consist of the foreword, general
framework, the income statement, the balance sheet,
the statement of changes in shareholders’ equity, the
cash flow statement and the Notes to the financial statements.
Foreword
Regulatory framework
On 19 July 2002, the European Union adopted EC Regulation
1606/2002, which requires European companies whose
securities are traded on a regulated market to produce
consolidated financial statements under IFRS as from
2005.
Applicable standards and comparability
The consolidated financial statements have been prepared
in accordance with IAS /IFRS and IFRIC interpretations
as adopted by the European Union and applicable at
31 December 2006.
The accounting principles and methods applied are the
same as those used to prepare the consolidated financial
statements for the Group for the year ended 31 December
2005, supplemented by the provisions of those standards
and interpretations that must be applied in 2006 for the
first time.
These cover the following:
This regulation was supplemented by EC Regulation
1725/2003 of 29 September 2003 on the application
of international accounting standards, by EC Regulation
2086/2004 of 19 November 2004 allowing the adoption
of IAS 39 in an amended format, and by EC Regulations
2236/2004, 2237/2004 and 2238/2004 of 29 December
2004, 211/2005 of 4 February 2005, 1073/2005 of
7 July 2005, 1751/2005 of 25 October 2005, 1864/2005
of 15 November 2005, 1910/2005 of 8 November 2005,
2106/2005 of 21 December 2005, 108/2006 of 11 January
2006 and 708/2006 of 8 May 2006.
- the revision to IAS 19, Employee Benefits, pertaining to
actuarial gains and losses and Group plans,
- the revisions to IAS 39 on financial instruments and
pertaining to cash flow hedging for future intra-group
transactions and the conditions for using the fair value
option,
- the revisions to IAS 39 on financial instruments and of
IFRS 4 on insurance contracts and applying to financial
guarantee contracts,
- the IFRIC 4 interpretation on conditions for determining
whether an agreement contains a lease,
- the amendment to IAS 21 on net investment in a foreign
entity.
Under the French Ministry of Finance decree No. 2004/1382
of 20 December 2004, companies, even if they are not
publicly traded, may prepare their financial statements
using IFRS as of 2005. All Calyon entities have elected for
this option.
The application of these new provisions had no material
impact on the company’s income statement or balance
sheet for the period.
The Group has not applied the provisions of those standards, interpretations and amendments that are optional
for the period.
General background
This applies to:
Since the Extraordinary General Meeting of 30 April
2004, the company’s name has been Calyon. Its trading
name is Calyon Corporate and Investment Bank.
- IFRS 7 on information to be provided on financial
instruments,
- the amendment to IAS 1 on additional information to
be provided on equity,
- IFRIC 7 applying to the financial statement restatement
approach under IAS 29,
- IFRIC 8 clarifying the scope of IFRS 2,
- IFRIC 9, Reassessment of embedded derivatives.
The first three standards and interpretation will produce
an impact only on the presentation of the Group’s
financial statements.
The last two interpretations are not expected to produce
any material impact on the income statement or balance
sheet.
presentation format
Calyon uses summarised documents formats (balance
sheet, income statement, statement of changes in
shareholders’ equity, cash flow statement) advised by
CNC recommendation 2004-R.03 of 27 October 2004.
Legal presentation of Calyon
Address and registered office of the company:
9 quai du Président Paul Doumer,
92920 Paris La Défense cedex France.
Registration number: 304 187 701, Nanterre Trade and
Companies Registry.
APE code: 651 C.
Corporate form
Calyon is a societe anonyme (joint stock corporation)
with a Board of Directors, governed by the laws and
regulations applicable to credit institutions and joint stock
corporations and by its Articles of Association.
78 - 79
Simplified organisational chart of Calyon
Calyon
International Network CIB
100 % CGB Calyon Global Banking
100 % Calyon Bank Hungary
100 % Calyon Bank Ukraine
100 % Banco Calyon Brasil
24 % Calyon Holdings (UK) Ltd
100 % Calyon Global
Partners Inc
100 % Calyon Bank
Turk AS
13 % Calyon Bank
(Egypt) SAE
100 % Calyon Australia Ltd
100 % Filiales USA
Branches
Europe : Germany, Italy, Luxembourg,
United Kingdom, Spain, Belgium, Finland,
Sweden, Czech, Poland, Slovakia
Asia : Japan, Taiwan, South Korea, China,
Hong-Kong, India, Malaisia, Philippines,
Singapore, Thailand, Vietnam
Corporate and Investment Banking
Américas : United States of America
Others : Gulf, South Africa, Yemen
Capital Markets & Investment Banking
100 % CA Chevreux
100 % CA Chevreux
North America Inc.
100 % Other European
subsidiaries
and branches
Financing
100 % Calyon Securities
(USA) Inc
100 % CCMA - Calyon Capital
Market Asia bv
100 % Calyon Securities
Japan
100 % CPR Online
65 % CLSA Group
100 % Calyon North America
Holdings Inc
9%
100 % Calyon Financial Inc
100 % Calyon Financial SNC
50 % CASAM
50 % Altura Markets
International Private Banking
100 % Calyon Rusbank
100 % CCMI - Calyon Capital
Market International 76 %
100 % CAI Banque Privée Holding
29 % CA Suisse
and subsidiaries
71 % 100 % C.F.A. - Compagnie
Française de l’Asie
40 % CA Luxembourg
and subsidiaries
60 %
98 % Fininvest
2%
68 % CFM - Crédit
Foncier Monaco
100 % CA Brasil DTVM
100 % CLINFIM
100 % Calyon Airfinance
31 % B.S.F.- Banque
Saudi Fransi
100 % CLIFAP
100 % Calyon Asia
Shipfinance
47 % UBAF - Union
de Banques Arabes
et Françaises
Related parties
Relations between consolidated companies
within the Calyon group
The Calyon group’s related parties comprise companies
within the Credit Agricole S.A. group with which it has a
stockholding relationship and/or joint directors.
The information provided in this report is supplemented
by the information given in the statutory auditors’ special
report on regulated agreements on page 162 to 165.
Relations with the Credit Agricole S.A. group
On- and off-balance sheet sums outstanding representing
transactions between the Calyon group and the rest of
the Credit Agricole S.A. group are summarised in the
following table:
Outstandings
31 december 2006
Loans
Loans and advances
4,375
Trading derivatives outstandings
8,251
Liabilities
Loand and advances
2,219
Trading derivatives outstandings
7,136
Subordinated debts
6,142
Preference shares
418
Financing commitments
Financing commitments received
Guarantees received
94
1,363
The loans and accounts outstandings identify cash relations between Calyon and the rest of the Credit Agricole
S.A. group.
Trading derivatives outstandings mainly represent Crédit
Agricole group interest-rate hedging transactions arranged
by Calyon in the market.
Subordinated debt outstanding increased following the
issue of securities during the period in view of obtaining
Financial Holding Company status in the USA. The amount
of these issues was 1,700 million dollars and 1,100 million euros.
The information concerning preferred shares appears in
note 7.18.
A list of Calyon group companies can be found in note 12
to the consolidated financial statements.
Transactions and outstandings at the period end between
fully consolidated companies are eliminated in full on
consolidation. Therefore, the consolidated financial
statements are only affected by transactions between
fully consolidated companies and proportionally consolidated companies to the extent of the interests held by
other shareholders.
The corresponding sums outstanding in the consolidated
balance sheet at 31 December 2006 concern the UBAF
group, Altura and Chauray for the following amounts:
- due from banks: 6 million euros
- due to banks: 24 million euros
Relations with the executive officers and senior
management
Detailed information on senior management compensation is provided in note 8.7 to the financial statements
“Executive officers’ compensation”.
80 - 81
Income statement
Notes
31.12.2006
31.12.2005
Interest receivable and similar income
5.1
11,729
10,303
Interest payable and similar expense
5.1
(13,689)
(10,247)
Fee and commission income
5.2
3,173
2,962
Fee and commission expense
5.2
(1,249)
(1,044)
Ne gains (losses) on financial instruments at fair value through profit or loss
5.3
5,390
2,466
5.4, 7.4
297
288
Net gains (losses) on available-for-sale financial assets
Income related to other activities
5.5
297
300
Expenses related to other activities
5.5
(86)
(90)
5,862
4,938
5.6, 8.1, 8.4
(3,468)
(3,057)
5.7
(106)
(111)
Net banking income
General operating expenses
Depreciation, amortisation and impairment of property,
plant & equipment and intangible assets
2,288
1,770
Risk-related costs
5.8
9
87
Share of net income of affiliates
3.3
166
125
Net gains (losses) on other assets
5.9
5
203
Goodwill
Pre-tax income
Income tax
Net income
Minority interests
(86)
3.6
5.10
2,468
2,099
(620)
(383)
1,848
1,716
77
84
Net income – Group share
1,771
1,632
Earnings per share
14.59
14.13
Diluted earnings per share
14.59
14.13
* in 2005, before integration-related costs
Consolidated balance sheet
Assets
Notes
31.12.2006
31.12.2005
Cash, due from central banks and French postal system
7.1
1,787
4,890
Financial assets at fair value through profit or loss
7.2
359,535
288,302
4.2, 4.4
344
493
Derivative hedging instruments
Financial assets available-for-sale
7.4
24,551
23,147
Due from banks
4.1, 4.3, 7.5, 7.6
59,519
47,085
4.1, 4.3, 7.5, 7.6
101,942
87,920
Securities portfolio
4.2, 4.4
3
Held-to-maturity financial assets
7.6, 7.8
Current tax assets
1
31
Deferred tax assets
7.10
743
711
7.11
37,053
26,154
Fixed assets held for sale
7.12
Investments in equity affiliates
2
3.3
668
524
Investment property
7.14
16
200
Property, plant and equipment
7.15
646
616
Intangible assets
7.15
82
57
3.6
1,250
1,214
588,170
481,316
Goodwill
Total Assets
Liabilities
Notes
31.12.2006
31.12.2005
Due to central banks and current accounts with French postal system
7.1
80
457
Financial liabilities at fair value through profit or loss
7.2
302,991
239,393
4.4
188
639
4.3, 7.7
78,810
72,912
4.1, 4.3, 7.7
84,035
71,665
4.3, 7.9
62,830
47,311
Due to banks
Customer accounts
Valuation adjustment on portfolios of hedged items
4.4
Current tax liabilities
2
438
135
Deferred tax liabilities
7.10
191
216
7.11
38,175
30,863
Liabilities associated with fixed assets held for sale
7.12
General reserves
7.17
920
1,169
Subordinated debt
4.3, 7.9
6,277
4,342
7.18
13,235
12,212
Shareholders’ equity – Group share
12,396
11,496
Share capital and reserves
7,686
6,678
Consolidated reserves
2,569
2,611
Unrealised or deferred gains or losses
370
575
Net income for the year
1,771
1,632
839
716
588,170
481,316
Minority interests
Total Liabilities and shareholder’s equity
82 - 83
Changes in shareholders’ equity
Unrealised or deferred gains
or losses
Share capital and reserves
at 1 January 2005
Share
Share premiums
and
other
capital
reserves
(1)
3,120
6,646
Elimination of
treasury
shares
0
Retained
earnings
– Group
share
9,766
Net
Change in
in income,
fair value of Change
fair
value
group
On foreign available- of hedging
share
exchange
for-sale
instrufinancial
ments
assets
(76)
199
125
0
Total
equity,
group
share
Minority
interests
Total
shareholders’
equity
10,014
681
10,695
(489)
(32)
(521)
97
(1)
96
(37)
(1)
(38)
1,632
84
1,716
(61)
(61)
Capital increase
Dividends paid
in 2005
(489)
(489)
Change in value of
available-for-sale
securities (IAS 39)
97
Cash flow hedges
(IAS 39)
(37)
2005 net income
1,632
1,632
Impact of acquisitions/
disposals on minority
interests
Share of change in
equity of associates
companies accounted
for under the equity
method
Change in goodwill
309
Other changes
at 31 December 2005
Capital increase
(30)
(30)
10,879
233
88
0
383
(58)
11,496
716
12,212
7,759
316
692
1,008
1,008
(1,551)
(1,551)
(1,551)
(56)
(1,607)
100
1
101
(138)
(1)
(139)
1,771
77
1,848
157
157
Change in value of
available-for-sale
securities (IAS 39)
296
74
(28)
3,120
Dividends paid
in 2006
0
309
(30)
100
Cash flow hedges
(IAS 39)
(138)
2006 net income
1,771
Impact of acquisitions/
disposals on minority
interests
Share of change in
equity of associates
companies accounted
for under the equity
method
(32)
(32)
(36)
(36)
Change in goodwill
at 31 December 2006
(32)
(222)
Other changes
3,436
6,832
0
10,268
1,008
11
396
(50)
1,771
(32)
(222)
(50)
(272)
(36)
(5)
(41)
12,396
839
13,235
(1) Includes share premiums and parent company’s statutory reserve
The changes in the “Unrealised or deferred gains or
losses” category in 2006 resulted from the following
factors:
- the euro’s rise against most other currencies, particularly the US dollar, caused translation adjustments to
fall by 222 million euros during the year;
-h
igher interest rates dragged down the fair value of
certain cash flow hedging derivatives by 138 million
euros;
- the fair value of certain securities in the “availablefor-sale assets” category rose in value, contributing to
a 100 million euro rise in shareholders’ equity.
Cash flow statement
The cash flow statement is presented using the indirect
method.
Operating activities are Calyon’s revenue generating
activities.
Tax inflows and outflows are included in full within
operating activities.
Investing activities show the impact of cash inflows and
outflows associated with purchases and sales of investments in consolidated and non-consolidated compa-
nies, property, plant and equipment and intangible
assets. This section includes strategic equity interests
classified as available for sale.
Financing activities show the impact of cash inflows and
outflows associated with shareholders’ equity and longterm financing.
Net cash and cash equivalents include cash, debit and
credit balances with central banks and the French postal
system, and debit and credit sight balances with banks.
2006
2005
2,468
2,099
109
113
0
0
Net charge to provisions
(118)
(718)
(166)
(125)
Net loss/(gain) on investing activities
(7)
(221)
Net loss/(gain) on financing activities
1,467
324
Other movements
1,119
(295)
Total non-cash items included in pre-tax income and other adjustments
2,404
(922)
Change in interbank items
(16,545)
(3,903)
Change in customer items
(942)
(1,131)
3,788
(14,141)
(3,380)
5,740
Pre-tax income
Amortisation and depreciation of property, plant & equipment and intangible assets
Depreciation and impairment of goodwill and other fixed assets
Change in financial assets and liabilities
Change in non-financial assets and liabilities
Taxes paid
(107)
(253)
Net decrease/(increase) in assets and liabilities used in operating activities
(17,186)
(13,688)
Total net cash provided by operating activities (A)
(12,314)
(12,511)
45
(4,144)
Change in equity investments
Change in property, plant & equipment and intangible assets
(145)
(67)
Total net cash provided/(used) by investing activities (B)
(100)
(4,211)
Cash received from/(paid to) shareholders
(543)
(294)
297
(1,134)
Other cash provided/(used) by financing activities
Total net cash provided/(used) by financing activities (C)
(246)
(1,428)
Effect of exchange rate changes on cash and cash equivalents (D)
1,064
(829)
Net increase/(decrease) in cash & cash equivalents (A + B+ C + D)
(11,596)
(18,979)
(6,073)
12,906
Opening cash and cash equivalent
Cash, central banks, French postal system (assets & liabilities)
4,433
19,204
Interbank sight balances ( assets & liabilities)
(10,506)
(6,298)
Closing cash and cash equivalents
(17,669)
(6,073)
Cash, central banks, French postal system (assets & liabilities)
1,705
4,433
Interbank sight balances (assets & liabilities)
(19,374)
(10,506)
Change in net cash and cash equivalents
(11,596)
(18,979)
84 - 85
Notes to the consolidated financial
statements
Note 1: Accounting principles and methods
88
1.1 Significant accounting policies
88
1.2 Consolidation principles and methods (IAS 27, 28, 31)
96
Note 2: Assessments and estimates used to prepare the financial statements
99
Note 3: Scope of consolidation
101
3.1Changes in the scope of consolidation over the period
101
3.2 Main acquisitions during the year
101
3.3 Investments in equity affiliates
102
3.4Securitisation transactions and special-purpose vehicles
102
3.5Investments in non-consolidated companies
103
3.6 Goodwill
104
Note 4: Financial management, exposure to risk and hedging policy
4.1 Credit Risk
4.2 Market risk
4.3 Liquidity and financing risk
4.4 Derivative hedging instruments
4.5 Operational risk
4.6 Insurance and risk coverage
105
107
112
118
121
121
122
Note 5: Notes to the income statement
123
5.1 Interest income and expense
123
5.2 Net fee and commission income
123
5.3Net gains (losses) on financial instruments at fair value through profit or loss
124
5.4Net gains (losses) on available-for-sale financial assets
124
5.5Net income and expenses related to other activities
124
5.6 General operating expenses
124
5.7Depreciation, amortisation and impairment of property, plant and equipment and intangible assets
125
5.8 Risk-related costs
125
5.9 Net income on other assets
126
5.10 Income tax
126
Note 6: Segment reporting
Definition of business segments
Presentation of business lines
6.1 Analysis by business line
6.2Geographical analysis of business line information
127
127
127
127
128
Note 7: Notes to the balance sheet at 31 December 2006
129
7.1 Cash, due from central banks and French postal system
129
7.2Financial assets and liabilities at fair value
through profit or loss
129
130
7.4 Financial assets available-for-sale
130
7.5Due from banks and loans and advances to customers
131
7.6 Impairment deducted from assets
132
7.7Due to banks and customer accounts
133
7.8 Held-to-maturity financial assets
133
7.9Debt securities in issue and subordinated debt
134
7.10 Deferred tax assets and liabilities
134
7.11Accruals, prepayments and sundry assets and liabilities
135
7.12Fixed assets held-for-sale and associated liabilities
135
136
7.14 Investment property
136
7.15Property, plant and equipment and intangible assets (excluding goodwill) 136
7.16 Goodwill
137
7.17 Reserves
137
7.18 Shareholders’ equity
137
Note 8: Employee benefits and other compensation
139
8.1 Personnel costs
139
8.2 Average number of employees
139
8.3 Post-employment benefits, defined contribution plans
139
8.4Post-employment obligations, defined benefit plans
140
8.5 Other employee benefits
141
8.6 Share-based payments
142
8.7 Executive officers’ compensation
142
Note 9: Financing and guarantee commitments 142
Note 10: Fair value of assets and liabilities measured
at amortised cost
143
Note 11: Subsequent events
144
Note 12: Scope of consolidation at 31 December 2006
145
86 - 87
Note 1 : Accounting principles and methods
Employee benefits (IAS 19)
In accordance with IAS 19, employee benefits are recorded
in four categories:
1.1 Significant accounting policies
Non-current assets
(IAS 16, 36, 38, 40)
The Calyon group applies component accounting for all
of its non-current tangible and intangible assets.
In accordance with the provisions of IAS 16, the depreciable amount takes account of the potential residual
value of property, plant and equipment.
Land is measured at cost less any impairment charges.
Property used in operations, investment property and
equipment are measured at cost less accumulated
depreciation and impairment charges.
Purchased software is measured at purchase price less
accumulated depreciation and impairment charges.
Proprietary software is measured at cost less accumulated depreciation and impairment charges.
Other than software, intangible assets principally comprise
purchased goodwill, which is measured on the basis of
the corresponding future economic benefits or expected
service potential.
Fixed assets are amortised over their estimated useful
life.
The following components and depreciation periods
have been adopted by the Calyon group following the
application of component accounting for fixed assets.
These depreciation periods are adjusted according to
the type of asset and its location:
Component
Land
Depreciation period
Not depreciable
Structural works
30 to 80 years
Non-structural works
8 to 40 years
Plant and equipment
5 to 25 years
Fixtures and fittings
5 to 15 years
Computer equipment
3 to 7 years
Specialist equipment
4 to 5 years
Based on available information, Calyon has concluded
that impairment testing would not lead to any change
in the existing depreciable amount of its non-current
assets (excluding goodwill) as of the balance sheet
date.
- s hort-term employee benefits, such as wages, salaries,
security contributions and bonuses payable within
12 months of the end of the period,
- long-term employee benefits (long-service awards,
bonuses and compensation payable 12 months or more
after the end of the period,
- termination benefits,
- post-employment benefits, which in turn are recorded
in the two following categories: defined-benefit plans
and defined-contribution plans.
Retirement and early retirement benefits – defined
benefit plans
In keeping with IAS 19, these commitments are stated
based on a set of actuarial, financial and demographic
assumptions, and in accordance with the projected unit
credit method. Under this method, for each year of service, a charge is booked in an amount corresponding to
the employee’s vested benefits for the period. The
charge is calculated based on the discounted future
benefit.
The Calyon Group does not use the optional “corridor”
approach and recognises all actuarial differences in
profit and loss. The Group has opted not to apply the
option allowed under IAS 19 § 93, under which
actuarial gains or losses are recognised in a special
statement of changes in shareholders’ equity rather
than in the income statement. Consequently, the
amount of the reserve is equal to:
- the present value of the obligation to provide the
defined benefits as of the balance sheet date, calculated
in accordance with the actuarial method recommended
by IAS 19;
- less the fair value of any assets allocated to covering
these commitments, which may be represented by an
eligible insurance policy. In the event that 100% of
the obligation is fully covered by such a policy, the fair
value of the policy is deemed to be the value of the
corresponding obligation, i.e. the amount of the
corresponding actuarial liability.
Pension schemes – defined contribution plans
French employers contribute to a variety of compulsory
pension schemes. Plan assets are managed by independent organisations and the contributing companies have
no legal or implicit obligation to pay additional contributions if the funds do not have sufficient assets to
cover all benefits corresponding to services rendered by
employees during the year and during prior years.
Consequently, the Calyon Group has no liabilities in this
respect other than their ongoing contributions for the
past financial year.
when appropriate, a shorter period to the net carrying
amount of the financial asset or financial liability.
Share-based payments (IFRS 2)
Fair value is the amount for which an asset could be
exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction. Marketquoted rates provide the best estimate of fair value for
financial instruments quoted in an active market.
For financial instruments that are not quoted in an
active market, fair value is determined using valuation
techniques.
IFRS 2 on share-based payment requires share-based
payment transactions to be measured and recognised in
the income statement and balance sheet. The standard
applies to share option plans granted after 7 November
2002, in accordance with the option taken by the Group,
which have not yet vested at 1 January 2005 and covers
two possible cases:
- s hare-based payment transactions settled in equity
instruments,
- share-based payment transactions settled in cash.
The only share-based payments initiated by the Crédit
Agricole S.A. group that are eligible for IFRS 2 are transactions settled in equity instruments.
Options granted are measured at their fair value on the
date of grant using the Black & Scholes model. These
options are recognised as a charge under “Personnel
costs”, with a corresponding adjustment to equity,
spread over the vesting period.
Employee share issues made as part of an employee
share ownership plan are also governed by IFRS 2. The
Calyon group applies the treatment set out in the release
issued by the CNC on 21 December 2004, supplemented
by the release issued by the CNC on 7 February 2007.
Shares may be offered to employees with a discount of
no more than 20%. These plans have no vesting period
but the shares are subject to a lock-up period of five
years.
The benefit granted to employees is measured as the
difference between the fair value per share acquired
taking account of the lock-up period and the purchase
price paid by the employee on the issue date multiplied
by the number of shares issued.
Since the charge corresponding to this benefit is not
material at the group level, it has not been recognised.
Securities
Classification of financial assets
Under IAS 39, financial assets are divided into four
categories:
- f inancial assets at fair value through profit or loss
classified as held for trading and financial assets
designated as at fair value through profit or loss,
- available-for-sale financial assets,
- held-to-maturity investments,
- loans and receivables.
1. Financial assets at fair value through profit or loss
classified as held for trading and financial assets
designated as at fair value through profit or loss
According to IAS 39, this portfolio comprises securities
that are classified under financial assets at fair value
through profit or loss either as a result of a genuine
intention to trade them or designated as at fair value by
Calyon.
Financial assets or liabilities at fair value through profit
or loss classified as held for trading are assets or
liabilities acquired or generated by the enterprise
primarily for purposes of making a profit from shortterm price fluctuations or an arbitrage margin.
Designation of financial assets as at fair value through
profit or loss means that derivatives embedded in hybrid
instruments do not have to be recognised and measured
separately.
Financial instruments (IAS 32 et 39)
In the 2006 financial statements, financial assets and
liabilities are treated in accordance with IAS 39 as
endorsed by the European Commission on 19 November
2004, together with EC regulations 1751/2005 of
25 October 2005 and 1864/2005 of 15 November 2005
on use of the fair value option. However, the Calyon group
elected not to use the fair value option to measure its
financial liabilities at 31 December 2006.
The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts
through the expected life of the financial instrument or,
Securities that are classified under financial assets at fair
value through profit or loss are recognised at fair value at
inception, excluding transaction costs attributable
directly to their acquisition (which are taken directly to
profit or loss) and including accrued interest. They are
carried at fair value and changes in fair value are taken
to profit or loss. No impairment provisions are booked for
this category of securities.
88 - 89
2. Held-to-maturity investments
This category includes securities with fixed or determinable payments and fixed maturities that Calyon has the
intention and ability to hold until maturity other than:
Where there is objective evidence of impairment, a provision is booked to match the difference between the
carrying amount and the estimated recoverable amount
discounted at the original effective interest rate.
- s ecurities that are initially classified as financial assets
at fair value through profit or loss at the time of initial
recognition;
- s ecurities that are classified as available-for-sale assets;
- s ecurities that fall into the “Loans and receivables”
category. Hence, debt securities that are not traded in
an active market cannot be included in the “Held-tomaturity investments” category.
4. Available-for-sale financial assets
IAS 39 defines available-for-sale financial assets as the
default category.
To classify investments as held to maturity, an entity
must have the positive intention and ability to hold
them to maturity; otherwise the entire portfolio must
be reclassified as available for sale and may not subsequently be reclassified as held to maturity for a period
of two years.
However, there are certain exceptions to this rule:
- t he investment is close to maturity (less than three
months);
- the sale occurs after the entity has collected substantially all of the financial asset’s original principal
(about 90%);
- the sale is justified by an isolated or unforeseeable
event beyond the entity’s control;
- if it is anticipated that the investment will be impaired,
due to a worsening of the issuer’s condition (in which
case the asset must recorded in the available for sale
category).
Held-to-maturity securities are initially recognised at
acquisition cost, including transaction costs that are
directly attributable to the acquisition and including
accrued interest. They are subsequently measured at
amortised cost using the effective interest method.
According to IAS 39, the methods of accounting for
available-for-sale securities are the following:
-a
vailable-for-sale securities are initially recognised at
acquisition cost, including transaction costs that are
directly attributable to the acquisition and including
accrued interest;
- accrued interest is recognised in the balance sheet
under the appropriate category of loans and advances
and booked to the income statement as interest and
similar income;
- changes in fair value are recorded in reversible
shareholders’ equity. If the securities are sold, these
changes are reversed out and recognised in profit or
loss. Amortisation of any premiums or discounts on
fixed-income securities is taken to profit and loss
using the effective interest rate method;
- when there is objective evidence of significant or
prolonged impairment for equity securities or impairment evidenced by the appearance of a credit risk for
debt securities, the unrealised loss recognised under
shareholders’ equity is reversed out and recorded in
profit or loss for the year. In case of subsequent
enhancements, such impairment is recovered through
profit or loss for debt instruments but not for equity
instruments. Conversely, for equity instruments, any
positive change in fair value in case of recovery is
recognised in a shareholders’ equity account.
Valuation of investments
All financial instruments classified as financial assets at
fair value through profit or loss or as available-for-sale
financial assets are measured at fair value.
Where there is objective evidence of impairment, a
provision is booked to match the difference between the
carrying amount and the estimated recoverable amount
discounted at the initial effective interest rate. In case of
subsequent enhancements, the surplus provision is
recovered.
The fundamental valuation method is the price quoted
in an active market. If this is not possible, Calyon uses
recognised valuation techniques based mainly on recent
transactions.
3. Loans and receivables
Loans and receivables comprise unlisted financial assets
that generate fixed or determinable payments.
When there is no quoted price for an equity security and
no recognised valuation method, the Calyon group uses
methods based on objective, verifiable criteria, such as
revalued net assets or any other method of valuing
equity securities.
They are recognised at amortised cost using the effective
interest method adjusted for any impairment provisions.
If there is no satisfactory method, or if the estimates
obtained using the various methods differ excessively,
the security is valued at cost and is recorded under
’Available-for-sale securities’.
Impairment
Impairment is booked when there are objective signs
of impairment of assets other than assets held for
trading.
Impairment is evidenced by a prolonged or significant
decline in the value of the security for equity securities
or by the appearance of significant deterioration in
credit risk evidenced by a risk of non recovery for debt
securities.
With few exceptions, Calyon deems that a prolonged or
significant decline is presumed to exist when the equity
instrument has lost 30% or more of its value over a
period of six consecutive months.
This criterion of prolonged or significant decline in the
value of the security is a necessary but not sufficient
condition to justify the booking of a provision. A charge
is made to such provision only if the impairment will
result in a probable loss of all or part of the invested
amount.
Recognition date
Calyon recognises securities classified as held to maturity on the settlement/delivery date. Other securities,
regardless of type or classification, are recognised on the
trading date.
Financial liabilities (IAS 32)
1. D
istinction between liabilities and shareholders’ equity
A debt instrument or financial liability is a contractual
obligation to:
-d
eliver cash or another financial asset;
- exchange instruments under potentially unfavourable
conditions.
An equity instrument is a contract evidencing a residual
interest in an enterprise after deduction of all of its
liabilities (net assets).
The Calyon group has granted shareholders of certain
fully consolidated subsidiaries an undertaking to acquire
their holdings in these subsidiaries, at a price to be
determined according to a pre-defined formula which
takes account of future developments in their business.
These undertakings are in substance put options granted
to the minority shareholders, which in accordance with
the provisions of IAS 32, means that the minority interests
are treated as a liability rather than as shareholders’
equity.
The following accounting treatment has been applied:
-w
hen a put option is granted to the minority shareholders of a fully consolidated subsidiary, a liability is
recognised in the balance sheet; on initial recognition,
the liability is measured at the estimated present value
of the exercise price of the options granted; the IFRIC
confirmed this treatment at its meeting of 2 November
2006;
- the corresponding asset is recognised by reducing the
share of net assets belonging to the minority interests
concerned to zero and accounting for the balance as
goodwill;
- s ubsequent changes in the estimated value of the
exercise price will affect the amount of the liability and
on the asset side, the amount of goodwill recognised;
- the share of income due to the minority shareholders
is deducted from the amount of goodwill recognised.
Purchase of treasury shares
Treasury shares (or equivalent derivatives, such as
options to buy shares) purchased by the Calyon group,
including shares held to hedge stock option plans, do
not meet the definition of a financial asset and are
deducted from shareholders’ equity. They do not
generate any impact on the income statement.
2. Temporary purchases and sales of securities
Temporary sales of securities (securities lending/
borrowing, repurchase agreements) do not fulfil the
derecognition conditions of IAS 39 and are regarded as
collateralised financing. Assets lent or sold under
repurchase agreements are kept on the balance sheet. If
applicable, monies received, representing the liability to
the transferee, are recognised on the liabilities side of
the balance sheet. Items borrowed or bought under
repurchase agreements are not recognised on the
transferee’s balance sheet. Instead, if the items are
subsequently sold, the transferee recognises the amount
paid out representing its receivable from the transferor.
Revenue and expenses relating to such transactions are
taken to profit and loss on a pro rata temporis basis,
except in the case of assets and liabilities designated at
fair value through profit or loss.
Lending operations
Loans are principally allocated to the ’Loans and
receivables’ category. In accordance with IAS 39, they
are initially valued at fair value and subsequently valued
at amortised cost using the effective interest rate
method.
The effective interest rate is the rate that exactly discounts estimated future cash payments to the original
net loan amount, including any discounts and any
90 - 91
transaction income or costs that are an integral part of
the effective interest rate.
Subordinated loans and repurchase agreements (represented by certificates or securities) are included under
the various categories of loans and advances according
to counterparty type.
Revenue calculated using the effective interest rate on
receivables is booked to profit and loss as interest and
similar income.
In addition to the disclosures required by IAS, the Calyon
group continues to provide the information previously
required by CRC Regulation 2002-03 applicable to individual accounts.
Hence, the Calyon group classifies impaired loans or
receivables within the meaning of international standards
into three separate categories: bad debts, doubtful debts
and restructured loans (loans that have been restructured
due to customer default).
Impaired loans or receivables
In accordance with IAS 39, loans recorded under ’loans
and receivables’ are impaired when one or more loss
events occurs in the collection of such loans. Once these
loans and receivables have been identified, they may be
individually or collectively assessed for impairment.
Impairment charges are booked in the amount of the
loss incurred, which is equal to the difference of the
carrying value of the loans (amortised cost) and the sum
of estimated future cash flows, discounted at the original effective interest rate. Impairment charges are
booked to provisions or as discounts on loans restructured due to customer default.
account of their specific characteristics);
- the borrower’s financial position is such that an
identified risk exists regardless of whether the loan or
advance is in arrears;
- the bank and borrower are in legal proceedings.
When a loan is recorded as doubtful, all other loans or
commitments relating to that borrower are also recorded
in their entirety as doubtful debts, whether or not they
are collateralised.
Calyon makes the following distinction between doubtful
and bad debts:
-D
oubtful debts are all doubtful loans and advances
which do not fall into the bad debt category.
- Bad debts are those for which the prospects of recovery
are highly impaired and which are likely to be written
off in time.
Restructured performing loans
These are loans on which the entity has changed the
initial financial terms and conditions (interest rate,
duration) due to a counterparty risk, while reclassifying
the outstanding amount into performing loans. The
reduction in future payments to the counterparty at the
time of restructuring gives rise to recognition of a
discount.
Credit risk provisions for loans individually assessed
for impairment
Once a loan is classified as doubtful, an impairment is
deducted from the asset in an amount equal to the
probable loss. Probable losses in respect of off-balance
sheet items are covered by provisions recognised as liabilities in the balance sheet.
The following distinctions are made:
- loans individually assessed for impairment: these are
doubtful loans covered by provisions and loans
restructured due to customer default that have been
discounted;
- loans collectively assessed for impairment: these are
loans that are not individually assessed for impairment,
for which impairment is determined for a uniform class
of loans displaying similar credit risk characteristics.
Bad and doubtful debts
Loans and advances of all kinds, even those which are
guaranteed, are classified as bad or doubtful if they
carry an identified credit risk arising from one of the
following events:
Calyon books impairments for all foreseeable losses in
respect of bad and doubtful debts, discounted at the
initial effective interest rate.
Foreseeable losses in respect of portfolios of small loans
with similar characteristics may be estimated on a statistical basis rather than individually assessed.
- t he loan or advance is at least three months in arrears
(six months for mortgage loans and property leases
and nine months for loans to local authorities, to take
- the nominal value of the loan,
- the sum of the loan’s expected future cash flows
discounted at the original effective interest rate.
Treatment of discounts and impairment
Discounts in respect of restructured loans and impairment charges against doubtful debts are recognised in
profit or loss under risk-related costs.
This discount corresponds to the shortfall in future cash
flow, discounted at the original effective interest rate.
It is equal to the difference between:
For restructured loans classified as performing, the
discount is amortised to profit or loss in net interest
income over the life of the loan. For restructured loans
classified as doubtful and all non-restructured doubtful
loans, impairment charges and reversals are recognised
in risk-related costs and any increase in the carrying
amount of the loan arising from an impairment reversal
or discount amortisation over time is recognised in net
interest income.
Credit risk provisions for loans collectively assessed
for impairment
Statistical and historical customer default experience
shows that there is an identified risk of partial
uncollectibility of loans classified as performing. To cover
these risks, which cannot by nature be allocated to
individual loans, Calyon takes various collective
impairment charges by way of deduction from asset
values, such as sector provisions, country impairment
charges and impairment charges for sensitive exposure
(still under surveillance), using models based on
statistical experience. Sensitive exposure is calculated in
accordance with Basel II models.
Financial liabilities
IAS 39 as endorsed by the European Union recognises
two categories of financial liabilities:
- f inancial liabilities at fair value through profit or loss
classified as held for trading. Fair value changes on
this portfolio are recognised in profit or loss. However,
the Calyon group has elected not to use the fair value
option to measure its financial liabilities;
- other financial liabilities: this category includes all
other financial liabilities. These liabilities are initially
measured at fair value (including transaction income
and costs) and subsequently at amortised cost using
the effective interest method.
Derivatives
Derivatives are financial assets or liabilities and are
recognised on the balance sheet at fair value at inception
of the transaction. At each balance sheet date, derivatives
are measured at fair value, whether they are held for
trading purposes or used for hedging.
Any change in the value of derivatives on the balance
sheet is recorded in an account in the income statement
(except in the special case of a cash flow hedging relationship).
Hedge accounting
Fair value hedges reduce the risk of a change in the fair
value of a recognised asset or liability or an unrecognised
firm commitment.
Cash flow hedges reduce exposure to changes in cash
flows resulting from a particular risk on a recognised
asset or liability (for example, some or all future interest
payments on a floating-rate liability) or on a highly likely
forecast transaction.
Hedging of a net investment in a foreign activity is
intended to reduce the risk of a fall in fair value arising
from the exchange rate risk on an investment made
abroad in a currency other than the euro.
Micro-hedges must meet the following criteria in order
to be eligible for hedge accounting:
- the hedging instrument and the instrument hedged
must be eligible;
- there must be formal documentation from inception,
primarily including the individual identification and
characteristics of the hedged item, the hedging instrument, the nature of the hedging relationship and the
nature of the hedged risk;
- the effectiveness of the hedge must be demonstrated,
at inception and retrospectively.
The change in value of the derivative is recorded in the
accounts as follows:
- fair value hedges: the change in value of the derivative
is recognised in the income statement symmetrically
with the change in value of the hedged item in the
amount of the hedged risk and only the net amount of
any hedging ineffectiveness is recognised in the income
statement;
- cash flow hedges: the change in value of the derivative
is recognised in the balance sheet in a special reversible
shareholders’ equity account and any inefficient portion of the hedge is recognised in the income statement. Profits and losses on the derivative under
reversible shareholders’ equity are then taken to
income symmetrically with the hedged transactions;
- hedging of a net investment in a foreign activity: the
change in value of the derivative is recognised in the
balance sheet in a shareholders’ equity translation
adjustment account and the inefficient component of
the hedge is recognised in the income statement.
In the case of macro-hedging (i.e. hedging a group of
assets or liabilities with the same exposure to the risks
that is designated as being hedged), the Group documents such hedging relationships based on a gross position in derivative instruments and hedged items.
The effectiveness of macro-hedging relationships is
measured by maturity schedules based on average
outstandings. In addition, the effectiveness of macro-
92 - 93
hedging relationships must be measured through prospective and retrospective testing.
Depending on whether a macro cash flow hedging or
fair value hedging relationship has been documented,
the change in the value of the derivative is recorded
by applying the same principles as those previously
described for micro-hedging.
Embedded derivatives
An embedded derivative is the component of a hybrid
contract that meets the definition of a derivative product.
Embedded derivatives must be accounted for separately
from the host contract if the following three conditions
are met:
- the hybrid contract is not measured at fair value
through profit or loss;
- the embedded component taken separately from the
host contract has the characteristics of a derivative;
- the characteristics of the derivative are not closely
related to those of the host contract.
Recognition of margins on structured financial instruments at inception
Under IAS 39, margins on structured products and
complex financial instruments may be recognised at
inception only if these financial instruments can be
reliably measured from inception. This condition is met
when such instruments are measured using prices in an
active market or based on ’standard’ internal models
that use “observable” market data.
Instruments traded in an active market
If there is an active market, the instrument is stated at
the quoted price on that market.
A market is regarded as active if quoted prices are readily
and regularly available from an exchange, dealer, broker,
pricing service or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm’s length basis.
The market values adopted are buying prices for net
selling positions and selling prices for net buying positions. These values also factor in counterparty risks.
Instruments not traded in an active market
In the absence of an active market, fair value is determined
using valuation techniques and models incorporating all
factors that market participants would consider in setting
a price.
These fair values are determined by factoring in liquidity
risk and counterparty risk.
Instruments valued using internal models based
on observable market data
When models used are based on standard models
(e.g. discounted cash flows or Black & Scholes) using
observable market data (e.g. yield curves or implied
volatility ranges for options), the margin at inception on
such instruments is recognised immediately in profit or
loss.
Instruments valued using internal models based
on non-observable market data
In this case, the transaction price is deemed to reflect the
instrument’s market value. The margin at inception is deferred and amortised to profit or loss generally over the
period during which the market data is deemed to be
non-observable. If market data subsequently become
’observable’, the remaining deferred margin is recognised
immediately in profit or loss.
Financial guarantees and financing commitments
Financial guarantees are contracts that call for specific
payments to be made to reimburse the holder for a loss
incurred due to a specified debtor’s failure to make a
payment when due under the terms of a debt instrument.
Financial guarantee contracts are recognised at fair value
initially then subsequently at the higher of:
- the amount calculated in accordance with IAS 37 –
“Provisions, Contingent Liabilities and Contingent
Assets”; or
- the amount initially recognised, less any amortization
recognised in accordance with standard IAS 18 –
“Revenues ”.
Financing commitments that are not designated as
assets at fair value through profit and loss or that are
not treated as derivative instruments within the meaning
of IAS 39 are not recognised on the balance sheet.
They are, however, covered by reserves in accordance
with IAS 37.
Derecognition of financial instruments
A financial asset (or group of financial assets) is fully or
partially derecognised if:
- the contractual rights to the cash flows from the
financial asset expire or are transferred or are deemed
to have expired or been transferred because they
belong de facto to one or more end beneficiaries;
- s ubstantially all the risks and rewards of ownership in
the financial assets are transferred.
In this case, any rights or obligations created or retained
at the time of transfer are recognised separately as
assets and liabilities.
In France, the rate of tax on income from ordinary
activities and deferred tax is 34.43%.
Deferred taxes are not discounted.
If the contractual rights to the cash flows are transferred
but Calyon retains some of the risks and rewards of
ownership as well as control, the financial assets are
recognised to the extent of the Group’s continuing
involvement in the asset.
Income taxes (IAS 12)
Calyon has been 99.9%-owned by the Credit Agricole
group since 27 December 1996 and some of its subsidiaries form part of the tax consolidation group at the
Credit Agricole S.A. level.
The tax charge takes into account current income taxes
on taxable income and expenses for the year, along with
deferred taxes.
This standard requires that deferred taxes be recognised
in the following cases:
A deferred tax liability should be recognised for any taxable
temporary differences between the carrying amount of
an asset or liability on the balance sheet and its tax base,
unless the deferred tax liability arises from:
- initial recognition of goodwill,
- initial recognition of an asset or liability in a transaction:
- that is not a business combination, and
- that does not affect either the accounting or the
taxable profit (tax loss) as of the transaction date.
A deferred tax asset should be recognised for any deductible
temporary differences between the carrying amount of an
asset or liability on the balance sheet and its tax basis,
insofar as it is probable that a future taxable profit will be
available against which such deductible temporary differences can be allocated.
A deferred tax asset should also be recognised for
carrying forward unused tax losses and tax credits
insofar as it is probable that a future taxable profit will
be available against which the unused tax losses and tax
credits can be allocated.
Deferred taxes and liabilities are measured at the tax
rates that are expected to apply when the asset is
realised or the liability is settled, based on tax rates that
have been enacted or substantially enacted by the
balance sheet date.
The tax rates applicable in each country are used.
Taxable unrealised gains on securities do not generate
any taxable temporary differences between the carrying
value of the asset and the tax basis. As a result, deferred
tax is not recognised on these gains. When securities are
classified as available for sale, the tax charge actually
borne by the entity with respect to these unrealised
gains is reclassified as a charge to shareholders’ equity.
In France, all but 5% of long-term capital gains on the
sale of investments in participating interests, as defined
by the General Tax Code and which come under longterm tax rules, are exempt from tax as from the tax year
commencing on 1 January 2007; this 5% is taxed at the
standard tax rate. Hence, deferred tax is recognised only
on the taxable portion of the unrealised gains at the
end of the financial year.
Deferred tax is recognised in net income for the year,
unless the tax arises from:
-e
ither a transaction or event that is recognised directly
through equity, during the same year or during another
year, in which case it is directly debited or credited to
equity;
- or a business combination.
Deferred tax assets and liabilities are offset against each
other if, and only if:
-the entity has a legal right to offset current tax assets
against current tax liabilities; and
-the deferred tax assets and liabilities apply to taxes
levied by the same taxing authority:
- either on the same taxable entity,
- or on different taxable entities that intend either to
settle current tax assets and liabilities on a net basis,
or to settle their tax assets and liabilities at the same
time during each future financial year in which it is
expected that substantial deferred tax assets or liabilities will be paid or recovered.
Provisions (IAS 37,19)
Calyon has identified all obligations (legal or constructive) resulting from a past event for which it is probable
that an outflow of resources will be required to settle the
obligation, and for which the due date or amount of the
settlement is uncertain but can be reliably estimated.
94 - 95
Calyon has set aside general provisions for such obligations to cover:
Non-monetary assets are treated differently depending
on the type of asset:
-
-a
ssets at historical cost are valued at the exchange rate
on the transaction date;
- assets at fair value are measured at the exchange rate
on the closing date.
operational risks,
employee benefits,
financing commitment execution risks,
claims and liability guarantees,
tax risks.
Leases (IAS 17)
As required by IAS 17, leases are analysed in accordance
with their substance and financial reality. They are
classified as operating leases or finance leases.
Operating leases are treated as an acquisition of a fixed
asset by the lessee financed by a loan from the lessor.
In the lessor’s accounts, analysis of the economic
substance of the transactions results in the following:
Foreign exchange differences on non-monetary items
are recognised:
- in the income statement if the gain or loss on the nonmonetary item is recorded in the income statement;
- in shareholders’ equity if the gain or loss on the nonmonetary item is recorded in shareholders’ equity.
1.2 C onsolidation principles and methods (IAS 27, 28, 31)
Scope of consolidation
- r ecognition of a financial receivable from the customer,
which is amortised by the lease payments received;
- lease payments are broken down into interest and
principal, known as financial amortisation.
In the lessee’s accounts, finance leases and leases
with purchase options are restated such that they are
recognised in the same way as if the asset had been
purchased on credit.
In the income statement, the theoretical depreciation
charge (the charge that would have been recognised if
the asset had been purchased) and the finance charges
(incurred in connection with the financing) are recorded
in the place of the lease payments.
Currency transactions (IAS 21)
In accordance with IAS 21, a distinction is made between
monetary and non-monetary items.
At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are converted
into the functional currency of Calyon at the closing
exchange rate.
Foreign exchange differences arising from translation
are recorded in the income statement. There are two
exceptions to this rule:
- for available-for-sale financial assets, only the foreign
exchange difference calculated on amortised cost is
taken to the income statement; the balance is recorded
in shareholders’ equity;
- foreign exchange differences on monetary items classified
as cash flow hedges or that are part of a net investment
in a foreign entity are recorded in shareholders’ equity.
The consolidated financial statements include the
accounts of Calyon and of all companies over which
Calyon exercises control, in accordance with IAS 27, IAS
28 and IAS 31, and which as such are included in the
scope of consolidation of Calyon, and which have a
material impact on the overall consolidated financial
statements.
In application of the general principles set out in IAS 27
and IAS 28 (investments in subsidiaries and associates)
and IAS 31 (interests in joint ventures), materiality is
assessed in the light of several criteria including the size
of the company’s earnings or shareholders’ equity in
relation to the earnings or shareholders’ equity of the
consolidated group.
Materiality is deemed to exist when the following criteria
are met:
- total assets exceed 10 million euros ;
- Calyon directly or indirectly holds more than 20% of
existing and potential voting rights.
Definitions of control
All entities falling under exclusive control, joint control
or material influence are consolidated, providing that
their contribution is deemed to be material and that
they are not covered under the exclusions described
below.
Exclusive control is presumed to exist if Calyon owns over
half of the voting rights in an entity, whether directly or
indirectly through subsidiaries, except if, in exceptional
circumstances, it can be clearly demonstrated that such
ownership does not give it control. Exclusive control also
exists if Calyon, as the owner of half or less than half of
the voting rights in an entity, holds majority power
within management bodies.
Joint control is exercised in joint ventures in which each
of the two or more co-owners are bound by a contractual contribution that provides for joint control.
Significant influence is defined as the power to influence
but not control a company’s financial and operational
policies. Calyon is presumed to have significant influence
if it owns 20% or more of the voting rights in an entity,
whether directly or indirectly through subsidiaries.
Consolidation of special-purpose entities
The consolidation of special-purpose entities (structures
created to manage a transaction or group of similar
transactions) is specified by SIC 12.
A special-purpose entity (SPE) is consolidated if it is in
substance controlled by the Calyon group, even in the
absence of a capital link.
Whether or not a special-purpose entity is controlled in
substance is determined by considering the following
criteria:
Consolidation methods
The consolidation methods are respectively defined by
IAS 27, 28 and 31, based on the type of control exercised
by Calyon over the entities that can be consolidated,
regardless of their business or of whether or not they
have legal entity status:
-e
ntities under exclusive control are fully consolidated,
including entities with different account structures,
even if their business are not an extension of that of
Calyon ;
- entities under joint control are proportionally consolidated, including entities with different account structures, even if their business are not an extension of
that of Calyon ;
- entities over which Calyon exercises significant influence
are consolidated under the equity method.
Full consolidation consists of eliminating the book value
of the shares held in the consolidating company’s
financial statements and aggregating all assets and
liabilities carried by the consolidated companies, and
determining and separately identifying the value of the
minority interests in their net assets and earnings.
- t he activities of the SPE, in substance, are conducted
on behalf of a Calyon group company according to its
specific business needs, such that this company obtains
benefits from the SPE’s activities;
- this company, in substance, has the decision-making
powers to obtain a majority of the benefits of the
SPE’s activities or has delegated such decision-making
powers by establishing an “autopilot” mechanism;
- this company, in substance, has rights to obtain a
majority of the benefits of the SPE’s activities and as a
result may be exposed to the risks related to the SPE’s
activities; or
- this company, in substance, retains the majority of the
residual risks or risks arising from ownership relating
to the SPE or its assets, in order to obtain benefits
from its activities.
Proportional consolidation consists of eliminating the
book value of the shares held in the consolidating company’s financial statements and aggregating a proportion of the assets, liabilities and results of the company
concerned representing the consolidating company’s
interest.
Exclusions from the scope of consolidation
An interest in a controlled entity or an entity under
significant influence is excluded from the scope of
consolidation if it is acquired and held exclusively with
a view to its subsequent disposal in the near future.
Such interests are recorded in assets held for sale.
Group internal transactions affecting the consolidated
balance sheet and income statement are eliminated,
with the exception of losses realised when selling assets
reflecting an effective reduction in the carrying value of
these assets.
Minority equity interests held by venture capital entities
are also excluded from the scope of consolidation insofar
as they are classified under financial assets designated as
at fair value through profit or loss.
The equity method consists of eliminating the book
value of the shares held in the Group’s financial statements and accounting for its interest in the underlying
equity and results of the companies concerned.
Consolidation adjustments and eliminations
The Group makes all material adjustments required to
ensure the application of consistent accounting policies
in the consolidated financial statements.
Translation of foreign subsidiaries’ financial
statements (IAS 21)
Financial statements of subsidiaries expressed in foreign
currencies are translated into euros in two stages:
- the local currency (or, if applicable, the currency in
which the accounts are prepared) is converted into the
functional currency using the historical rate method,
96 - 97
and all foreign exchange gains or losses are fully and
immediately taken to the income statement;
- the functional currency is then converted into the
consolidation currency using the exchange rate at the
balance sheet date and the translation adjustment is
recorded in a separate line under shareholders’ equity,
showing the share attributable to the entity and the
share attributable to minority interests. This adjustment
is taken to the income statement when all or part of
the interest in the foreign subsidiary is sold or
liquidated.
The functional currency of an entity is closely linked to
whether or not the entity is independent or not independent:
- t he functional currency of an entity that is not independent is the functional currency on which it is
dependent, i.e. the currency in which its main transactions are denominated;
- the functional currency of an independent foreign
entity is its local currency, other than in exceptional
circumstances.
Business combinations
Goodwill (IFRS 3)
Business combinations after the transition date (1 January 2004) are accounted for using the purchase method
in accordance with IFRS 3.
The cost of a business combination is the aggregate of the
fair values, on the date of acquisition, of assets given,
liabilities incurred or assumed, and equity instruments
issued by the acquirer, in exchange for control of the
acquiree, plus any costs directly attributable to the business combination.
On the date of acquisition, the acquiree’s identifiable
assets, liabilities and contingent liabilities which satisfy
the conditions for recognition set out in IFRS 3 are
recognised and at their fair value. Restructuring liabilities are only recognised as a liability if the acquiree is
under an obligation to complete the restructuring on
the date of acquisition.
The initial valuation of assets, liabilities and contingent
liabilities may be revised within a period of twelve
months after the date of acquisition.
The excess of the cost of acquisition over the fair value of
the Group’s share in the net assets acquired is recognised
in the balance sheet as goodwill if the acquiree is fully or
proportionately consolidated. If the acquiree is accounted
for using the equity method, the excess is included under
the heading “investments in affiliates”.
Any negative goodwill is recognised immediately through
profit or loss.
When the Group increases its holding in an entity which
it already controls, in the absence of specific accounting
rules, the additional shares purchased give rise to the
recognition of an additional amount of goodwill by
comparing the acquisition price of the shares with the
share in the net assets acquired. This approach may be
subject to change in the future, notably as a function of
observable accounting practices in the banking sector or
as regulations evolve.
Goodwill is carried in the balance sheet at its initial
amount in the currency of the acquiree and translated
at the year-end exchange rate.
It is tested for impairment whenever there is objective
evidence that it may be impaired and at least once a
year.
For the purpose of impairment testing, goodwill is
allocated to the Cash Generating Units (CGUs) that are
expected to benefit from the business combination. The
Group has defined its CGUs as the smallest identifiable
group of assets and liabilities within its core businesses
that can operate on the basis of a specific business
model.
Impairment testing consists of comparing the carrying
amount of each CGU, including any goodwill allocated to
it, with its recoverable amount.
Recoverable amount is defined as the higher of fair value
less costs to sell and value in use, which is the present
value of the future cash flows expected to be derived
from continuing use of the CGU, as set out in mediumterm business plans prepared by the Group for management purposes.
When the recoverable amount is lower than the carrying
amount, an irreversible impairment loss is recognised
through profit or loss and deducted from the goodwill
allocated to the CGU. This impairment is irreversible.
Non-current assets held for sale
and discontinued operations (IFRS 5)
A non-current asset (or a disposal group) is classified as
held for sale if its carrying amount will be recovered
principally through a sale transaction rather than
through continuing use.
For this to be the case, the asset (or disposal group)
must be available for immediate sale in its present
condition and its sale must be highly probable.
The relevant assets and liabilities are shown separately
on the balance sheet under ’Non-current assets held for
sale’ and ’Liabilities associated with non-current assets
held for sale’.
A non-current asset (or disposal group) classified as held
for sale is measured at the lower of its carrying amount
and fair value less costs to sell. A charge for impairment
of unrealised gains is recognised in the income statement. Unrealised gains are no longer amortised when
they are reclassified.
A discontinued operation is a component of the entity
that has either been disposed of, or is classified as held
for sale and:
- r epresents a separate major line of business or geographical area of operations;
- is part of a single coordinated plan to dispose of a
separate major line of business or geographical area of
operations;
- is a subsidiary acquired exclusively with a view to
resale.
Are disclosed on a separate line of the income statement:
- t he post-tax profit or loss of discontinued operations
until the date of disposal;
- the post-tax gain or loss recognised on the disposal or
on measurement to fair value less costs to sell of the
assets and liabilities constituting the discontinued
operations.
Note 2 : Assessments and estimates used to
prepare the financial statements
A certain number of estimates have been made by
management to draw up the financial statements for the
year ended 31 December 2006. These estimates are based
on certain assumptions and involve risks and uncertainties
as to their actual achievement in the future.
Actual results may be influenced by many factors,
including but not limited to:
-a
ctivity in domestic and international markets,
- fluctuations in interest and exchange rates,
- the economic and political climate in certain industries or countries,
- changes in regulations or legislation.
The list is not exhaustive.
Accounting estimates based on assumptions are principally used to value the following assets and liabilities:
Financial instruments at fair value
Most instruments traded over the counter are measured
using models that are based on observable market data.
For example, the fair value of interest rate swaps is
usually determined using market yield curves on the reporting date.
Other financial instruments are generally measured on a
discounted cash flow basis.
The fair value of complex financial instruments that are
not traded on an active market is determined using
valuation techniques. As described in the section on
significant accounting policies, the margin at inception
is only immediately recognised in profit or loss where
the valuation models used are based on market data
that is regarded as observable.
Market data is regarded as observable if the market risks
department can obtain data from several sources independent of the front offices on a regular basis (daily if
possible), for example from brokers or pricing services
that collect data from a sufficient number of market
participants. A dedicated data management team, which
reports to the market risks department, regularly checks
the relevance of data obtained in this way and formally
documents it.
Conversely, some complex products with a basket
component, where valuation requires correlation or
volatility data that are not directly comparable with
market data, may be regarded as non-observable. Most of
these instruments are complex fixed-income products,
credit derivatives (certain correlation products or products
whose measurement incorporates non-observable credit
spreads), equity derivatives (certain products with
multiple underlying instruments), or hybrid products
and, to a lesser extent, foreign exchange and commodities
products. Certain traditional market financial instruments
with a long maturity may also be classified as ’nonobservable’ if the only market data available to measure
them are for terms that are shorter than the contractual
maturity of such instruments and must extrapolated in
order to measure fair value.
Market data is officially classified as ’observable’ and
’non-observable’ by a monthly valuation committee
which comprises representatives from the front office,
the independent market risks department and the
finance department.
98 - 99
The gross impact on 2006 results of applying the principle
of amortising the margin at inception to Calyon financial
statements was (46) million euros. At 31 December 2006,
margins not yet recognised in profit or loss amounted to
445 million euros gross. Periodic updating of mapping of
products regarded as non-observable did not produce
any material impact on the financial statements.
All market products, regardless of their method of recognition in profit or loss, are subject to the risk management system described in the note on market risks. As a
result, products for which the variables are regarded as
’non-observable’ within the meaning of IAS 39 are
subject to the same control rules as other products (risk
indicator monitoring, stress tests, limits, etc.).
Retirement and other employee benefits,
stock option plans
Liabilities for retirement and other employee benefits
are based on assumptions made by management with
respect to the discount rate, staff turnover rate and
probable increases in salary and social security costs. If
the actual figures differ from the assumptions made,
the liability may increase or decrease in future years.
The return on plan assets is also estimated by management. Returns are estimated on the basis of expected
returns on fixed-income securities, and notably bonds.
Impairment of unrecoverable debts
Impairment provisions are deducted from the carrying
value of loans and advances when there is objective
evidence of a risk of non-recovery.
The provisions are discounted and estimated on the basis
of several factors, notably business or sector-related. It is
possible that future assessments of the credit risk may
differ significantly from current estimates, which may
lead to an increase or decrease in the amount of the
impairment.
Collective impairment is also taken against performing
loans. The amount is based on the probability of default
in each rating class assigned to borrowers, but also on
management’s experienced judgement.
A change in estimates within the meaning of IAS 8
(accounting policies, changes in accounting estimates
and errors) was made in 2006 regarding collective credit
risk provisions. The change was intended to improve
portfolio segmentation and the parameters used for
estimating impairment, to better reflect Calyon’s risk of
loss. The change was based on the experience gained
over time and is consistent with the work done to prepare
for the Basel II reform. It has no material impact on the
overall level of collective provisions.
Provisions
Share-based payment plans are measured primarily using
the Black & Scholes model. A description of the plans and
valuation methods is given in the paragraph on sharebased payments.
Certain estimates may be made to determine the amount
of provisions:
Full details of all employee benefits are provided in
note 8.
- the reserve for legal and tax risks is based on management’s best estimate in light of the information in its
possession at 31 December 2006.
Impairments
Goodwill impairment
Equity instruments (other than those held for trading)
are tested for impairment and an impairment charge
recognised in case of a prolonged or significant decline
in their value. In general, a prolonged or significant
decline is presumed to have occurred when the instrument has lost at least 30% of its value over a period of
six consecutive months. However, management may also
take account of other factors (type of investment,
issuer’s position, short-term prospects, etc.) which may
change or prove to be incorrect during subsequent
years.
Goodwill is tested for impairment at least once a year.
The assumptions made to measure the fair value of
goodwill may influence the amount of any impairment
loss taken.
The method used is described in note 1.2 “Consolidation principles and methods”.
Recognition of deferred tax assets
Deferred tax assets are recognised on all deductible
temporary differences to the extent that management
believes there will be sufficient taxable profits in the
future to offset these differences.
Note 3 : Scope of consolidation
The detailed scope of consolidation at 31 December
2006 is given in note 12.
3.1 Changes in the scope of consolidation over
the period
The main changes in the scope of consolidation between
31 December 2005 and 31 December 2006 were as
follows:
-
Sagrantino,
European NPL S.A.,
DGAD International SARL,
Indosuez Levante S.A.,
Indosuez Norte SL,
Casam subsidiaries acquired in the USA: Casam Americas
LLC, Lyra Capital LLC, Casam Advisers LLC, Alternative
Investment and Research Technologies, Lyra Partners
LLC, Casam Cayman Ltd, Casam US Holding Inc, - Calyon Financial Canada and Calyon Financial Hong
Kong.
Removals
The following companies whose activities became insignificant or are being discontinued or liquidated were
deconsolidated:
3.2 M
ain acquisitions during the year
-
As part of a strategic partnership, Calyon (67%) and
Pirelli Re (33%) set up a joint venture operating in the
European impaired loans market.
This transaction was authorised by the Italian competition authority and market regulator.
The gross carrying value of portfolios acquired and
managed by this joint venture was 2 billion euros at
31 December 2006.
CL Property Broadwalk,
CL Group Management Ltd,
BFC Holding,
CPR BK,
CL Rouse Limited UK,
Indosuez Holding UK,
the Multinational Asset Co. Limited structure, the
Casam Systeïa Equity Linked Fund , ICF IIa and ICF III
funds following the liquidation of their assets,
- Calyon Bank Czech Republic following the transfer of
its business to a branch newly created by Calyon in the
Czech Republic.
Following the absorption of Egyptian American Bank
S.A.E. by Calyon Bank Egypt S.A.E. (since renamed Crédit
Agricole Egypt S.A.E.) decided by the extraordinary
shareholders’ meetings of both companies held on 27
June 2006 and approved by Egypt’s Central Bank in July
2006, Calyon owns a 13.09% stake in this new entity.
On 31 August 2006, Crédit Agricole Egypt S.A.E. left
Calyon’s scope of consolidation, since Calyon no longer
had any control over this company.
Finally, Clim was absorbed by Clinfim and no longer
features in the scope of consolidation.
Additions
The following entities entered the scope of consolidation in 2006:
- Bletchley Investments Limited,
- Aylesbury,
- Calyon Investments, previously known as Crédit
Lyonnais Capital Market Plc, which had been deconsolidated in January 2006 following the discontinuation of its business, was reactivated to become
Aylesbury’s parent company and therefore rejoined
the scope of consolidation,
- Minerva SRL,
Partnership with Pirelli Re in the impaired
loans market
Development of CASAM
CASAM (Crédit Agricole Structured Asset Management), a
50%-owned subsidiary of Calyon, acquired the entire
capital of Ursa Capital LLC, a US holding company specialising in alternative managed accounts.
100 - 101
31.12.2006
Equityaccounted
value
Market
value
31.12.2005
Net
Total
Net
assets banking
income income
Share
of net
income
Equityaccounted
value
Market
value
Net
Total
Net
assets banking
income income
Share
of net
income
(breakdown) :
596
2,934 18,517
853
638
159
510
4,272 17,549
689
479
120
Banque Saudi Fransi
574
2,934 16,112
832
635
158
488
4,272 15,256
666
477
119
Crédit Agricole
Financement Suisse
22
2,405
21
3
1
22
2,293
23
2
1
Non-financial companies (breakdown) :
72
450
90
19
7
14
141
44
12
5
CASAM
18
179
37
2
1
4
33
12
3
9
38
27
14
6
3
23
14
6
3
Groupe Cholet Dupont
8
102
23
4
1
7
85
18
3
1
CASAM (USA) affiliates
21
131
3
(1)
(1)
CLSA BV affiliates
16
CA AM Espana Holding
SIM SPA Selezione e
distributione
Net book value
of investments
in affiliates
1
668
2,934 18,967
943
The market value shown in the above table is the quoted
price of the shares on their trading market at 31 December. It may not be representative of the realisable value
of the securities.
The change in Banque Saudi Fransi’s stockmarket value
should be compared with the performance of Saudi
Arabia’s TASI stockmarket index, which fell from 16,712.64
at 31 December 2005 to 7,933.29 at 31 December 2006.
657
166
524
4,272 17,690
733
491
125
Securitisation transactions carried out
on behalf of customers
commercial paper in the euro money markets. Calyon
issues letters of credit to guarantee a portion of the
risk of default attaching to the assets securitised by its
customers, which amounted to 0.93 billion euros at
31 December 2006. No reserves were considered
necessary at 31 December 2006. Calyon had also
granted a total of 21.51 billion euros in cash lines to
these SPEs at 31 December 2006;
- C alyon manages a consolidated SPE (ESF), to which it
had granted cash lines totalling 759 million euros at
31 December 2006;
- Calyon manages a consolidated French credit institution, Ester Finance Titrisation, to which it had granted
92 million euros of guarantees at 31 December 2006.
These transactions usually involve the creation of special
purpose entities (SPEs) which are not consolidated if
Calyon does not exercise control. The criterion of control
is usually assessed on an “in substance” basis (i.e. based
on ownership of the risks and rewards).
At 31 December 2006, Calyon had granted 339.5 million
euros in letters of credit and 2.07 billion euros in cash
lines to SPEs that are neither consolidated nor managed
by the Bank.
3.4 S ecuritisation transactions and special-purpose vehicles
Calyon has carried out various types of transactions on
behalf of its customers:
- it manages five non-consolidated SPEs in Europe and
America (Hexagon Finance a.r.l., LMA, H2O, Atlantic
Asset Securitization Corp and La Fayette Asset
Securitization) in relation to transactions carried out by
customers. These SPEs finance themselves by issuing
Securitisation transactions on own account
As part of its portfolio management strategy, Calyon carries
out synthetic securitisation transactions to transfer the
credit risk on some of its portfolios to the market.
In 2006, the Bank carried out 7 new securitisations in
Europe and the USA for a total of 32.9 billion euros.
These transactions formed part of efforts to manage
outstanding risks in the financing business.
At 31 December 2006, there were 15 outstanding synthetic securitisation transactions maturing between 2007
and 2013, with a total nominal value of 56.6 billion
euros.
Calyon had retained a total of 2,012 million euros in
non-investment-grade risk, plus a residual share in the
investment-grade tranches amounting to 744 million
euros.
The loans concerned are kept on the bank’s balance
sheet, while most of the credit enhancement is recognised in financial instruments.
Other special purpose entities - Units in funds
Special purpose entities and funds are consolidated
when the Group exercises control in substance.
The entities concerned appear in the list of consolidated
companies in note 12 to the consolidated financial
statements.
At 31 December 2006, Calyon fully consolidated 8 funds:
Casam Systeïa Global Macro, Casam Systeïa Pair Trading,
Casam Systeïa Event Driven, Casam Systeïa Equity Quant,
Casam Systeïa Futures Euro, Alcor, Mezzasia and Korea
21st Century Trust.
3.5 Investments in non-consolidated companies
31.12.2006
31.12.2005
Net book
value
% interest
Net book value
% interest
Attijari Wafa Bank (formerly Banque Commerciale du Maroc)
57
1.44
31
1.44
SIIC de Paris
12
2.00
20
5.02
Gestion Immobilière de Sites Industriels et Commerciaux (GISIC)
16
99.99
16
99.99
1301 Sixth Avenue
30
18.26
33
18.60
CA Preferred Funding LLC
49
2.00
53
2.00
CLCM Limited Partnership
13
99.90
16
99.00
Bolsas Y Mercados
56
2.20
23
ns
Immarex
30
100.00
28
100.00
GATX
17
ns
65
ns
BFO
138
99.71
135
99.71
CAI Risk Solutions Assurances
56
100.00
50
100.00
CAI Risk Solutions Insurances
16
100.00
17
100.00
Sicovam Holding
15
6.37
38
6.40
Indosuez W.I Carr Malaysia
11
100.00
11
100.00
Indosuez Beteiligungs und Verwaltungs
13
100.00
13
100.00
Banque Libano Française SAL
19
8.57
19
8.99
Chicago Board of Trade***
29
ns
New-York Mercantile Exchange***
24
ns
14
100.00
18
33.33
Pagson Holding CY
22
100.00
Calyon Algeria
26
100.00
Redcliffe Investment
11
100.00
FX Alliance
12
4.34
Crédit Agricole Egypte SAE**
81
13.09
Financière Saint Nicaise
10
16.70
CL Rouse London**
38
100.00
337
100.00
CPR BK**
China Euro Securities Ltd *
Other shares
Net book value
* equity affiliates in 2006
** deconsolidated companies in 2006
*** reclassified under other available-for-sale securities in 2006
218
362
1,303
1,015
102 - 103
3.6 Goodwill
Additions
01.01.2006 (Acquisitions)
Decreases
(Disposals)
Impairment
losses Translation
during the adjustments
period
Other
movements
31.12.2006
Calyon Egypt SAE S.A.
(25)
0
132
Crédit Lyonnais Securities Asia BV
116
Calyon (incl. transfer of Crédit Lyonnais
activities)
682
682
9
9
CPR Online
25
Crédit Agricole Cheuvreux S.A.
132
93
(14)
(14)
181
International retail banking
CA Suisse S.A.
Crédit Agricole Luxembourg
CA Brasil DTVM
292
286
(1)
2
Private Bank in Spain
Gross value
(6)
11
2
3
1,269
10
96
3
(39)
(20)
(1)
1,305
activities)
(55)
(55)
Accumulated impairment losses
(55)
(55)
Calyon Egypt SAE
25
(25)
0
132
116
activities)
627
627
9
9
CPR Online
132
93
(14)
(14)
181
CA Suisse S.A.
CA Brasil DTVM
292
286
(1)
2
Private Bank in Spain
Net book value
(6)
11
2
3
1,214
Over the 2006 financial year, goodwill was the subject of
impairment tests, based on the assessment of the fair
value or value in use of the Cash-Generating Units (CGUs)
to which they are attached.
Fair value is the amount that could be obtained by selling
a CGU through a transaction under normal market conditions. It is based on observed prices in recent transactions involving comparable entities or on multiples that
are in line with valuation practices common in the CGU’s
market (e.g. a percentage of assets under management).
10
96
3
(39)
(20)
(1)
1,250
Value in use is determined by calculating the present
value of the CGU’s estimated future cash flows based on
its medium-term plans. The following assumptions were
used:
- estimated future cash flows: projections between 3 and
5 years,
-p
erpetual growth rate: rates range between 0% and
3.5% depending on the CGU,
- discount rate: rates range between 10.3% and 15%
depending on the CGU.
These tests led to no impairment charge being recorded
over the 2006 financial year.
We estimate that a reasonable change in the assumptions used to determine the recoverable value of CGUs
would not require further goodwill provisions.
Additions
01.01.2005 (Acquisitions)
Decreases
(Disposals)
Impairment
losses Translation
during the adjustments
period
Other
movements
31.12.2005
Calyon Egypt SAE
activities)
22
3
25
132
61
132
56
(1)
116
682
CPR Online
682
9
9
CA Suisse S.A.
Gross value
104
190
(2)
292
(2)
1,267
11
1,012
11
258
(1)
activities)
(55)
(55)
Accumulated impairment losses
(55)
(55)
Calyon Egypt SAE
activities)
22
3
25
132
61
132
56
(1)
116
627
627
CA Suisse S.A.
104
CPR Online
(2)
292
9
9
11
Other
Net value
190
11
2
957
Note 4 : F inancial management, exposure
to risk and hedging policy
Asset and liability management: structural
financial risk and global interest rate risk
260
2
(1)
0
(2)
0
1,214
This Committee meets once per quarter, and is the asset-liability decision-making body for all of Calyon. It
intervenes either directly or, in asset-liability management areas that have been formally delegated to foreign
branches and subsidiaries, in a general coordination
and supervisory role.
Structural financial risks
The Asset and Liability Committee defines the financial
and asset-liability management policies of Calyon in close
co-operation with Credit Agricole S.A. This committee is
chaired by the Executive Committee member in charge of
Finance, and comprises the Executive Committee members, the Chief Finance Officer, heads of the Structured
Finance, Capital Markets and International segments, the
heads of the Asset-Liability Management, Treasury and
Credit Portfolio Management units, as well as a Finance
representative from Credit Agricole S.A. and representatives of market risk control teams from Calyon and Crédit
Agricole S.A.
The management of financial risks covers the monitoring
and supervision of the Calyon group’s structural and operational financial risks in France and abroad, excluding
risks taken on trading floors. It includes the direct management of Calyon’s equity and long-term positions, the
consolidation of such positions taken at group level and
special monitoring of entities specifically exposed to
either interest-rate risk outside of capital markets activities or to liquidity risks incurred in their operations.
Global interest rate risk
Beyond the direct management of interest-rate positions related to long-term financing, periodic measurements enable monitoring of global interest-rate risk by
104 - 105
identifying differences in the maturity and type of
interest rates for balance sheet and off-balance sheet
items in the form of mismatch schedules. Interest-rate
risks other than in of market activities are managed
within a limit delegated by Credit Agricole S.A.
The Group uses the gap method to measure its global
interest-rate risk. This consists of determining maturity
schedules and interest rates for all assets, liabilities and
hedging derivatives at fixed, adjustable and inflationlinked interest rates: until the adjustment date for
adjustable-rate items, until the contractual date for
fixed-rate items and using model-based conventions for
items without a contractual maturity.
Calyon’s exposure to interest-rate risk in its customer
transactions is limited through interest-rate matching
carried out on customer assets by its market teams, and
due to the low level of non-remunerated deposits.
Credit, market and operational risk
management
Banking risk management within Calyon is organised by
the Risk and Permanent Control Division (RPCD) which
has the task of optimising the cost of risk for the various
business lines, with regard to the policies developed in
these lines. Calyon constantly adapts its risk management processes and practices to the development of the
Bank’s activities, new regulatory requirements and best
practices in risk management.
The scope of risk control covers counterparty risk – including the monitoring of individual risks and a global
portfolio approach including the management of country risk – along with market risks and operational risks.
The RPCD is also in charge of implementing the Basel II
project for all of Calyon.
The Group’s risk and permanent control
organisation
Calyon’s risk management was reorganised in 2006. This
was due to the application of CRBF regulation 97-02 (as
amended), which requires permanent control to be
separated from periodic control (at the Control and Audit
level). A Permanent Control Department was set up
within the Risk Management and Control Department,
which has been renamed the Risk and Permanent Control
Division.
The Permanent Control Department now covers both
internal control and operational risk management. It also
supervises accounting control and IT risk management.
The organisation of risk and permanent control activities
within Calyon is integrated into the Credit Agricole S.A.
group’s Risk and Permanent Control business line. Thus,
risk management is delegated to Calyon under formally
adopted subsidiarity and delegation principles. Within
this framework, the RPCD regularly reports its major risks
to Credit Agricole S.A.’s Group Risks Division, and has
Credit Agricole S.A.’s Group Risks Committee approve those
cases which exceed its delegated limits as well as
substantial risk strategies at the Credit Agricole S.A. group
level.
Within Calyon, the Risk and Permanent Control Division
is a worldwide organisation with the following main
characteristics:
-a
ll risk management tasks and business lines,
whatever their nature or location, are grouped together
within the Division. The RPCD has six departments:
Individual Counterparty Risks, Administration of
Counterparty Risks, Country and Portfolio Risks, Market
Risks (including development of methods for measuring
market risk and counterparty risks on market transactions), Permanent Control and Operational Risks, and
Projects and Corporate Secretariat;
- all of Calyon’s local and regional RPCD managers within
the international network report directly to the RPCD’s
managers at Head Office;
- Calyon’s head of Risk and Permanent Control reports
hierarchically to Credit Agricole S.A.’s head of Group
Risk Management;
- Calyon’s head of Risk and Permanent Control reports
functionally to Calyon’s Management Board and is a
member of Calyon’s Executive Committee;
- Governance is structured around the following decision-making bodies:
-a
Counterparty Risk Committee, which decides on
individual risks (ad hoc approvals or annual line
renewals), whatever the nature of the operation
(on- or off-balance sheet, credit or market transaction);
- a Market Risk Committee, which carries out strict
supervision of positions taken for the Bank’s own
account and defines applicable limits;
- a Strategy and Portfolio Committee, which studies
and decides on the main development guidelines
for each business line and each geographical unit; it
also decides on the main risk limits used in the
global portfolio, and periodically reviews their utilisation.
4.1 Credit Risk
A credit risk occurs when a counterparty is unable to
honour its obligations and when the book value of these
obligations in the bank’s records is positive. The counterparty may be a bank, an industrial or commercial
enterprise, a government and its various entities, an
investment fund or a natural person.
The exposure may be a loan, debt security, deed of
property, performance exchange contract, performance
bond or unused confirmed commitment.
The risk also includes the settlement risk inherent in any
transaction entailing an exchange of cash or physical
goods outside a secure settlement system.
General principles of credit risk management
Any counterparty or group of counterparties is attributed
limits intended to frame the amount of commitments,
whatever the type of counterparty (corporate, sovereign,
banks, financial institutions, local authorities, SPEs, etc.).
The delegations vary according to the quality of the risk,
assessed by an internal rating of the counterparty. The
credit decision must enter within the formally approved
risk strategies.
Second-level control of compliance with limits is made
by the RPCD, supplemented by a process for monitoring
individual risks and portfolio risks, notably in order to
detect any possible deterioration in the quality of the
counterparty and our commitments as far ahead as possible.
Where the risk is substantiated, a collective and specific
impairment policy is put into effect.
Decision-making, monitoring and impairment
Credit decisions:
New transactions are approved according to a decisionmaking process based on two front-office signatures, one
by a commitment analysis unit, the other by a front-office
manager as signing officer. The decision is supported by
an independent opinion of the RPCD and must take Basel
II parameters into account, notably the internal rating of
the counterparty and the predictive Loss Given Default
(LGD) attributed to the proposed transactions; a
calculation of ex-ante profitability (RAROC) must also be
included in the credit file. In the event that the RPCD’s
opinion is negative, the decision-making power is passed
up to the chairman of the higher committee and, if
necessary, all the way up to the Management Board via
the Counterparty Risks Committee.
Monitoring of commitments
First-degree controls on compliance with the conditions
accompanying a credit decision are carried out by the
front office. The RPCD is in charge of second-degree controls.
Monitoring of commitments is carried out for this purpose, and portfolio business is monitored constantly in
order to identify assets that could deteriorate at an
early stage. The aim is to carry out practical initiatives as
early as possible so as to protect the Bank’s interests.
The main methods used in this monitoring are:
-“
Control Committees” which meet monthly to examine
deviations and exceptions (arrears, excess drawings
and breaches of limits, ongoing syndications, flawed
legal documentation, review frequency etc.);
- monthly “Early Warning Committees” which endeavour,
by various means, to identify early signs of potential
deterioration in loans which are healthy but deemed
sensitive, in order to reduce or cover the risk exposure;
- quarterly reviews of Major Risks regardless of the
quality of borrowers concerned;
- a regular search for excessive concentrations with
respect to the amount of economic capital employed
and the amount of existing commitments, assessed
according to several criteria pertaining to the individual borrower concerned (quality based on internal
rating, size of the company, influence of its local environment).
These steps lead to:
- c hanges in internal ratings of counterparties which
are, where necessary, classified as sensitive;
- practical decisions to reduce or cover commitments at
risk;
- possible transfers of assets to the specialised recovery
unit.
Monitoring of sensitive business and impairment
“Sensitive items”, whether debts on the watch list
without default, or doubtful or bad debts, are managed
on a daily basis within the entities, and enhanced
surveillance is carried out on a quarterly basis:
-q
uarterly sensitive business review committees are
held locally, in order to provide an update of the scope
and changes in impairment for each entity. Central
committees are also convened under the chairmanship of the RPCD, in order to proceed with a joint
examination of the classification of these loans as
Doubtful or Sensitive Business. The definition of
default complies with the required Basel II definition;
- these committees propose specific impairment decisions which are then validated by the Management
Board.
106 - 107
The method for calculating impairment was reviewed in
2004 in order to comply with IAS 39, both for specific
and collective impairment.
Annually-reviewed limits and risk strategies are applied
to each country whose rating is below the threshold set
by the Group’s procedures.
As part of its portfolio management strategy, the Bank
uses credit derivatives together with a series of risk
transfer instruments including securitisations.
The implementation of a reporting and regular review
system has strengthened the increasingly sophisticated
country risk supervision mechanism, on a portfolio basis,
through greater use of quantitative tools.
The purpose is to reduce concentration of exposure to
corporate risk, diversify the portfolio and reduce loss
levels.
This approach is supplemented by scenario analyses that
aim to test the impact of unfavourable macroeconomic
and financial assumptions, and will help develop an
integrated view of the risks to which the bank could be
exposed in situations of extreme pressure.
Risks related to these transactions are monitored by the
Market Risks Division with the help of indicators including
VaR for all own-account liquid purchases and sales of
protection.
Country risk
Country risk is the risk that economic, financial, political
or social conditions in a foreign country will affect the
bank’s financial interests. It does not differ in nature
from “elementary” risks (credit, market and operational
risks). It constitutes a set of risks resulting from the
bank’s vulnerability to a specific political, macroeconomic and financial environment.
The system for assessing and monitoring country risk
within Calyon is based on an internal rating model.
Internal country ratings include criteria relating to economic solidity, the ability to pay, governance and political stability.
Concentrations by customer type
Due from banks and loans and advances to customers by customer type
31.12.2006
Gross
o/w doubtful
debts
Impairment of
doubtful debts
o/w bad debts
Impairment of
bad debts
101
(90)
3,653
Total
Central government,
government agencies
3,743
81,359
9
(3)
185
(184)
81,172
3,505
24
(14)
117
(85)
3,406
73,140
347
(108)
1,276
(381)
72,651
161,747
380
(125)
1,679
(740)
160,882
Personal and small business
customers
Companies
(including insurance
companies) and other
Total
Net accrued interest
Collective provisions
Net book value
1,704
(1,125)
161,461
31.12.2005
Gross
o/w doubtful
debts
Impairment of
doubtful debts
o/w bad debts
Impairment of
bad debts
Total
86
(72)
6,932
Central government,
government agencies
7,018
56,338
240
(211)
100
(88)
56,039
4,409
34
(11)
131
(131)
4,267
68,370
831
(316)
901
(547)
67,507
136,135
1,128
(552)
1,218
(838)
134,745
Personal and small business
customers
Companies
(including insurance
companies) and other
Total
23
(14)
1,379
(1,119)
Net book value
135,005
Commitments given to customers by customer type
31.12.2006
31.12.2005
4,917
4,578
25,478
21,650
3,914
4,501
Financing commitments to customers
Personal and small business customers
Companies (including insurance companies) and other customers
59,351
56,099
Total
93,660
86,828
Guarantee commitments given to customers
Local authorities
179
159
7,511
7,521
922
786
26,934
22,007
Total
35,546
30,473
31.12.2006
31.12.2005
6,501
8,826
32,215
24,373
18,334
16,081
26,709
22,180
Total
83,759
71,460
276
205
84,035
71,665
Customers accounts by customer type
Accrued interest
Net book value
108 - 109
Concentration by geographical area
Due from banks and loans and advances to customers by geographical area
31.12.2006
Gross
o/w doubtful
debts
Impairment of
doubtful debts
o/w bad debts
Impairment of
bad debts
Total
France (including overseas
departments & territories)
28,803
109
(50)
184
(92)
28,661
(23)
809
(111)
63,969
59
(59)
8,620
(74)
24,627
64,103
61
Rest of Europe
8,679
5
North America
24,727
155
(26)
137
8,008
31
(21)
168
(127)
7,860
9,424
1
150
(138)
9,286
12,864
11
170
(137)
12,722
5,139
7
2
(2)
5,137
161,747
380
1,679
(740)
160,882
Asia and Pacific
(excluding Japan)
Japon
Total
(5)
(125)
1,704
(1,125)
Net book value
161,461
31.12.2005
Gross
o/w doubtful
debts
Impairment of
doubtful debts
o/w bad debts
Impairment of
bad debts
Total
France (including overseas
departments & territories)
31,629
209
(148)
126
(98)
31,383
40,311
230
(32)
257
(147)
40,132
Rest of Europe
7,766
140
(125)
142
(108)
7,533
North America
14,543
278
(75)
275
(139)
14,329
8,653
140
(104)
54
(29)
8,520
9,961
80
(54)
254
(224)
9,683
Asia and Pacific
(excluding Japan)
12,779
39
(14)
110
(93)
12,672
Japon
10,493
12
Total
136,135
1,128
10,493
(552)
1,218
(838)
134,745
1,379
(1,119)
Net book value
135,005
Commitments given to customers by geographical area
31.12.2006
31.12.2005
30,449
26,972
22,822
21,037
Rest of Europe
4,626
4,459
North America
Financing commitments to customers
25,738
25,702
2,411
3,103
2,464
2,098
Asia and Pacific (excluding Japan)
4,075
2,434
Japon
1,075
1,023
Total
93,660
86,828
11,367
10,439
8,815
6,540
Rest of Europe
1,595
2,261
North America
4,025
4,843
3,557
2,461
1,306
1,166
4,603
2,337
278
426
35,546
30, 473
31.12.2006
31.12.2005
17,831
18,283
Guarantee commitments given to customers
Japon
Total
Customer accounts by geographical area
21,342
14,538
Rest of Europe
6,881
6,362
North America
8,783
8,622
4,966
3,173
6,296
6,524
10,870
7,969
Japon
6,790
5,989
Total
83,759
71,460
Accrued interest
Net book value
276
205
84,035
71,665
110 - 111
Derivative financial instruments
31.12.2006
Governments, OECD central banks and similar
OECD financial institutions and similar
Total
31.12.2005
Market value
Potential
credit risk
Market value
Potential
credit risk
783
508
797
490
85,180
75,836
99,170
55,466
9,839
11,387
11,814
9,308
95,802
87,731
111,781
65,264
81,671
75,216
100,960
Risk on:
- interest rate, exchange rate and commodities
54,599
- equity and index derivatives
14,131
12,515
10,821
10,664
Impact of netting agreements
82,141
53,250
95,914
40,603
Total after impact of netting agreements
13,661
34,481
15,867
24,661
4.2 Market risk
Market risk is the risk of a negative impact on the income
statement or balance sheet of adverse fluctuations in the
value of financial instruments following changes in
market parameters:
- interest rates: interest-rate risk is the risk of a change
in the fair value of the a financial instrument or the
future cash flows from a financial instrument due to a
change in the interest rates;
-e
xchange rates: exchange-rate risk is the risk of a
change in the fair value of a financial instrument due
to a change in exchange rates;
-p
rices: price risk is the risk of a change in the price or
volatility of equities, commodities, baskets of equities
and share price indexes. The instruments most exposed
to this risk are variable-income securities, equity
derivatives and commodity derivatives.
Calyon has a well-developed system for controlling
market risks, comprising an independent Risk Management organisation, robust and consistent control and
reporting procedures and a reliable and exhaustive
assessment system.
Work undertaken to consolidate these parts of the
system has led to the internal model being validated by
the regulatory authorities across a most of Calyon’s
activities.
It applies mainly to the Bank’s trading books.
Organisation
Decision-making and risk monitoring committees
The entire system falls under the authority of the Market
Risk Committee.
This committee is chaired by the member of Calyon’s
Management Board in charge of supervising the Risk
and Permanent Control Division, and meets twice a
month. It monitors and analyses market risks and their
evolution. It ensures compliance with supervision indicators, specific management rules and defined limits.
It sets limits for the operational units within the overall
limit fixed by the Strategy and Portfolio Committee.
This committee includes members of Calyon’s Executive
Committee, a representative of Credit Agricole S.A. Group
Risks Division, heads of Market Risk Management and
officers in charge of capital markets activities.
Minutes from these committee meetings are sent to
Calyon’s Chief Executive Officer, who is also informed
about risks, strategies and projected movements as part
of Strategy and Portfolio Committee meetings.
Finally, Internal Audit carries out regular audits to
ensure compliance with the Group’s internal control
standards.
Scope
The system covers all market risks, which are defined as
potential losses associated with variations in interest
rates, exchange rates, the prices of shares, the prices of
commodities and their volatility, as well as the quality of
the issuers of the securities in question.
Risk control
Market risk control forms an independent global function within the Risk and Permanent Control Division:
At the global level, Risk Management monitors, controls
and reports on market risks for all product lines.
Its duties include:
Calyon has set an overall risk limit, expressed in VaR
terms, for all its capital markets activities which stood at
35 million euros at 29 December 2006.
- s etting limits and ensuring compliance with them,
- analysing market portfolio risks on a permanent
basis,
- validating risks and results,
- analysing and monitoring complex transactions.
Stress scenarios
Since VaR does not reflect the potential impact of extreme
market conditions, Calyon uses a set of stress scenarios,
developed using three complementary approaches:
Quantitative analysis:
- identifies and analyses market risks,
- validates valuation models,
- proposes provisions and valuation adjustments,
- proposes methods for assessing the model’s parameters.
The Activity Monitoring Team is in charge of producing
management results data and risk indicators for all
activities subject to market risk limits. Its functions
include:
- independently collecting market data,
- producing management results,
- producing risk indicators.
Cross-company teams supplement this system and have
the tasks of ensuring international consolidation,
reporting, defining the overall risk policy, ensuring the
consistency of market parameters and monitoring the
quality of the internal model.
Market risk measurement and management
methodology
The management of market risks is based on several
indicators that are used to devise overall or specific risk
limits. These limits are intended to cover all risk factors.
Value at Risk (VaR)
VaR is the central plank of the risk-measurement system.
The regulatory authorities’ validation of the internal
model supports the use of VaR in the operational
monitoring of market risks:
-h
istorical scenarios, which replicate the impact of
major past crises on the current portfolio,
- hypothetical scenarios, which anticipate likely shocks,
modelled with the help of our economists,
- adverse scenarios, which anticipate unfavourable
market movements in the light of Calyon’s current positions.
These scenarios are adjusted to the risks existing in the
various portfolios on which they are calculated.
Portfolios at all levels, from the most specific to the
most general, are evaluated on a regular basis and on
request. The results are presented to the Market Risk
Committee.
Other indicators
VaR measurement is associated with a set of complementary and explanatory indicators, most of which are
subject to limits:
-o
perational indicators allow risk controls to be honed.
These indicators are calculated for each activity (issuer
risk, authorised currencies, maximum terms), and
include a system of loss alerts and stop losses;
- analytical indicators are used by Risk Management for
explanatory purposes.
These market activities are managed through a system
of market risk indicators accompanied by limits designed
to cover all market risk factors, including market movements (fixed income, equities, forex), correlations and
credit issues.
Control procedures
- V aR is a measure of the potential loss that Calyon’s
portfolio could suffer in the event of adverse movements in market parameters over a one-day period
and for a confidence interval of 99%, based on one
year of historical data;
- Calyon’s internal model is based on an historic VaR
model, except in the case of commodities, for which a
Monte Carlo model is applied.
Limit monitoring
General product line limits are determined at group
level, after which more specific limits are defined if
necessary.
Risk Management monitors all limits on a daily basis,
and reports any breaches to the appropriate levels of
the group. Limit breaches and significant variations in
results are reported to the Market Risk Committee.
112 - 113
Backtesting
Under the internal model, a daily loss should not exceed
VaR more than two or three times per year.
These activities are managed through a system of market risk indicators accompanied by limits designed to
cover all risk factors. These indicators are:
Backtesting allows permanent comparisons between
VaR and the daily results of product lines, calculated
both on the basis of real positions and assuming unchanged positions. This allows the relevance of VaR
measurements to be assessed. In 2006, there was only
one exception to Calyon’s global VaR: on one day, the
previous day’s loss estimate underestimated the actual
loss.
- VaR (historical, 99%, daily, including credit spread and
correlation risk),
- credit sensitivity,
- sensitivity to correlation,
- sensitivity to recovery rates,
- sensitivity to interest rates.
The system also includes stop loss limits and stress
testing.
Independent teams belonging to the Risk and Permanent
Control Division are responsible for valuation, calculating
risk indicators, setting limits and validating models.
Within the capital markets business, Calyon has developed
a credit derivatives business encompassing trading,
structuring and selling credit derivatives to its customers.
The products handled range from simple products (credit
default swaps), where the principal risk factor is credit
spreads, through to more structured products that introduce other more complex risk factors (e.g. correlation).
Positions are measured at fair value with deductions for
model and data uncertainties.
Derivative financial instruments: analysis by remaining maturity
Hedging – Fair value of assets
31.12.2006
Exchange-traded
31.12.2005
Over-the-counter
1-5 years
Over 5
years
Total
notional
amount
outstanding
Total
notional
amount
outstanding
33
16
168
247
Under 1 1-5 years
year
Interest rate instruments:
2
Futures
2
Over 5
years
Under 1
year
117
2
Forward rate agreements
Interest rate swaps
115
Swaptions
33
16
164
1
1
Other options
1
1
Currency and gold:
9
9
Currency futures
6
6
Currency options
3
Caps, floors and collars
17
3
Other:
2
2
Equity and index derivatives
2
2
Precious metal derivatives
Commodity derivatives
Credit derivatives
Other
Sub-total
2
Forward currency transactions
Net book value
2
126
35
154
11
280
46
16
16
179
264
165
229
344
493
Derivative financial instruments held for trading – Fair value of assets
31.12.2006
Exchange-traded
31.12.2005
Over-the-counter
1-5 years
Over 5
years
Total
notional
amount
outstanding
Total
notional
amount
outstanding
11,141
30,763
55,415
97,331
85,633
10,650
27,568
41,435
79,653
491
3,142
13,979
17,612
38
1
39
Under 1
year 1-5 years
Over 5
years
12
Under 1
year
Futures
2
Interest rate swaps
Swaptions
Other options
Currency and gold:
Currency futures
Currency options
Other:
12
126
2
13
186
398
85
25
2,666
5,720
5
9,101
348
5,681
5
6,119
41
186
398
2,318
39
2,982
18,061
5,525
445
1,017
16
25,064
7,019
1,348
66
7
9,016
14,737
8,440
1,009
Credit derivatives
1,009
1
1
15,614
Other
11,042
4,177
379
1
15
Sub-total
18,199
5,711
843
14,824
36,499
162
111
14,986
36,610
Net book value
18,199
5,711
843
55,420
131,496
109,386
273
55,420
131,769
109,386
114 - 115
Hedging instruments – Fair value of liabilities
31.12.2006
Exchange-traded
31.12.2005
Over-the-counter
1-5 years
Over 5
years
Total
notional
amount
outstanding
Total
notional
amount
outstanding
46
88
23
157
521
44
88
21
153
2
3
Under 1 1-5 years
year
Over 5
years
Under 1
year
Futures
Interest rate swaps
Swaptions
1
Other options
1
Currency and gold:
5
1
1
6
Currency futures
3
1
4
Currency options
2
14
2
Other:
Credit derivatives
Other
Sub-total
51
89
28
(3)
Net book value
79
86
23
23
163
535
25
104
188
639
Derivative financial instruments held for trading – Fair value of liabilities
31.12.2006
Exchange-traded
31.12.2005
Over-the-counter
1-5 years
Over 5
years
Total
notional
amount
outstanding
Total
notional
amount
outstanding
9,556
32,496
54,749
96,801
87,733
8,758
28,055
39,944
76,757
638
4,376
14,804
19,818
59
1
Under 1
year 1-5 years
Over 5
years
Under 1
year
Futures
1
Interest rate swaps
Swaptions
Other options
160
5
1
60
165
Currency and gold:
85
2,882
5,224
82
8,273
Currency futures
85
335
5,185
5
5,610
Currency options
2,547
39
77
2,663
Other:
4,245
1,348
66
8,596
6,359
757
21,371
4,245
1,348
66
18
5,677
533
533
Credit derivatives
252
8,387
13,535
Other
Sub-total
4,330
1,348
66
Net book value
252
7,793
6,359
757
14,909
21,034
44,079
55,588
126,445
346
4,330
1,348
66
21,380
109,655
346
44,079
55,588
126,791
109,655
Structural currency risk
The Group’s structural currency risk results from its otherthan-temporary investments in assets denominated in
foreign currencies, mainly the equity of its foreign operating entities, whether they result from acquisitions,
transfers of funds from Head Office or the capitalisation
of local earnings.
Hedging of structural currency risk is managed centrally
and arranged following decisions by the Bank’s AssetLiability Management Committee.
Calyon’s structural currency positions are also included
with those of Crédit Agricole S.A., which are presented
five times a year to its Asset-Liability Management
Committee, chaired by its CEO.
The Group’s policy is usually to borrow funds in the investment currency in order to neutralise the investment’s sensitivity to currency risk. These borrowings are documented
as investment hedging instruments. In some cases, and
for illiquid currencies in particular, the investment gives
rise to a purchase of the local currency, and the resulting
currency risk may be hedged through forward transactions.
Operational currency risk
The Bank is further exposed to operational currency
positions on its income and expenses stated in foreign
currencies, both at Head Office and in its foreign
operations.
The Group’s general policy is to limit net operational
currency positions as far as possible by periodically
hedging them, usually without prior hedging of earnings
not yet generated except if they have a high probability
and a high risk of impairment.
Overall, the Group’s policy for managing its structural
currency positions has two main objectives:
- f irstly, to protect the Group’s solvency ratio against
currency fluctuations; unhedged structural currency
positions will be scaled so as to equal the proportion
of risk-weighted assets denominated in the currencies
concerned and unhedged by other types of equity in
the same currency;
- secondly, to reduce the risk of a fall in asset value.
Rules and authorisations applicable to the management
of operational positions are put in place by decision of
the Asset-Liability Management Committee.
Analysis of the consolidated balance sheet by currency
31.12.2006
EUR
Other EU currencies
31.12.2005
Assets Equity and liabilities
371,872
Assets
Equity and liabilities
345,153
318,274
295,676
34,736
49,113
22,474
24,931
USD
120,591
139,914
92,646
117,390
JPY
22,019
24,008
25,535
18,924
Other currencies
Total
38,952
29,982
22,387
24,395
588,170
588,170
481,316
481,316
Price risk
Price risk arises from variations in the price and volatility
of equities, commodities, baskets of equities and share
price indexes.
The following in particular are subject to this risk:
floating-rate instruments, equity derivatives and commodity derivatives.
Calyon takes on exposure to price risk in its equity and
commodity derivatives activities within its capital
markets business, and in its brokerage activities within
CA Cheuvreux, CLSA and Calyon Financial.
116 - 117
4.3 Liquidity and financing risk
Liquidity and financing risk is the risk of loss if a company is unable to meet its financial commitments in
timely fashion and at reasonable prices when they reach
maturity.
These commitments include obligations to depositors
and suppliers, as well as commitments in respect of
loans and investments.
Calyon, as a credit institution, complies with the liquidity
requirements set out in the following texts:
- C RBF regulation 88-01 of 22 February 1988 relating to
liquidity,
- F rench Banking Commission instruction 88-03 of 22
April 1988 relating to liquidity,
- F rench Banking Commission instruction 89-03 of 20
April 1989 relating to the conditions for including refinancing agreements in liquidity calculations.
Like all credit institutions, Calyon is exposed to the risk
that it may not have the necessary funds to meet its
commitments when they fall due. This may happen in
the event of a general crisis of confidence or liquidity in
the market.
Liquidity risk is managed in the following ways:
- liquidity risk is measured by looking at applications
and sources of funds based on their contractual or
modelled maturity schedules. This approach shows
amounts falling due in various periods, which vary
over time. Short-term liquidity risk is measured by
comparing schedules for assets to be repaid and liabilities falling due, and the Bank’s transformation
mismatch is also measured, notably at one and five
years, by identifying the difference in amount between
bank lending granted and long maturity securities
held on the one hand, and financial resources available in the long term on the other;
-a
suitable policy for matching applications and sources
of funds, and for maintaining liquid assets.
In addition to the applicable regulatory ratios, Calyon’s
policy for managing its short-term and medium-term
liquidity risk is set by its Asset-Liability Management
Committee as part of the Crédit Agricole group’s policy
on this issue.
Short-term liquidity management is handled by the
Bank’s Treasury Department. It renews the necessary
financing and manages suitable portfolios of liquid
assets. It also sets rules and limits on the Bank’s various
global liquidity centres and ensures compliance with the
applicable regulatory liquidity coefficient.
Calyon’s medium- to long-term liquidity management is
provided centrally by the Asset-Liability Management
Department of the Finance Department.
This management includes:
-d
efining internal transformation policies, rules and
procedures, both on an overall basis for major currencies and on a specific basis for certain local currencies;
- determining medium- and long-term financing needs,
as well as the needs of financial transactions concerning
equity and long-term financing;
- carrying out transactions decided upon by the AssetLiability Management Committee;
- monitoring the creditworthiness of Calyon.
The Financing Committee shared by the Treasury Department and the Finance Department’s Asset-Liability
Management unit also meets periodically to analyse
developments in long-term resource requirements and
in the market. It sets the financial terms of new
transactions.
Other than liquidity arising from subordinated or
perpetual debt, the greater part of Calyon’s long-term
liquidity resources comes from debt issues in various
forms (certificates of deposit, BMTN, EMTN), customer
deposits and interbank borrowings, some of which are
entered into with Credit Agricole S.A.
Calyon makes extensive use of its Euro Medium Term Notes
(EMTN) programmes: There is a programme governed by
English law, for a maximum amount of 30 billion euros,
and a programme governed by French law for a maximum
amount of 4 billion euros.
Unless stated otherwise, issues carried out under these
programmes for Calyon’s international customers are
“structured”, meaning that the coupon paid and/or the
amount redeemed on maturity comprises a component
which is linked to one or more market indexes (equity,
interest rate, currency or commodity indexes).
Similarly, certain issues are termed “Credit Linked Notes”
meaning that the redemption is reduced in the event of
default on the part of a third party who is contractually
defined at the time of issue.
Finally, Calyon has put various types of subordinated debt
into place, either in the form of borrowings or in the form
of securities. As well as contributing to the Bank’s solvency
ratios, they help with its overall medium- and long-term
financing.
Subordinated debt issues
Super-subordinated notes
The activity of any bank involves making constant changes to its liabilities with respect to movements in its
capital uses. Subordinated debt therefore forms part of
the continuous management of Calyon’s liabilities and
equity.
The super-subordinated notes issued by Calyon are
fixed-rate or adjustable-rate perpetual borrowings,
senior to ordinary shares but subordinated to all subordinated debt. The coupons are non-cumulative and
subordinated to Calyon’s annual net income which must
be sufficient to remain positive after payment of the
coupon due for the financial year in question.
Redeemable subordinated notes
Considering the current operating structure of the Credit
Agricole S.A. group, Calyon no longer issues redeemable
subordinated notes (“TSR”) but uses subordinated
borrowings entered into with Credit Agricole S.A. These
loans are generally at an adjustable rate with interest
paid quarterly or annually.
Issues by Calyon provide for the possibility of early
redemption by the issuer after the tenth anniversary of
their being put into place, subject to the prior agreement
of the Company Secretary of the Commission Bancaire.
Depending on the issue, the interest rate may be increased
after the first possible date for early redemption by the
issuer.
The subordinated borrowings may be distinguished from
ordinary loans and bonds due to the ranking of the debt
contractually defined in the subordination clause. For
borrowings obtained by Calyon, and in the event of
liquidation, they will be reimbursed after secured and
ordinary-ranking creditors have been paid, but before
reimbursement of Calyon’s participating securities and
loans.
To date, five issues of Super-Subordinated Notes have
been made, three at a fixed rate and two at an adjustable
rate. They were all underwritten by Credit Agricole S.A.
Breakdown of debt securities in issue and subordinated debt by currency
31.12.2006
Bonds
EUR
Fixed rate
333
Floating rate
Fixed-term
subordinated
debt
31.12.2005
Perpetual
subordinated
debt
31
USD
Fixed rate
3
Floating rate
2,094
Fixed-term
subordinated
debt
Perpetual
subordinated
debt
406
106
26
316
866
31
1
1,967
Bonds
1,989
JPY
68
2
913
2,140
71
Floating rate
Other currencies
248
29
95
Fixed rate
Fixed rate
Floating rate
64
Total
610
Fixed rate
581
29
Floating rate
before the impact of hedging contracts
4,129
2,020
819
2,024
2,197
68
0
406
245
26
4,061
2,020
413
1,779
2,171
118 - 119
Due from banks and loans and advances to customers: analysis by remaining date
31.12.2006
31.12.2005
Under 3 3 months
months to 1 year
1 to
5 years
Over 5
years
Under 3 3 months
months to 1 year
Total
1 to
5 years
Over 5
years
Total
Loans and advances to banks
44,555
5,224
5,780
3,004
58,563
32,890
5,844
5,404
2,252
46,390
Loans and advances to
customers (including lease
finance)
47,626
9,497
28,593
17,468 103,184
42,471
9,900
25,262
12,112
89,745
Total
92,181
14,721
34,373
20,472 161,747
75,361
15,744
30,666
14,364 136,135
Accrued interest
1,949
Provisions
Net book value
1,688
(2,235)
(2,818)
161,461
135,005
Due to banks and customer accounts: analysis by remaining maturity
31.12.2006
31.12.2005
Under 3 3 months
months to 1 year
1 to
5 years
Over 5
years
Total
Due to banks
68,072
5,478
1,805
1,472
76,827
42,232
Customer accounts
68,228
4,209
8,255
3,066
83,857
59,039
136,300
9,687
10,060
4,538 160,585 101,271
Total
Accrued interest
Book value
Under 3 3 months
months to 1 year
1 to
5 years
Over 5
years
Total
15,087
14,299
307
71,925
8,801
2,707
913
71,460
23,888
17,006
1,220 143,385
2,260
1,192
162,845
144,577
Debt securities in issue and subordinated debt
31.12.2006
Under 3 3 months
months to 1 year
31.12.2005
1 to
5 years
Over 5
years
Total
Under 3 3 months
months to 1 year
1 to
5 years
Over 5
years
Total
21
24
46
2
47
25
74
Interest-bearing notes
1
Negotiable debt securities:
. Issued in France
12,201
395
3,105
3,429
19,130
3,889
1,883
1,359
1,966
9, 097
. Issued in other countries
19,547
19,197
3,493
123
42,360
20,321
12,617
3,808
183
36,929
260
190
144
16
610
89
406
308
16
819
32,009
19,782
6,771
3,592
62,154
24,299
14,908
5,522
2,190
46,919
Bonds
Total
8
8
Accrued interest
Net book value
676
392
62,830
47,311
Subordinated debt
Fixed-term subordinated debt
589
Perpetual subordinated debt
Total
Accrued interest
Book value
589
3,540
4,129
2,020
2,020
5,560
6,149
99
99
1
1
944
980
2,024
26
2,171
2,197
970
3,151
4,221
128
121
6,277
4,342
Fair value hedges
A fair value hedge is a hedge of the exposure to changes
in the fair value of a fixed-rate financial instrument
caused by changes in interest rates. Fair value hedges
transform fixed-rate assets or liabilities into adjustablerate assets or liabilities.
In the Calyon Group, foreign currency-denominated net
investments in foreign subsidiaries and branches are
generally hedged against currency risk by currency
borrowings or currency derivatives.
Cash flow hedges
Items hedged are principally fixed-rate loans, securities,
deposits and subordinated debt.
Fair value hedges include, notably, the hedging of fixedrate subordinated debt, deposits, securities and loans.
Net investment hedges
Net investment hedges cover the currency risk inherent
in holding net investments in foreign operations.
A cash flow hedge is a hedge of exposure to variability in
cash flows arising from variable rate financial instruments.
Items hedged are principally variable-rate loans and
deposits.
In the Calyon group, cash flow hedging is essentially tied
to the global management of interest-rate risk.
31.12.2006
En millions d’euros
Positive market
value
31.12.2005
Negative market
value
Positive market
value
Negative market
value
Micro-hedging
320
154
303
633
· fair value hedges
280
127
294
627
· cash flow hedges
40
27
9
6
Macro-hedges (fair value)
23
33
186
Macro-hedges (cash flow)
1
· hedges of net foreign investment
Total
344
1 188
4
493
6
639
4.5 Operational risk
Operational risk is the risk of loss resulting from shortcomings in internal procedures or information systems,
human error or external events that are not linked to a
credit, market or liquidity risk.
In accordance with principles in force within the Credit
Agricole S.A. group, Calyon’s Permanent Control - Operational Risk division has set up a qualitative and quantitative system for identifying, evaluating, preventing and
supervising operational risks in accordance with Basel II
regulations.
This operational risk management system comprises the
following five components:
-o
rganisation of the operational risk management
function: supervision of the system by the Management
Board through the operational risk unit of Calyon’s
Internal Control Committee, the work done by the Risk
and Permanent Control Division and by subsidiaries
and business lines via a network of Operational Risk
Managers;
- identification and qualitative evaluation of risks through
risk mapping, along with indicators that allow monitoring of the most sensitive processes;
120 - 121
-n
otification of operational losses and reporting of
alerts for significant incidents, with consolidation in a
database allowing the measurement and monitoring
of risk-related costs;
- c alculation and allocation of economic capital with
respect to operational risks;
- periodic reporting via operational risk scorecards.
The aim is that this system will be approved by the
French Banking Commission as an “advanced measurement approach” (AMA) in 2007.
Operational risk management relies on a network of
around 50 Operational Risk Managers, most of whom are
also Permanent Control Correspondents, who cover all
Group subsidiaries and business lines and are co-ordinated by the Risk and Permanent Control Division.
The system is monitored by internal control committees
under the authority of each entity’s management.
To enable operational risk-related costs to be measured
and monitored, a unified loss notification and alert
reporting procedure has been implemented across the
entire scope of application.
The data required by the internal model for calculating
the economic capital allocation, in accordance with the
Basel II advanced method, have been integrated into a
single database that provides five years of historical data.
Calyon has thus been able to carry out initial simulations
of capital calculations using the advanced method for the
2001-2005 period.
The operational risk mapping process, launched at the
end of 2004 with the aim of covering Calyon’s head office
business lines and all of its international units and
subsidiaries, has been completed. Annual updates will be
carried out.
Finally, a quarterly operational risk scorecard is produced,
highlighting key events and movements in costs related
to these risks. These scorecards provide global confirmation of the main sources of risks, i.e. litigation, inadequate compliance with regulations and good commercial
practices and process management (particularly relating
to market operations). These sources of risks determine
the priorities of preventative or corrective action plans
(FIDES programme).
4.6 Insurance and risk coverage
Calyon has broad insurance coverage of its operating
risks in accordance with guidelines set by its parent
company, Credit Agricole S.A., with the aim of protecting
its balance sheet and its income statement.
In line with the principle of harmonising policies
regarding the transfer of personal and property risk to
insurance companies, and the principle of setting up a
differentiated insurance policy for each business line in
terms of civil liability and fraud, Calyon is covered by all
Group insurance policies set up by Credit Agricole S.A.
with highly rated insurance companies (AIG, AXA, ACE, AGF,
Chubb, GAN Eurocourtage, Zurich, etc.), for high intensity
risks:
-
fraud and “All Risks Securities” insurance,
operating losses,
professional liability,
operating liability,
liability of Directors and Corporate Officers,
property damage (operational buildings and IT).
The latter programme only concerns France, while the
other programmes apply on a worldwide level.
In addition, the business line subsidiaries manage their
own smaller risks.
Small and common risks that cannot be insured in an
economically satisfactory manner are kept as deductibles
within Calyon or spread within the Credit Agricole S.A.
group by the Group’s own reinsurance company.
This general framework may vary according to local regulations and specific requirements of countries in which
the Calyon group operates. It is generally complemented
by local insurance.
Continuity of operations
A global co-ordination and verification system is in place
to ensure continuity of operations, and benefits from
specific monitoring by the Management Board. Calyon
assesses and improves its back-up systems on an ongoing
basis. It carried out in-depth tests in 2006, both in
France and worldwide, and covering all subsidiaries and
branches.
Note 5 : N
otes to the income statement
5.1 Interest income and expense
31.12.2006
31.12.2005
Loans and advances to banks
4,697
2,840
4,919
3,146
822
700
1,208
3,324
65
28
Accrued interest receivable on available-for-sale financial assets
Accrued interest receivable on hedging instruments
Lease finance
Other interest income
18
265
Interest Income
11,729
10,303
Deposits by banks
(6,184)
(4,141)
Customer accounts
(2,829)
(1,708)
(190)
(630)
(2,779)
(2,083)
Available-for-sale financial assets
Subordinated debt
Accrued interest payable on hedging instruments
Lease finance
(289)
(207)
(1,374)
(1,472)
(44)
(6)
(13,689)
(10,247)
Other interest and similar expense
Interest expense
5.2 Net fee and commission income
Interbank transactions
31.12.2006
31.12.2005
Income
Expense
Net
Income
Expense
Net
29
(134)
(105)
41
(103)
(62)
Customer transactions
500
(27)
473
733
(287)
446
Securities transactions
1,159
(286)
873
592
(182)
410
7
(20)
(13)
13
(13)
863
(340)
523
614
(127)
487
* Net revenue from mutual fund management
11
(59)
(48)
239
(47)
192
* Net revenue from payment systems
84
(41)
43
53
(32)
21
520
(342)
178
677
(253)
424
3,173
(1,249)
1,924
2,962
(1,044)
1,918
Foreign exchange transactions
Financial future and forward instruments and other
off-balance sheet transactions (including brokerage)
Banking and financial services:
* Other
Net fee and commission income
122 - 123
5.3 Net gains (losses) on financial instruments at fair value through profit or loss
Dividends received
Unrealised or realised gains or losses on financial assets/liabilities at fair value
Profit or loss on currency transactions and similar financial instruments
Ineffective portion of fair value hedges
31.12.2006
4,490
2,459
771
8
3
(15)
5,390
2,466
31.12.2006
31.12.2005
59
76
Ineffective portion of cash flow hedges
Net gains (losses) on financial instruments at fair value through profit or loss
31.12.2005
126
14
5.4 Net gains (losses) on available-for-sale financial assets
Dividends received
Realised gains or losses on available-for-sale financial assets
Impairment losses on variable-income securities
Net gains (losses) on available-for-sale financial assets
214
253
24
(41)
297
288
31.12.2006
31.12.2005
Gains on available-for-sale financial assets result mainly
from dividends on variable-income securities (59 million
euros) and disposal gains (214 million euros) realised
mainly on sales of equities.
5.5 Net income and expenses related to other activities
Net income from investment properties
86 0
Other net income (expense)
125
210
Net income (expense) from other activities
211
210
31.12.2006
31.12.2005
(2,435)
(2,025)
(42)
(48)
(991)
(984)
(3,468)
(3,057)
5.6 General operating expenses
Personnel costs
Taxes other than income or payroll-related
External services and other expenses
Operating expenses
5.7 Depreciation, amortisation and impairment of property, plant and equipment and intangible
assets
Depreciation and amortisation
Impairment provisions
Total
31.12.2006
31.12.2005
(107)
(111)
1
0 (106)
(111)
This item covers depreciation, amortisation and impairment of intangible assets and property, plant and equipment assigned to the company’s operations.
5.8 Risk-related costs
31.12.2006
31.12.2005
Charge to provisions and impairment
(391)
(663)
Counterparty risks
(282)
(334)
Risks and expenses
(109)
(329)
Write-back of provisions and impairment
384
706
Counterparty risks
348
395
Risks and expenses
36
311
Net change in provisions and impairment
(7)
43
Bad debts written off – not provided for
(21)
(46)
Recoveries on bad debts written off
38
65
Other losses
(1)
25
9
87
Risk-related costs
In 2006, there was a net release of 66 million euros
from impairment reserves on loans and receivables
(61 million euros in 2005). This figure breaks down as
follows:
-1
39 million euros of net releases relating to individual
risks,
- 73 million euros of net additions to collective reserves.
General reserves, which represented a net charge of
73 million euros in 2006, mainly cover litigation and tax
risks.
124 - 125
5.9 Net Income on other assets
Property, plant and equipment and intangible assets
31.12.2005
0
1
Gains
1
7
Losses
(1)
(6)
5
202
Consolidated equity investments
Gains
35
282
Losses
(30)
(80)
5
203
31.12.2006
31.12.2005
(652)
(252)
32
(131)
(620)
(383)
Net gains (losses) on other assets
31.12.2006
Most gains on other assets consisted of a disposal gain
on Crédit Foncier de Monaco shares and deconsolidation
or disposal gains on entities that left the scope of
consolidation in 2006.
In 2005, the 203 million euro net gain resulted from
disposals of consolidated entities, mainly within the
Crédit Agricole S.A. group. These disposals were intended
to complete the initiative to bring the Credit Agricole
S.A. group’s legal organisation into line with the managerial structure of its business lines.
5.10 Income tax
Tax charge
Current tax charge
Deferred tax charge
Tax charge for the period
Reconciliation of theoretical tax rate and effective tax rate
Base
Tax rate
Tax charge
2,302
34.43%
(793)
2.48%
(57)
Impact of different rates on foreign subsidiaries
(3.69%)
85
Impact of losses for the year, utilisation of tax loss carry forwards
and temporary differences
(8.64%)
199
2.35%
(54)
26.91%
(620)
Income before tax, goodwill impairment and share of net income
of associates
Impact of permanent timing differences
Effective tax rate and tax charge
Impact of other items
Note 6 : Segment reporting
Definition of business segments
The naming of Calyon’s business lines corresponds to the
definitions applied within the Credit Agricole S.A.
group.
The capital markets and investment banking business
encompasses the capital markets activities (treasury,
foreign exchange, commodities, interest-rate derivatives, debt markets, credit markets and CDOs, and equity
derivatives), the investment banking activities (mergers
and acquisitions and equity capital market), as well as
equity and futures brokerage activities carried out by CA
Cheuvreux, CLSA and Calyon Financial.
Presentation of business lines
The Bank’s activities are based around two predominant
business segments: financing on the one hand, and
capital markets and investment banking on the other.
Together, these represent virtually all of Credit Agricole
S.A.’s corporate and investment banking business.
Calyon is also present in international private banking
through its establishments in Switzerland, Luxembourg,
Monaco, Spain and Brazil.
The financing activities encompass syndication, commercial banking in France and internationally, and
structured financing: project, aircraft, shipping, acquisition, real estate, trade, export and structured commodities finance.
6.1 Analysis by business line
31.12.2006
Financing
Capital markets
and investment
banking
Total Corporate
and investment
banking
International
Private Banking
Proprietary
asset
management
& other
activities
Total
Net banking income
2,091
3,306
5,397
474
(9)
5,862
Operating expenses
(843)
(2,406)
(3,249)
(322)
(3)
(3,574)
1,248
900
2,148
152
(12)
2,288
5
4
9
1
159
7
166
(5)
20
(10)
5
Risk-related costs
Net gains or losses on other assets
5
158
(5)
Pre-tax income
1,406
901
2,307
183
(22)
2,468
(337)
(243)
(580)
(42)
2
(620)
Net income
1,069
658
1,727
141
(20)
1,848
(38)
(28)
(66)
(11)
1,031
630
1,661
130
- of which investments in affiliates
637
31
668
- of which goodwill arising during
the period
38
(2)
36
582,438
5,732
588,170
8,100
150
8,250
Minority interest
Net income - group share
(77)
(20)
1,771
Business line assets:
Total assets
Allocated capital
at 31 december 2006
126 - 127
31.12.2005
Financing
Capital markets
and investment
banking
Total Corporate
and investment
banking
International
Private
Banking
International
retail banking
Proprietary
asset
management
& other
activities
Total
Net banking income
1,778
2,556
4,334
415
175
14
4,938
Operating expenses
(753)
(1,972)
(2,725)
(315)
(109)
(19)
(3,168)
Gross operating income (before
integration-related costs)
1,025
584
1,609
100
66
(5)
1,770
Risk-related costs
(12)
(7)
(19)
7
(9)
108
120
120
5
Net gains or losses on other
assets
87
125
(6)
20
14
1
188
Pre-tax income
1,127
597
1,724
113
57
203
(86)
(86)
205
2,099
(252)
(146)
(398)
(27)
(14)
56
(383)
Net Income
875
451
1,326
86
43
261
1,716
Minority interest
(39)
(20)
(59)
(8)
(17)
Net income – group share
836
431
1,267
78
26
261
1,632
499
25
524
69
188
257
472,444
8,872
481,316
8,000
176
8,176
(84)
Business line assets:
- of which investments
in affiliates
- of which goodwill arising
during the period
Total assets
Allocated capital
at 31 december 2005
Each segment’s assets are determined on the basis of
balance sheet accounting items for each business line.
The allocation of Calyon’s capital to each business line is
based on regulatory prudential ratio requirements.
Each segment’s liabilities, equivalent to allocated shareholders’ equity, are determined using a normalised
calculation of capital allocation by business line.
The allocated capital represents 6% of risk-weighted
assets as defined for the international solvency ratio.
The capital requirements thus calculated are incremented
by 50% of the value of shares in equity affiliates.
6.2 Geographical analysis of business line information
The geographical analysis of business line assets and results is based on the places where operations are booked for
accounting purposes.
31.12.2006
31.12.2005
Net banking income
Business line assets
Net banking income
Business line assets
France (including overseas departments
& territories)
2,283
431,474
1,893
351,204
1,191
38,906
449
14,734
Rest of Europe
418
27,543
935
35,378
North America
933
39,254
747
32,102
19
215
13
179
84
4,767
236
4,565
772
32,219
568
21,162
Japon
162
13,792
97
21,992
5,862
588,170
4,938
481,316
Total
Note 7 : Notes to the balance sheet at 31 december 2006
7.1 Cash, due from central banks and French postal system
31.12.2006
Assets
Cash
31.12.2005
Liabilities
28
Assets
29
Liabilities
Due to central banks, French postal system
1,759
80
4,861
457
Total
1,787
80
4,890
457
7.2 Financial assets and liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets held for trading
Financial assets designated as at fair value
Fair value on balance sheet
Of which lent securities
31.12.2006
31.12.2005
359,497
288,285
38
17
359,535
288,302
4,729
2,735
31.12.2006
31.12.2005
Financial assets held for trading
Due from banks
34
86
Pledged securities
0
Securities bought under repurchase agreements
Securities held for trading
- Treasury bills and similar items
99,057
87,466
128,671
91,313
27,568
21,851
- Bonds and other fixed-income securities
(1)
* Listed securities
* Unlisted securities
59,137
36,734
7,369
182
- Equities and other variable-income securities
* Listed securities
34,487
32,475
110
71
131,769
109,386
359,497
288,285
(1)
Including mutual funds.
128 - 129
Financial liabilities designated as at fair value
31.12.2006
31.12.2005
Securities held for trading
- Equities and other variable-income securities
* Listed securities
38
17
38
17
31.12.2006
31.12.2005
38,040
29,317
110,087
81,320
28,073
19,095
Financial liabilities held for trading
Securities sold short
Pledged securities
Securities sold under repurchase agreements
Accounts due to customers
6
Amounts due to banks
126,791
109,655
302,991
239,393
31.12.2006
31.12.2005
Detailed information is provided in note 4.4. on cash
flow and fair value hedging, particularly for interest
rates and exchange rates.
7.4 Financial assets available-for-sale
Securities measured at fair value
Treasury bills and similar items
12,376
11,498
9,567
5,834
435
1,332
647
1,586
Bonds and other fixed-income securities
(1)
* Listed securities
Equities and other variable-income securities
* Listed securities
1,366
2,897
Total available-for-sale securities
24,391
23,147
Total available-for-sale receivables
Accrued interest
Fair value on balance sheet(2)
(1)
including 786 million euros of impairment on securities and receivables in 2006
including 615 million euros of impairment on securities and receivables in 2005
3
157
24,551
23,147
Unrealised gains and losses on available-for-sale financial assets
31.12.2006
31.12.2005
Fair value
Unrealised
gains
Unrealised
losses
Fair value
Unrealised
gains
Unrealised
losses
12,376
2
1
11,498
3
3
10,002
42
7,166
97
33
710
223
3,468
28
10
1,303
269
1,015
284
72
Non-consolidated investments
Available-for-sale receivables
Accrued interest
3
157
24,551
Deferred tax
Total unrealised gains and losses net of tax
35
3
536
36
23,147
(103)
24,551
433
36
23,147
412
121
(38)
(3)
374
118
7.5 Due from banks and loans and advances to customers
Due from banks
31.12.2006
31.12.2005
28,603
31,447
20
111
29,870
14,737
4
50
56
45
Due from banks
Loans and advances
Pledged securities
Subordinated loans
Securities not traded in an active market
Other loans and interest
Total
Accrued interest
Impairment
Net book value
9
58,562
46,390
1,153
961
(196)
(266)
59,519
47,085
130 - 131
31.12.2006
31.12.2005
8,264
8,260
Other loans
74,045
70,518
12,876
3,780
440
231
2,624
2,503
4,463
3,916
102,712
89,241
793
726
(2,039)
(2,552)
101,466
87,415
472
503
1
1
473
504
Customer items
Bills discounted
Subordinated loans
Securities not traded in an active market
Short-term advances
33
Current accounts in debit
Total
Accrued interest
Impairment
Net book value
Lease finance
Property leasing
Equipment leasing, rental contracts with purchase option and similar transactions
Total
Accrued interest
3
2
Impairment
(1)
Net book value
Total
476
505
101,942
87,920
7.6 Impairment deducted from assets
01.01.2006
Changes in
scope
Charges
Amount
used and
write-backs
Interbank loans
266
2
3
(63)
Customer loans
2,552
(46)
330
(611)
of which collective provisions
1,119
Lease finance
73
1
Translation
adjustments
(139)
Other
movements
31.12.2006
(12)
196
(47)
2,039
(67)
1,125
(1)
Held-to-maturity securities
Other assets
Total
On available-for-sale assets
Total asset provisions
18
51
(9)
384
(684)
2,837
(44)
(93)
612
240
44
(91)
(19)
3,449
196
428
(775)
(112)
71
131
(34)
2,366
(34)
3,152
786
01.01.2005
Changes in
scope
Charges
Amount
used and
write-backs
Translation
adjustments
Other
movements
31.12.2005
Interbank loans
172
27
58
(66)
13
62
266
Customer loans
3,106
(145)
428
(1,065)
226
2
2,552
1,090
12
(71)
88
of which collective provisions
Lease finance
1,119
1
1
Held-to-maturity securities
Other assets
Total
0
33
(2)
7
(22)
2
3,312
(120)
493
(1,153)
241
18
64
2,837
7.7 Due to banks and customer accounts
Due to banks
Deposits
Pledged securities
31.12.2006
31.12.2005
59,298
56,642
347
4
17,180
15,279
Total
76,825
71,925
Accrued interest
1,985
987
Net book value
78,810
72,912
Customer accounts
31.12.2006
31.12.2005
Current accounts in credit
19,823
28,143
Other customer accounts
60,736
40,006
Total
Accrued interest
Net book value
7.8 Held-to-maturity financial assets
Calyon does not have a portfolio of held-to-maturity
financial assets.
3,200
3,311
83,759
71,460
276
205
84,035
71,665
132 - 133
7.9 Debt securities in issue and subordinated debt
31.12.2006
31.12.2005
46
74
. Issued in France
19,130
9,097
. Issued in other countries
42,360
36,929
610
819
Interest-bearing notes
Negotiable debt securities:
Bonds
Total
Accrued interest
Book value
8
62,154
46,919
676
392
62,830
47,311
4,129
2,024
Subordinated debt
Fixed-term subordinated debt
Perpetual subordinated debt
2,020
2,197
Total
6,149
4,221
Accrued interest
Book value
128
121
6,277
4,342
7.10 Deferred tax assets and liabilities
Deferred tax liabilities
Assets available-for-sale
31.12.2006
31.12.2005
100
81
Cash flow hedges
(1)
54
Other timing differences
46
36
Other deferred tax liabilities
46
45
Total deferred tax liabilities
191
216
Deferred tax assets
31.12.2006
31.12.2005
Non-deductible reserves
404
250
Non-deductible accrued expenses
146
117
Cash flow hedges
23
Other deferred tax assets
170
344
Total deferred tax assets
743
711
7.11 Accruals, prepayments and sundry assets and liabilities
Prepayments, accrued income and sundry assets
Sundry assets
31.12.2006
31.12.2005
24,231
14,320
19,598
9,857
4,633
4,457
Inventory accounts and miscellaneous
6
Miscellaneous debtors
Settlement accounts
Prepayments and accrued income
12,822
11,834
Items in course of transmission to other banks
3,464
2,424
Adjustment and suspense accounts
7,976
6,502
Accrued income
1,133
1,802
152
89
Prepayments
Other
Net book value
97
1,017
37,053
26,154
Sundry liabilities
(1)
Settlement accounts
Miscellaneous creditors
31.12.2006
31.12.2005
22,993
17,515
5,218
5,102
17,775
12,367
Liabilities related to trading securities
20
Other
26
Accruals and deferred income
Items in course of transmission to other banks
(2)
Adjustment and suspense accounts
Deferred income
Accrued expenses
Other
Net book value
15,182
13,348
4,154
5,252
7,700
5,143
865
1,047
2,327
1,906
136
38,175
30,863
31.12.2006
31.12.2005
(1) Amounts are stated inclusive of accrued interest.
(2) Amounts are stated net
7.12 Fixed assets held-for-sale and associated liabilities
Fixed assets held for sale
Liabilities associated with assets held for sale
2
134 - 135
Details are given in the “scope of consolidation” section in note 3.3.
7.14 Investment property
Gross value
Depreciation and impairment
Net book value
Gross value
Net book value
Decreases
Increases
(redemption
(acquisitions) and disposals)
01.01.2006
Changes in
scope
Translation
adjustments
Other
movements
31.12.2006
322
(7)
5
(169)
(8)
(109)
34
(122)
7
(6)
13
6
84
(18)
200
0
(1)
(156)
(2)
(25)
16
01.01.2005
Changes in
scope
Decreases
Increases
(redemption
(acquisitions) and disposals)
Translation
adjustments
Other
movements
31.12.2005
341
(23)
47
(33)
17
(27)
322
(165)
16
(12)
21
(13)
31
(122)
176
(7)
35
(12)
4
4
200
7.15 Property, plant and equipment and intangible assets (excluding goodwill)
01.01.2006
Changes in
scope
Increases
(acquisitions,
business
combinations)
Decreases
(redemption
and
disposals)
Translation
adjustments
Other
movements
31.12.2006
1 120
(2)
109
(73)
(31)
107
1,230
Gross value
Accrued interest
(1)
Net book value
(504)
616
(2)
228
11
(89)
66
18
(75)
(584)
20
(7)
(13)
32
646
Intangible assets
Gross value
Net book value
(171)
32
(12)
(4)
1
256
(18)
12
4
(1)
(174)
57
11
14
0
0
0
82
01.01.2005
Changes in
scope
Increases
(acquisitions,
business
combinations)
Decreases
(redemption
and
disposals)
Translation
adjustments
Other
movements
31.12.2005
1 233
(71)
86
(189)
20
41
1,120
(611)
91
(84)
143
(15)
(28)
(504)
622
20
2
(46)
5
13
616
286
(43)
24
(61)
7
15
228
(215)
30
(21)
63
(4)
(24)
(171)
71
(13)
3
2
3
(9)
57
(1) Accrued rents on assets let to third parties.
Gross value
Accrued interest
(1)
Net book value
Intangible assets
Gross value
Net book value
(1) Accrued rents on assets let to third parties.
7.16 Goodwill
Details are given in the «scope of consolidation» section
in note 3.6.
7.17 Reserves
Financing commitment
execution risks
Operational risks
01.01.2006
Litigation
544
Synergy-related costs
Other risks and expenses
Reserves
Write-backs, Write-backs,
amount
amount
used
released
9
(28)
Other Translations
movements adjustments
2
6
257
Restructuring
Charges
44
Employee retirement
and similar benefits
Equity investments
Changes
in scope
31.12.2006
(1)
26
(6)
(9)
48
(10)
(8)
22
(4)
305
144
(62)
(55)
(81)
(3)
478
6
(6)
16
(16)
40
(40)
256
(4)
10
(35)
(44)
(68)
(4)
111
1,169
(13)
211
(107)
(135)
(193)
(12)
920
At 31 December 2006, reserves for employment-related
liabilities and similar reflect the impact of regulatory
changes to pension liabilities in France (following the
amendment to the Fillon act) and the UK (following the
updating and harmonisation of mortality tables), and
increased by 48 million euros.
The 478 million euros of litigation reserves break down
as follows:
- tax disputes: 80 million euros
- employment-related disputes: 3 million euros
- legal disputes: 395 million euros
7.18 Shareholders’ equity
Ownership structure at 31 December 2006
Calyon (parent-company) has share capital of
3,435,953,121 euros. It is divided into 127,257,523
shares with a par value of 27 euros each, fully paid-up.
No shares are held by Calyon (parent-company) or by any
of its subsidiaries.
To the best of the company’s knowledge, there is no
shareholders’ agreement.
At 31 December 2006, ownership of Calyon (parentcompany)’s capital and voting rights was as follows:
Number of shares
31.12.2006
% of share capital
% of voting rights
121,246,753
95.28
95.28
SACAM Développement **
2,838,193
2.23
2.23
C.A. Bourse *
2,623,011
2.06
2.06
Delfinances *
504,652
0.40
0.40
44,897
0.04
0.04
100.00
100.00
Shareholder
CPR G *
Individuals
Total
* Held by the Crédit Agricole S.A. group.
** Held by the Crédit Agricole group.
17
127,257,523
136 - 137
Preferred shares
Issuer list
Date of issue
Amount of issue in
millions of dollars
31.12.2006
in millions of euros
31.12.2005
dec-98
230
175
195
june-02
320
243
272
550
418
467
Calyon Preferred Funding LLC
Calyon Preferred Funding II LLC
Total Earnings per share
31.12.2006
Net income used to calculate earnings per share (in millions of euros)
31.12.2005
1,771
1,632
121,402,307
115,547,092
0
0
121,402,307
115,547,092
Basic earnings per share
14.59
14.13
Diluted earnings per share
14.59
14.13
Average number of ordinary shares in issue during the year
Number of potentially dilutive shares
Weighted average number of ordinary shares used to calculate fully
diluted earnings per share
Dividends
Calyon’s Board of Directors has proposed a net dividend
of 16.10 euros per share with respect to 2006, subject
to shareholders’ approval in the general meeting of
shareholders.
Dividend paid in respect of year
Net amount
2004
250
2005
1,551
2006
2,049
Appropriation of net income and proposed dividend
for 2006
The appropriation of net income and the fixing of the
dividend for 2006 are proposed in the draft resolutions
presented by the Board of Directors to Calyon’s general
meeting of shareholders to be held on 14 May 2007.
The proposed resolution is drafted as follows:
The General Meeting determines that the net income for
the 2006 financial year amounts to 1,530,909,518.89
euros.
Pursuant to article L. 232-10 paragraph 1 of the French
Commercial Code, the General Meeting decides to appropriate 76,545,475.94 euros to the statutory reserve,
thereby increasing said reserve to an amount of
292,980,726.16 euros, corresponding to 8.53% of the
registered capital.
Noting that the Company is free from all other reserve
obligations and that the income available for distribution
is 1,785,702,485.72 euros after taking into account
retained earnings of 331,338,442.77, the General
Meeting decides to distribute:
- all income available for distribution, i.e.
1,785,702,485.72 euros and
- 263,143,634.58 euros from the available “share premium” reserve,
making a total of 2,048,846,120.30 euros.
As a result, the General Meeting sets a dividend of
16.10 euros with respect to the period ended 31 December 2006 for each share entitled to this dividend, i.e.
127,257,523 shares.
This dividend is eligible for the 40% tax allowance
provided for in article 158/3/2 of the General Tax Code,
for the benefit only of shareholders who are natural
persons.
The General Meeting fixes the date for payment of the
dividend at 6 June 2007.
In accordance with the law, the General Meeting formally
takes note of the amounts of dividends paid for the last
three financial years:
Financial year
Number of shares receiving
dividends
Net dividend per share
(in euros)
French tax already paid
(in euros)
Total
(in euros)
5.125(*)
15.375
2003
42,179,533
10.25
2004
115,547,092
2.16(**)
2005
115,547,092
13.42(***)
* Only for those shares which are not held by companies belonging to Credit Agricole S.A.’s tax consolidation group.
** Dividend eligible for the 50% tax allowance provided for in article 158/3/2 of the General Tax Code, solely for shareholders who are natural persons.
*** Dividend eligible for the 40% tax allowance provided for in article 158/3/2 of the General Tax Code, solely for shareholders who are natural persons.
Note 8 : Employee benefits and other compensation
8.1 Personnel costs
Analysis of personnel costs
Salaries
Other social security expenses
Incentive schemes and profit-sharing
Payroll-related tax
Total personnel costs
8.2 Average number of employees
2006
2005
France
4,474
4,813
Outside France
8,627
11,553
13,101
16,366
Total
8.3 Post-employment benefits, defined contribution plans
There are various compulsory retirement plans to which
employers must contribute. The funds are managed by
independent organisations and the employers have no
legal or implied obligation to pay additional contributions
should the funds not have sufficient assets to pay the
benefits corresponding to current and past service
rendered by employees. Consequently, Calyon has no
liability in this respect other than the contributions
payable.
Within Calyon, there are several compulsory defined
contribution plans, the main ones being Agirc/Arrco,
which are French supplementary retirement plans,
supplemented by an «Article 83»-type plan.
31.12.2006
31.12.2005
(1,845)
(1,600)
(474)
(330)
(52)
(39)
(64)
(56)
(2,435)
(2,025)
138 - 139
8.4 Post-employment obligations, defined benefit plans
Change in actuarial liability
31.12.2006
31.12.2005
774
720
Current service cost
30
26
Interest cost
Actuarial liability at 31/12 / N-1
34
31
Employee contributions
7
7
Plan revision / curtailment / settlement
9
(12)
Acquisition, divestments (change in scope of consolidation)
Early retirement allowances
Benefits paid (obligatory)
Actuarial gains(losses)
Actuarial liability at 31/12 / N
1
1
(29)
(16)
27
31
853
788
The difference between the closing figure in 2005 and the opening figure in 2006 is due in particular to changes in scope.
Breakdown of net charge recognised in the income statement
31.12.2006
31.12.2005
Current service cost
30
26
Interest cost
34
31
(29)
(6)
Expected return on assets during the period
Amortisation of past-service costs
Amortisation of actuarial gains (losses)
Gains (losses) on plan curtailment / settlement
2
13
16
5
(6)
55
61
31.12.2006
31.12.2005
540
470
Expected return on assets
29
15
Actuarial gains (losses) on plan assets
23
15
Employer contributions
25
44
Employee contributions
8
7
1
1
Benefits paid
(27)
(12)
Fair value of assets / reimbursement rights at 31/12/N
599
540
Net charge recognised in the income statement
Fair value of plan assets and reimbursement rights
Fair value of assets / reimbursement rights at 31/12/N-1
Plan revision / curtailment / settlement
Acquisition, divestments (change in scope of consolidation)
Early retirement allowances
Net position
31.12.2006
31.12.2005
Closing actuarial liability
853
788
Closing actuarial liability
853
788
Closing fair value of assets / reimbursement rights
599
540
Closing net position (liability) asset
254
248
2006
2005
The net position is hedged by a reserve for employee liabilities.
Information on annualised return on plan assets (1)
Breakdown of assets
- % bonds
74%
74%
- % equitie
16%
16%
- % other
10%
10%
Defined benefits plans/key actuarial assumptions (1)
Discounting rate
(2)
2006
2005
2,25% to 4,25%
2,5% to 4,09%
Expected rate of return on plan assets and reimbursement rights
Expected salary increases
4%
4%
2,65% to 3,55%
2,50%
4%
4%
Increase in healthcare costs
Other (detail)
n/a
(1) Calculated on the basis of the assets of Calyon (parent-company) in France.
(2) Calculated on the basis of the discount rates defined by the Group and on the residual term of the commitments.
8.5 Other employee benefits
Calyon gives its employees an interest in its development
and in its results via a number of mechanisms.
Under the profit-sharing agreement, the special reserve
is calculated according to the statutory formula as of
2005, pursuant to article L.442-2 of the Employment
Code. It is shared among beneficiaries in proportion to
their gross salary subject to statutory caps.
An incentive agreement was concluded for the 2004,
2005 and 2006 financial years in order to give employees
an interest in the improvement in Calyon’s gross
profitability and overall performance, excluding the
impact of extraordinary elements.
The amounts distributed in the last five years have been
as follows:
(In millions of euros)
Financial year
Year of payment
Profit-sharing
scheme
2005
2006
2004
2005
29.1
2003
2004
23.4
2002
2003
10.7
2001
2002
12.9
Incentive
scheme
37.1
10.0
4.1
Calyon also has an employee savings plan which completes the above systems.
Moreover, Calyon pays out long-service bonuses associated with the awarding of workers’ medals.
140 - 141
8.6 Share-based payments
No stock options relating to shares in Calyon or a
controlled company were granted during 2006, as Credit
Agricole S.A. decided to set up a single system at parent
company-level to cover all group companies.
8.7 Executive officers’ compensation
Calyon’s principal executive officers include all members
of the Executive Committee.
The members of the Executive Committee are as follows:
the Chief Executive Officer of Calyon, the deputy CEOs,
the CEO of Cheuvreux and the officers responsible for
Calyon’s main businesses.
Compensation and benefits paid to Executive Committee
members in 2006 were as follows:
- S hort-term employee benefits: 25 million euros comprising fixed and variable pay including social security
charges, as well as benefits in kind,
- Post-employment benefits: 7.7 million euros
comprising termination benefits and supplementary
pension benefits arranged for the Group’s principal
executives
- Other long-term employee benefits: the amount
granted under long-service bonuses is insignificant,
- Termination benefits: insignificant.
Payments in Calyon shares: no allotment of Calyon shares
in 2006.
Note 9 : Financing and guarantee commitments
Contingent liabilities and off-balance sheet commitments given and received
31.12.2006
31.12.2005
Commitments given
165,340
145,244
124,751
105,947
Banks
31,091
19,120
Customers
93,660
86,828
Confirmed credit lines
- Confirmed documentary credits
- Other confirmed credit lines
Other
Guarantee commitments
7,499
8,945
85,345
77,174
816
708
40,589
39,296
Banks
Confirmed credit lines
1,971
915
Other
3,072
7,908
Customers
35,546
30,473
Guarantees
23,108
18,250
- Property guarantees
1,801
2,086
- Loan repayment guarantees
7,047
6,804
Other
3,590
3,333
Commitments received
56,281
45,628
5,771
8,323
Banks
4,959
7,674
Customers
812
649
Guarantee commitments
50,510
37,305
Banks
11,533
6,272
Customers
Guarantees received from government bodies or similar
Other
7,994
8,804
30,983
22,229
Note 10 : Fair value of assets and liabilities
measured at cost
Fair value is the amount for which an asset could be
exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction.
The fair values shown below are estimates made on the
reporting date. They are likely to change in subsequent
periods due to developments in market conditions or
other factors.
Calculations represent best estimates. These estimates
are based on a certain number of assumptions. To the
extent that these models contain uncertainties, the fair
values shown may not be achieved upon actual sale or
immediate settlement of the financial instruments
concerned.
In practice, and in line with the going-concern principle, not all these financial instruments would necessary
be settled immediately at the values estimated below.
Fair value of assets and liabilities measured at amortised cost
31.12.2006
31.12.2005
Carrying value
Estimated
market value
Carrying value
Valeur de
marché
estimée
59,519
59,519
47,085
47,085
101,942
101,892
87,920
87,897
Assets
Due from banks
Held-to-maturity financial assets
Investment properties
16
16
200
232
Due to banks
78,810
78,810
72,912
72,912
Customer accounts
84,035
84,035
71,665
71,665
62,830
62,830
47,311
47,293
6,277
6,277
4,342
4,342
Liabilities
Subordinated debt
In some cases, market values are close to book values.
This is particularly the case for:
- f loating-rate assets or liabilities where changes in
interest rates have no significant influence on fair
value as the rates on these instruments are frequently
adjusted to market rates;
- short-term assets or liabilities where the redemption
value is considered to be close to the market value;
- sight liabilities;
- transactions for which there are no reliable observable
data.
142 - 143
Note 11 : Subsequent events
Press release dated 26 March 2007
The main post-balance-sheet event concerns the plan to
combine brokerage subsidiary Calyon Financial with
Fimat (Société Générale group), as well as the joint venture between Citic East China and Calyon Financial as
reported by the 9 January 2007 and the 26 March 2007
press releases (reproduced below).
Citic East China and Calyon Financial Announce Joint
Venture Agreement to Form Chinese Futures Brokerage
Press release dated 9 January 2007
Calyon and Société Générale plan to merge their
brokerage activities currently carried out by Calyon
Financial and Fimat
Calyon and Société Générale have entered into exclusive
negotiations regarding a possible merger of their brokerage activities, currently carried out by Calyon Financial and Fimat respectively.
The newly formed entity would be a world leader in
execution and clearing of listed financial futures and
options (number 3 in the US in particular)1. This combined group would provide access to more than 70 derivatives exchanges to an international base of institutional clients.
It would also be a major player in interdealer brokerage
of listed or OTC derivatives and cash products such as
prime brokerage services.
The combination of both parties’ customer base, as well
as their respective products and services, would ensure
the new group’s competitiveness in the coming years as
well as creating a strong potential for cross-selling.
The considered merger would be jointly controlled by
Société Générale and Calyon, with headquarters located
in Paris.
The two groups will commence mutual due-diligence
processes, with the aim of signing a definitive agreement. Prospects for the newly created group would be
presented at the time of signing of the definitive agreement. The project will be subject to a consultation of
employee representatives.
Ranking based on customer segregated funds on US markets and customer amounts required on foreign markets as of 31/10/2006 (source:
Commodity Futures Trading Commission)
1
Citic East China (Group) Corp., Ltd and Calyon Financial
Hong Kong Ltd. today announced the signing of a joint
venture agreement, forming a new futures brokerage
entity established under the Closer Economic Partnership Arrangement (referred as CEPA).
If all approvals are obtained as per schedule, the joint
venture may become the first futures brokerage in
Shangai and second futures brokerage in China that is
jointly owned by a Chinese firm and a Hong Kong brokerage firm. Citic East China will be the majority shareholder.
Citic Futures is part of China’s top State-Owned Enterprise, namely Citic Group. Citic Futures currently has
memberships on the Shangai Futures Exchange, Dalian
Commodity Exchange and Zhengzhou Commodity
Exchange.
Calyon Financial Hong Kong is a part of Calyon Financial
group, which is wholly owned by Calyon Credit Agricole
CIB and part of the Credit Agricole Group in France.
Calyon Financial is a leading global futures brokerage
firm and has access to more than 70 global financial
and commodity exchanges.
After signing the agreement, the joint venture will seek
regulatory approval from the China Securities Regulatory
Commission (CSRC) and relevant required regulatory
bodies. The overall approval process is anticipated to
conclude within three to six months.
Note 12 : Scope of consolidation at 31 December 2006
Calyon scope of consolidation
(a)
Country
Method
Parent company
% of control
CALYON
France
Parent
100.00
100.00
Saudi Arabia
equity
31.11
Australia
full
100.00
Egypt
full
Singapore
full
100.00
Banks and financial institutions
Calyon Australia Ltd
M
CAI Merchant Bank Asia LTD
Cogenec
100.00
100.00
31.11
31.11
31.11
100.00
100.00
100.00
100.00
100.00
100.00
Banque Saudi Fransi - BSF
Crédit Agricole (Egypt) S.A.E.
% of interest
31.12.2006 31.12.2005 31.12.2006 31.12.2005
75.00
75.00
Monaco
full
99.99
99.99
99.99
99.99
Crédit Agricole Financement
Switzerland
equity
20.00
20.00
20.00
20.00
Luxembourg
full
100.00
100.00
100.00
100.00
Crédit Agricole Suisse
Switzerland
full
100.00
100.00
100.00
100.00
Bahamas
full
100.00
100.00
100.00
100.00
Turkey
full
100.00
99.96
100.00
99.96
Monaco
full
70.12
77.11
68.94
75.93
Crédit Agricole Suisse (Bahamas)
Calyon Turk Bank A.S.
Crédit Foncier de Monaco
Finanziaria Indosuez International Ltd
Switzerland
full
100.00
100.00
100.00
100.00
Calyon Uruguay S.A.
Uruguay
full
100.00
100.00
100.00
100.00
Calyon Bank Slovakia AS
Slovakia
full
100.00
100.00
100.00
100.00
Russia
full
100.00
100.00
100.00
100.00
Ukraine
full
100.00
100.00
100.00
100.00
Czech
Republic
full
Hungary
full
100.00
100.00
100.00
100.00
Poland
full
100.00
100.00
100.00
100.00
Brazil
full
100.00
100.00
100.00
100.00
France
proportional
47.32
43.93
47.32
43.93
Spain
proportional
50.00
50.00
35.00
36.41
Calyon Rusbank SA
Calyon Bank Ukraine
Calyon Bank Czech Republic
M
Calyon Bank Hungary Ltd
Calyon Bank Polska SA
Banco Calyon Brasil
UBAF (Union de Banques Arabes
et Françaises)
Stockbrokers
Altura
Calyon Financial Inc
Calyon Financial Pte Singapore
Calyon Financial SNC
Crédit Agricole Cheuvreux Nordic AB SB
Crédit Agricole Cheuvreux Italia SIM SPA
Credit Agricole Cheuvreux
North America, Inc
Cholet Dupont (group)
Crédit Agricole Cheuvreux Espana S.A.
Crédit Agricole Cheuvreux International Ltd
Crédit Agricole Cheuvreux Securities Ltd
CAI Derivatives Products PLC
Calyon Financial Canada
In
Calyon Securities USA Inc.
CLSA BV (group)
Calyon Financial Hong Kong
100.00
In
100.00
USA
full
100.00
100.00
100.00
100.00
Singapore
full
100.00
100.00
100.00
100.00
France
full
100.00
100.00
100.00
100.00
Sweden
full
100.00
100.00
100.00
100.00
France
full
100.00
100.00
100.00
100.00
Italy
full
100.00
100.00
100.00
100.00
USA
full
100.00
100.00
100.00
100.00
France
equity
33.40
33.40
33.40
33.40
Spain
full
100.00
100.00
100.00
100.00
United Kingdom
full
100.00
100.00
100.00
100.00
Hong-Kong
full
100.00
100.00
100.00
100.00
Ireland
full
99.98
99.98
99.98
99.98
Canada
full
100.00
100.00
USA
full
100.00
100.00
100.00
100.00
Hong-Kong
full
100.00
100.00
77.74
73.19
Hong-Kong
full
100.00
100.00
144 - 145
(a)
Country
Method
Investment companies
BFC Holding
% of interest
ns
France
full
Cie Française de l’Asie (CFA)
France
full
100.00
100.00
100.00
100.00
Doumer Finance SAS
France
full
100.00
100.00
100.00
100.00
Fletirec (group)
France
full
100.00
100.00
100.00
100.00
Fininvest
France
full
98.27
98.27
98.27
98.27
United Kingdom
full
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
ICF Cayman Holdings
Calyon Air Finance SA
99.55
99.34
France
full
ns United Kingdom
full
France
full
100.00
100.00
100.00
100.00
USA
full
100.00
100.00
100.00
100.00
IPFO
France
full
100.00
100.00
100.00
100.00
Mescas
France
full
100.00
100.00
100.00
100.00
Switzerland
full
100.00
100.00
100.00
100.00
Spain
equity
45.00
45.00
45.00
45.00
Casam Systeïa Global Macro
Ireland
full
99.60
100.00
99.60
100.00
Casam Systeïa Pair Trading
Ireland
full
99.57
100.00
99.57
100.00
Casam Systeïa Event Driven
Ireland
full
99.63
100.00
99.63
100.00
Casam Equity Quant
Ireland
full
96.90
100.00
96.90
100.00
Casam Futures Euro
Ireland
full
97.22
100.00
97.22
100.00
Indosuez Holding UK Ltd
% of control
31.12.2006 31.12.2005 31.12.2006 31.12.2005
CAI BP Holding
Calyon North America Holding
SAFEC
Crédit Agricole Assets Management Espana
Holding
100.00
100.00
Casam Systeïa Equity Linked Fund
L
Ireland
full
100.00
Multinational Asset Co. Limited
L
Cayman
full
43.93
European Sovereign Funding SA
France
full
100.00
100.00
100.00
FCC Masterace
France
full
100.00
100.00
100.00
0.00
United Kingdom
full
100.00
100.00
100.00
100.00
Calyon Investments
Crédit Lyonnais Rouse limited
100.00
43.93
ns United Kingdom
full
LF Investiments LP
USA
full
100.00
100.00
100.00
100.00
CLASI
USA
full
100.00
100.00
100.00
100.00
Calyon Leasing Corporation
USA
full
100.00
100.00
100.00
100.00
Calyon Global Partners Inc.
USA
full
100.00
100.00
100.00
100.00
Japon
full
100.00
100.00
100.00
100.00
USA
full
100.00
100.00
100.00
100.00
United Kingdom
full
100.00
100.00
100.00
100.00
Crédit Lyonnais Leasing Japan Company Ltd
Calyon North America Inc.
Calyon Holdings
Calyon Capital Market Asia BV
100.00
0.00
100.00
Netherlands
full
100.00
100.00
100.00
100.00
Calyon Capital Market International
France
full
100.00
100.00
100.00
100.00
Calyon Securities Japan
Japan
full
100.00
100.00
100.00
100.00
Doumer Philemon
France
full
100.00
100.00
100.00
100.00
South Korea
full
100.00
100.00
100.00
100.00
France
equity
50.00
50.00
50.00
50.00
Korea 21st Century Trust
CASAM
Casam Americas LLC
In
USA
equity
50.00
50.00
Lyra Capital LLC
In
USA
equity
50.00
50.00
Casam Advisers LLC
In
USA
equity
50.00
50.00
Alternative Investment and Research
Technologies
In
USA
equity
50.00
50.00
Lyra Partners LLC
In
USA
equity
50.00
50.00
Casam Cayman Ltd
In
USA
equity
50.00
50.00
Casam US Holding Inc
In
USA
equity
50.00
50.00
(a)
Country
Method
% of control
% of interest
31.12.2006 31.12.2005 31.12.2006 31.12.2005
Leasing companies
Ergifrance
France
full
100.00
100.00
100.00
100.00
Financière Immobilière Calyon
France
full
100.00
100.00
100.00
100.00
Cardinalimmo
France
full
49.61
49.61
49.61
49.61
Other
CA Brasil DTVM
CA Conseil SA
Calyon Preferred Funding II LLC
100.00
Brazil
full
100.00
100.00
100.00
Luxembourg
full
99.99
99.99
99.99
99.99
USA
full
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
USA
full
Fonds ICF II a
L
Cayman
full
100.00
100.00
Fonds ICF III
L
Cayman
full
100.00
100.00
Fonds Mezzasia
Hong Kong
full
100.00
100.00
88.87
Fonds Alcor
Hong Kong
full
99.05
98.30
93.62
89.51
Merisma
France
full
100.00
100.00
100.00
100.00
Calixis Finance
France
full
89.90
89.80
89.90
89.80
Italy
full
60.00
60.00
60.00
60.00
LSF Italian Finance Company SRL
86.60
Minerva S.R.L.
In
Italy
full
90.00
90.00
Sagrantino
In
Netherlands
full
100.00
67.00
European NPL S.A.
In
Luxembourg
full
67.00
67.00
DGAD International SARL
In
Luxembourg
full
100.00
100.00
Indosuez Holding SCA II
Luxembourg
full
100.00
100.00
100.00
100.00
Indosuez Management Luxembourg II
Luxembourg
full
100.00
100.00
100.00
100.00
Indosuez International Finance
Netherlands
full
100.00
100.00
100.00
100.00
SNC Doumer
France
full
99.94
99.94
99.94
99.94
Chauray Contrôle SAS
France
proportional
34.00
34.00
34.00
France
full
France
full
100.00
100.00
100.00
100.00
100.00
100.00
100.00
CPR BK
ns
CPR Online
SNC Haussmann Anjou
100.00
France
full
100.00
In
Spain
full
100.00
Indosuez Norte SL
In
Spain
full
95.00
Crédit Lyonnais Property Broadwalk
ns United Kingdom
full
United Kingdom
full
99.90
United Kingdom
full
99.90
ns United Kingdom
full
Indosuez Levante S.A.
Calyon Finance Guernesey
Calyon Financial Products
Calyon Capital Market Group Mngt Ltd
34.00
100.00
100.00
95.00
100.00
100.00
99.90
99.90
99.90
99.90
100.00
99.90
99.90
100.00
Ester Finance
France
full
99.99
99.99
99.99
99.99
Capital Plus
France
full
100.00
100.00
100.00
100.00
100.00
100.00
100.00
CLIM
M
France
full
France
full
100.00
100.00
Calyon Global Banking
France
full
100.00
100.00
100.00
CLIFAP
France
full
100.00
100.00
100.00
100.00
Carr Indosuez Asia SA
France
full
100.00
100.00
100.00
100.00
Calyon Asia Shipfinance Services Ltd
Hong Kong
full
99.99
99.99
99.99
99.99
Calyon Investment Products Limited
Cayman
full
100.00
100.00
100.00
100.00
CLINFIM
100.00
100.00
Aylesbury
In
Netherlands
full
100.00
100.00
Bletchley Investments Limited
In
Netherlands
full
82.22
82.22
(a) : Included (In) the scope of consolidation.
Excluded from (Out) the scope of consolidation because the entity is non-significant (ns) or has been merged (M), liquidated (L), spun off (SO),
sold or transferred out (S). Change (C) of consolidation method.
146 - 147
Statutory Auditors’ report
on the consolidated
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided
solely for the convenience of English speaking readers. The Statutory Auditors’ report includes information specifically
required by French law in all audit reports, whether qualified or not, and this is presented below the opinion on the
consolidated financial statements. This information includes an explanatory paragraph discussing the auditors’
assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose
of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate
assurance on individual account captions or on information taken outside of the consolidated financial statements.
This report should be read in conjunction with, and construed in accordance with, French law and professional
auditing standards applicable in France
For the year ended 31 December 2006
In compliance with the assignment entrusted to us by
your Shareholders’ Meeting, we have audited the accompanying consolidated financial statements of Calyon for
the year ending 31 December 2006.
The consolidated financial statements have been approved by the Board of Directors. Our role is to express an
opinion on these financial statements based on our
audit.
I. O
pinion on the consolidated financial
statements
We have conducted our audit in accordance with professional standards applicable in France. These standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
presentation of the financial statements. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
give a true and fair view of the assets, liabilities, financial position and results of the companies and entities
included in the consolidated group in accordance with
the IFRS standards as adopted in the European Union.
II. Justification of our assessments
In accordance with the requirements of article L. 823-9
of the Code de Commerce (French company law) relating
to the justification of our assessments, we bring to your
attention the following matters:
- As indicated in note 2 to the financial statements, the
Group establishes impairment to cover the risk on
non-recoverable loans inherent to its business activities. We have reviewed the arrangements put in place
by the management to identify and evaluate these
risks and to determine the amount of impairment it
considers necessary, and we have verified that these
accounting estimates were based on documented
methods that conform to the principles described in
notes 1.1 and 2 to the consolidated financial statements.
- The Group uses internal models to assess the fair value
of financial instruments that are not traded on
organised markets. We have reviewed the procedures
used by management to determine and control these
models and the parameters used and whether they
reflect the risks associated with such instruments, we
have verified that these accounting estimates were
based on documented methods that conform to the
principles described in notes 1.1 and 2 to the consolidated financial statements. We also reviewed and
tested the procedures implemented by executive
management:
(i) to identify margins on financial instruments calculated on the basis of non-observable market parameters or determined on the basis of valuation
models that are not widely used;
(ii) to recognise these margins accordingly in the
income statement.
-A
s a customary part of the process of preparing financial
statements, the Group’s management has made a
number of other accounting estimates as explained in
note 2 to the financial statements notably on the costs
of pension provision and future employee benefits,
permanent decline in value of non-consolidated
participating interests, provisions for operating risks,
provisions for legal risks, impairment of goodwill and
deferred taxes. We have reviewed the methods and
assumptions used as described in notes 1.1 and 2 to
the financial statements, assessed the resulting
valuations and checked that the notes give appropriate
information.
We assessed whether these estimates were reaseonable.
Our assessments were made in the context of our audit
of the consolidated financial statements, taken as a
whole, and therefore assisted us in reaching our
unqualified opinion as expressed in the first part of this
report.
III. Specific verification
In accordance with professional standards applicable in
France, we have also verified the information given in
the Group management report. We have no comments
to report with respect to the fairness of their presentation and consistency with the consolidated financial
statements.
Valérie Meeus
148 - 149
Information
on the parent company
Calyon’s annual financial statements for the period ended 31 December 2006,
some items of which are reproduced below, are covered by the Statutory Auditors’ general report,
which presents an unqualified opinion containing observations about the changes
in accounting methods discussed below.
The annual financial statements and the general auditors’ report can be obtained
at the company’s registered office.
Balance sheet
(at 31 December 2006 and at 31 December 2005)
Assets
Cash, money market and interbank items
Cash due from central banks and French postal system
31.12.2006
31.12.2005
207,707
162,683
1,440
4,318
36,641
33,975
169,626
124,390
94,410
80,707
Securities portfolios
98,262
66,971
61,813
40,824
36,449
26,147
6,630
5,800
425
388
5,972
5,200
Due from banks
Fixed assets
Participating interests and other long-term investments
Investments in non-consolidated companies
64
38
169
174
79,836
47,279
Other assets
59,890
36,768
Accruals and prepayments
19,946
10,511
486,845
363,440
31.12.2006
31.12.2005
203,821
160,869
Intangible assets
Treasury shares
Total assets
Liabilities and shareholders’ equity
Money market and interbank items
Due to central banks and current accounts with French postal system
57
68
203,764
160,801
Customer accounts
76,715
61,640
Other liabilities
76,715
61,640
Due to banks
65,367
48,795
121,660
75,825
Other liabilities
104,166
64,059
17,494
11,766
Provisions and subordinated debt
9,250
7,260
General reserves for risks and expenses
2,106
2,123
Subordinated debt
7,144
5,137
Accruals and deferred income
Fund for general banking risks
105
105
Shareholders’ equity (excl. FRBG)
9,927
8,946
Share capital
3,436
3,120
Share premiums
4,250
3,558
341
273
Reserves
Excess of restated assets over historical cost
Regulated reserves and investment grants
Consolidated reserves
Net income for the year
Total liabilities
38
45
331
600
1,531
1,350
486,845
363,440
150 - 151
Off-balance sheet items
31.12.2006
31.12.2005
Guarantees and commitments given
261,213
187,699
Financing commitments given
128,122
105,281
Guarantees given
132,442
81,471
649
947
Guarantees and commitments received
36,390
22,309
Financing commitments given
14,112
15,302
Guarantees given
20,414
5,781
1,864
1,226
Securities commitments given
Securities commitments given
Income statement
Net interest and similar income
2006
2005
(3,035)
(135)
Income from variable-income securities
520
364
Net commission and fee income
306
280
5,971
2,457
Net income from financial transactions
Other net banking income
Net banking income
Operating expenses
Depreciation and amortisation
Risk-related costs
Net operating income
Net income (loss) on disposal of fixed assets
Pre-tax income on ordinary activities
413
298
4,175
3,264
(2,231)
(1,923)
(66)
(59)
1,878
1,282
5
206
1,883
1,488
40
82
1,923
1,570
(76)
Net extraordinary items
Net allocation to FGBR and regulated reserves
Net income
(2)
(399)
(137)
7
(5)
1,531
1,350
Changes in accounting methods
Calyon prepares its financial statements in accordance
with the accounting standards applicable to banks in
France.
The following changes have been made in accounting
methods and the presentation of the financial statements in relation to last year:
In accordance with CRC regulation 2005-04 of 3 November 2005 amending CRC regulation 2000-03 relating to
summarised documents, the terms “reserves” relating
to assets and “general reserves for risks and expenses”
on the liabilities side, along with the related additions
and releases on the income statement, have been replaced by the terms “impairment” and “reserves”.
Calyon has since 1 January 2006 applied CNC opinion
2006-05 relating to the recognition of the alternative
minimum tax. This opinion relates to the accounting
consequences of the decision to make the alternative
minimum tax no longer deductible from income tax. It
becomes a charge deductible from taxable income based
on the amount paid in 2006. As a result, this charge is
now recognised in the “taxes other than on income or
payroll-related” item.
Also as regards changes in tax law, Calyon has since
1 January 2006 applied CNC opinion 2006-12 relating to
releases of impairment charges and the neutralisation
of tax impacts on the parent company financial statements. To allow an impairment charge on a depreciable
non-current asset to be tax-deductible, the impairment
charge must be transferred to a depreciation account at
the definitive impairment amount at each accounts
closing. The amount of the transfer is equal to the difference between the addition to depreciation based on
the new depreciable amount and the addition to depreciation that would have been recognised in the absence
of impairment.
Calyon did not make any financial collateral arrangement with a right of re-use in 2006. As a result, it did
not have to apply CNC opinion 2006-10 of 30 June 2006
relating to the recognition of assets provided as collateral under these agreements.
152 - 153
Changes in share capital and share premiums
Share capital
At 31 December 2003
1,142
Change in share capital
1,977
Change in share premiums
At 31 December 2004
3,119
Share premiums
709
1,977
2,926
3,635
6,754
3,119
3,435
Breakdown of change in share capital:
2004
Payment of dividends in shares
140
New share issues for cash
297
Change in capital resulting from transfer and merger transactions
Elimination of treasury shares
3,559
6,678
316
692
692
4,251
7,686
2005
2006
316
(4)
2004
Payment of dividends in shares
292
New share issues for cash
609
Elimination of treasury shares
(76)
1,544**
Breakdown of change in share premiums by origin:
Change in capital resulting from transfer and merger transactions
(76)
316
At 31 December 2006
1,851
2,926
At 31 December 2005
Total
2,032**
2005
2006
692
(76)*
(7)
* Transfer of CAIS Holding shares and allotment of bonus shares to Crédit Agricole S.A.
** Of which: 3,076 million euros relating to the transfer of Crédit Lyonnais’ corporate and investment banking activities 500 million euros relating
to the transfer of a portfolio of debt securities by Crédit Agricole S.A.
Investments in subsidiaries and associates
(Article L 233-15 of the Code of Commerce)
In millions of local currency units
Companies
Currency
Reserves
and retained
earnings
before
appropriation
of earnings
Share
capital
Percentage
ownership
In millions
of euros
Book value
of
investments
In millions
of euros
In millions (original currency)
Loans and
Guarantees
advances
and other
outstanding commitments
granted by
given by
Calyon
Calyon
Revenues
for the
year ended
31.12.2006
Net income
for the
year ended
31.12.2006
Dividends
received
by Calyon
during the
year
I – Investments whose book value exceeds 1% of Calyon’s share capital*
A – Banking subsidiaries (more than 50% owned)
CPR BK
EUR
42
88
100.00
336
BFO
EUR
77
15
99.71
138
11
3
CFA
(Cie française de L’Asie)
EUR
183
12
100.00
252
32
30
22
20
Crédit Agricole Cheuvreux
EUR
39
115
100.00
308
CHF 44
EUR 150
USD 42
SEK 94
USD 15
EUR 13
Mescas
EUR
31
(55)
100.00
83
EUR 56
CAI Risk Solutions Assurance
EUR
50
(1)
100.00
50
EUR
84
25
59.38
71
CHF 176
Crédit Agricole Suisse
CHF
579
459
71.23
590
CHF 1,238
JPY 8,415
EUR 2,234
USD 416
Calyon North America Holding
USD
80
120
100.00
79
CAI BP Holding
EUR
93
1
100.00
93
CHF 623
8
100.00
312
145
15
100.00
311
USD 6
63
(38)
100.00
35
EUR
420
1
100.00
420
EUR
1,150
100.00
1,150
Calyon Holdings (ex CLI Ltd)
GBP
40
76.19
Calyon Investments (ex CLCM)
GBP
1
99.80
Banco Calyon Brasil SA
BRL
319
EUR
231
Calyon Global Banking
EUR
Crédit Lyonnais Rouse London
GBP
Doumer Philemon
SAS Merisma
2
86.03
Total
2
12
6
EUR 21
96
28
11
USD 69
EUR 40
618
196
66
87
EUR 197
JPY 5,000
USD 90
Calyon Capital Markets Intl
192
28
39
19
27
101
2
96
1
1
27
16
23
64
20
19
23
746
7
7
33
9
28
4
6
79
EUR 45
USD 10
5,117
B – Banking associates (10-50% owned)
USD
460
Calyon Preferred Funding
2 LLC
USD
CASAM
EUR
U.B.A.F.
EUR
Crédit Agricole Egypt S.A.E.
EGP
30
50.00
175
28
640
40
50.00
243
38
37
78
(2)
50.00
38
36
(3)
249
8
47.32
121
USD 1
147
38
10
EUR 1
USD 45
USD 3
742
21
5
1,148
239
Total
13.09
CHF 14
75
652
II. – General information relating to other subsidiaries and associates
A – Subsidiaries not covered in I. above
a) French subsidiaries (aggregate)
126
b) Foreign subsidiaries (aggregate)
273
Total
399
B – Associates not covered in I. above
a) French subsidiaries (aggregate)
44
b) Foreign subsidiaries (aggregate)
244
Total
288
Total
6,456
* Detail not provided concerning securities 1301 AVENUE OF THE AMERICAS, CA PREFERRED CAPITAL.
154 - 155
5
General
information
158
Information on the company
158 R egistered office
158
158
158
158
158
158
158
158
Financial year
Date of establishment and duration
Legal status
Material contracts
Recent trends
Significant changes
Documents on display
Calyon publications
161 Additional information
161 Fees paid to Statutory Auditors
162Statutory auditors’ special report on regulated agreements
166Persons responsible for the shelf-registration document and for auditing the accounts
166
167
Responsibility statement
Statutory Auditors
156 - 157
general information
Information
on the company
Registered office
Recent trends
9 quai du Président Paul Doumer
92920 Paris La Défense
Tel: 33 1 41 89 00 00
Website: www.calyon.com
Calyon’s prospects have not suffered any significant
deterioration since 31 December 2006, the date of its
latest audited and published financial statements. See
Management report, “Recent trends and outlook”
section.
Financial year
The company’s financial year begins on 1 January and
ends on 31 December each year.
Date of establishment and duration
Significant changes
There has been no exceptional event or dispute since
31 December 2006 likely to have a significant effect on
the financial position, activity, results or assets of the
Calyon company and group.
The company was incorporated on 23 November 1973. Its
term ends on 25 November 2064, unless the term is
extended or the company is wound up before that date.
Documents on display
Legal status
This document is available at www.calyon.com and on
the website of the Autorité des Marchés Financiers
www.amf-france.org
Calyon is a French société anonyme (limited-liability
corporation) governed by ordinary company law, in
particular the Second Book of the Code de Commerce.
Calyon is a credit institution approved in France and
authorised to conduct all banking operations and
provide all investment and related services referred to in
the Code Monétaire et Financier. In this respect, Calyon
is subject to oversight by French supervisory authorities,
particularly the Commission Bancaire. In its capacity as
a credit institution authorised to provide investment
services, Calyon is subject to the Code Monétaire et
Financier, particularly the provisions relating to the
activity and control of credit institutions and investment
service providers.
Material contracts
Calyon has not entered into any material contracts
conferring a significant obligation or commitment for
the Calyon group, apart from those concluded within
the normal conduct of its business.
A copy of the Articles of Association may be consulted at
the registered office: 9, quai du President-Paul-Doumer
92920 Paris La Defense.
Calyon publications
The annual information report below lists the information
published or made public by the Calyon group in the last
twelve months to meet legal or regulatory obligations
applying to financial instruments, issuers of financial
instruments and financial instrument markets as required
by article 222.7 of the AMF’s General Regulations.
Shelf-registration document
Available on the Calyon website (www.calyon.fr) and on the Autorité des Marchés Financiers website
(www.amf-france.org):
Publication
dates
Type of document
31/05/2006
Shelf registration document - AMF registration n° R.06-078
05/10/2006
Update of the shelf registration document R.06-078 – AMF n° D.06-0295-A01
Issue programmes and prospectuses as issuer or guarantor
Available on the Bourse de Luxembourg website (www.bourse.lu) and approved by the CSSF Publication
dates
Type of document
18/08/2006
Prospectus relating to the warrant and certificate issue programmes of Calyon, Calyon Financial Products
(Guernsey) Limited and Calyon Finance (Guernsey) Limited
31/08/2006
Supplement to the 18/08/2006 prospectus
27/09/2006
Prospectus relating to the 4 billion euro EMTN (Euro Medium Term Note) issue programme of Calyon, Calyon
Financial Products (Guernsey) Limited and Calyon Finance (Guernsey) Limited
27/09/2006
Prospectus/offering circular relating to the 30 billion euro Structured Euro Medium Term Note issue programme
of Calyon, Calyon Financial Products (Guernsey) Limited and Calyon Finance (Guernsey) Limited
11/10/2006
Supplement to the 27/09/2006 prospectus
27/10/2006
Supplement to the 27/09/2005 prospectus/offering circular
Available on the Hong Kong Securities and Futures Commission website (www.sfc.hk)
Publication
dates
Type of document
26/06/2006
Memorandum and prospectus relating to the retail notes issue programme of Calyon Financial Products (Guernsey)
Limited
26/10/2006
Addendum to the 26/06/2006 prospectus
Available on the Hong Kong Stock Exchange website (www.hkex.com.hk)
Publication
dates
Type of document
08/06/2006
Prospectus relating to the warrant issue programme of Calyon Financial Products (Guernsey) Limited
23/06/2006
Addendum no.1 to the 08/06/2006 prospectus
27/10/2006
Addendum no.2 to the 08/06/2006 prospectus
Available on the Singapore Exchange Securities Trading Limited website (www.sgx.com)
Publication
dates
Type of document
28/06/2006
Prospectus relating to the warrant placing programme of Calyon Financial Products (Guernsey) Limited
27/10/2006
Addendum to the 28/06/2006 prospectus
158 - 159
Press releases
general information
Published on the Calyon website (www.calyon.com)
Publication dates
Type of document
03/08/2006
Calyon (67%) and Pirelli Re (33%) set up a joint venture to invest in non performing loans in Europe:
Italy, Germany, and Poland the main markets
19/09/2006
Crédit Agricole Structured Asset Management acquires Ursa Capital LLC
08/01/2007
Calyon and Société Générale plan to merge their brokerage activities currently carried out by Calyon Financial
and Fimat
26/03/2007
Citic East China and Calyon Financial Announce Joint Venture Agreement to Form Chinese Futures Brokerage
14/05/2007
Georges Pauget takes over from Jean Laurent as Calyon Chairman
Documents filed with the Registrar of the Nanterre commercial court
Available on the www.infogreffe.fr website (Calyon ID number: 304 187 701)
Filing notice published in the Gazette du palais: 3 Boulevard du Palais 75004 Paris
Publication dates
Type of document
Filing number
Filing notice
23/03/2006
Minutes to the Board meeting appointment of a director or directors
N° 8649
N°81 and 82 published
22 and 23 March 2006
15/06/2006
Minutes to the Shareholders’ meeting appointment of new alternate auditors
change(s) to the articles of association
Minutes to the Board meeting –
capital increase
Updated articles of association
2005 annual financial statements
N° 15887
165-166 published on
14 and 15 June 2006
N° 7491/7492
Publications in the Bulletin des Annonces Légales Obligatoires (BALO)
Published on the www.balo.journal-officiel.gouv.fr website
Publication dates
Type of document
Article number
13/03/2006
Quarterly position at 31 December 2005
N° 2276
12/04/2006
Notice of the general meeting of shareholders of 16 May 2006
N° 3783
30/05/2006
Quarterly position at 31 March 2006
N° 7561
26/05/2006
2005 annual financial statements
N° 10051
27/09/2006
Quarterly position at 30 June 2006
N° 14461
01/12/2006
Quarterly position at 30 September 2006
N° 17605
16/03/2007
Quarterly position at 31 December 2006
N° 02806
Publications in the Journal spécial des sociétés
8, rue Saint Augustin 75080 Paris cedex 02
Publication dates
Type of document
number
05 and 06/07/2006
Parent company financial statements 2005
N° 186 and 187
Additional
information
Fees paid to Statutory Auditors
College of Auditors of Calyon
(1)
(2)
Ernst & Young
in thousands of euros
Amount (excluding VAT)
PricewaterhouseCoopers
%
Amount (excluding VAT)
%
2006
2005
2006
2005
2006
2005
2006
2005
Issuer
4,283
3,361
54.4%
62.0%
2,929
3,128
48.2%
46.6%
Fully-consolidated subsidiaries
1,253
1,580
15.9%
29.2%
2,758
2,626
45.4%
39.1%
1,846
451
23.5%
8.3%
83
595
1.4%
8.9%
Audit
Independent audit, certification, review
of parent company and consolidated
Ancillary assignments
(3)
Issuer
Fully-consolidated subsidiaries
Subtotal
297
21
3.8%
0.4%
187
274
3.0%
4.1%
7,679
5,413
97.6%
99.9%
5,957
6,623
98.0%
98.7%
176
6
2.2%
0.1%
123
24
2.0%
1.3%
Other services
Legal, tax, personnel-related
Others to be disclosed
(if >10% of audit fees)
13
Subtotal
Total
0.2%
67
189
6
2.4%
0.1%
123
91
2.0%
1.3%
7,868
5,419
100%
100%
6,080
6,714
100%
100%
Other statutory auditors engaged in the audit of fully consolidated Calyon group
subsidiaries
Mazars & Guerard
Amount
in thousands of euros
(excluding VAT)
2006
2005
Deloitte
Amount
(excluding VAT)
%
2006
2005
2006
2005
KPMG
Amount
(excluding VAT)
%
2006
2005
2006
2005
Autres
Amount
(excluding VAT)
%
2006
2005
2006
2005
%
2006
2005
Audit
Independent
audit, certification,
review of parent
company
and consolidated
financial
statements
150
Ancillary
assignments
Total
(1)
(2)
(3)
145 100% 96.7%
5
150
318
3.3%
150 100% 100%
211 100% 98.1%
4
318
71
1.9%
215 100% 100%
These figures indicate the annual cost of Statutory Auditors’ fees
Including fully consolidated Calyon subsidiaries audited by the College of Auditors
Ancillary assignments in accordance with AMF regulation 2002-06
71
89 100%
89%
230
444 98.3% 97.6%
11
11%
4
11 1.7% 2.4%
100 100% 100%
234
455 100% 100%
160 - 161
general information
Statutory auditors’
special report
on regulated agreements
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided
solely for the convenience of English speaking readers.
This report should be read in conjunction with, and construed in accordance with, French law and professional
auditing standards applicable in France.
Year ended 31 December 2006
II - A
greements entered into in prior
years which remained in force
during the year
In our capacity as statutory auditors of your company,
we are required to report on certain contractual
agreements with related parties.
In accordance with the Decree of 23 March 1967, we have
been informed that the following agreements, approved
in prior years, remained effective during the year ended
31 December 2006.
We are not required to ascertain whether any other
agreements exist, but to inform you, on the basis of the
information provided to us, of the terms and conditions
of agreements indicated to us. We are not required to
comment as to whether they are beneficial or appropriate.
In accordance with article 92 of the decree of 23 March
1967, it is your responsibility to evaluate the benefits for
the company of entering into these agreements, with a
view to approving them.
We have performed our assignment in accordance with
the prevailing standards of the profession in France;
which require us to verify that the information given to
us is consistent with the documents from which it
derives.
I-A
greements entered into during the year
We inform you that we have not been made aware of
any agreements entered into during the year and covered
by article L.225-86 of the Commercial Code.
2.1 - With Crédit Agricole S.A.
2.1.1 - Subscription for preference shares or super-subordinated notes (SSNs)
Reminder of agreement
Further to the link-up between the corporate and
investment banking businesses of Crédit Agricole S.A.
and Crédit Lyonnais, Crédit Lyonnais made a partial asset
transfer to Calyon (formerly Crédit Agricole Indosuez).
In view of the above transaction, it was deemed
necessary to increase Calyon’s shareholders’ equity.
Crédit Agricole S.A. authorised to carry out a series of
transactions aimed at increasing Calyon’s shareholders’
equity by a total amount of up to 3 billion euros.
Terms of execution during the year
In accordance with this autorisation, Crédit Agricole S.A.
notably subscribed to an issue of deeply subordinated
notes for an amount of 1,730 million dollars. An amount
of 108.5 million dollars in interest with respect to these
notes was paid to Crédit Agricole S.A. during the 2006
financial year.
2.2 - With Crédit Lyonnais
2.2.1 - S ale by Calyon of Banque Francaise
Commerciale Antilles-Guyane (BFC-AG)
to Credit Lyonnais
In order that BFC-AG be provided with adequate
supervision for its retail banking activity, Calyon sold its
stake in BFC-AG to Credit Lyonnais, which became its sole
core shareholder, on 1 July 2005.
The disposal includes a claw-back clause that expires on
the closing date of the financial statements for 2008,
and provides for a price adjustment in the event that
restructuring costs incurred between the disposal date
and the closing date of the 2008 financial year is less
than 33 million euros.
Given Calyon’s subscription, before the disposal, to BFCAG’s capital increase of around 18 million euros, the
divested unit’s recurrent losses and the trend for 2005,
the consideration was set at one euro, without liability
guarantee.
2.2.3 - Indemnity agreement by Calyon for Crédit Lyonnais
Crédit Lyonnais’s corporate and investment banking
division (BFI) was transferred to Calyon on 30 April 2004
with retroactive effect from 1 January 2004 for accounting
and legal purposes. However, Calyon preferred to agree a
deferment, until 31 December 2004 at the latest, with
regard to short, medium and long-term commercial
outstandings.
To respect the principles of retroactive effet from 1
January 2004, Calyon undertook to indemnify Crédit
Lyonnais from the counterparty risks relating to these
outstandings from that date.
The amount of the guarantee stood at 248 million euros
Remuneration for 2006 totalled 3 million euros.
2.2.4 - Unlimited liability guarantee given to Calyon by Crédit Lyonnais in relation
to the sale of Crédit Lyonnais Rouse Ltd
The claw-back clause was not exercised in 2006.
2.2.2 - Acquisition by Calyon of Credit Lyonnais’
stake in Union des Banques Arabes et
Francaises (UBAF)
On completion of Crédit Lyonnais’s transfer of CBI to
Calyon (formerly CAI), Crédit Lyonnais sold London-based
futures trading and brokerage company Crédit Lyonnais
Rouse Ltd to Calyon on 28 May 2004.
On 1 July 2005, Calyon signed an agreement with Credit
Lyonnais to acquire its holding in UBAF.
In conjunction with the sale, Crédit Lyonnais gave Calyon
an unlimited liability guarantee, with a maximum excess
charge for Calyon of around 30 million of sterlings.
Calyon acquired the 43.93% shareholding in UBAF for
236 million euros. In addition, Calyon assumed Credit
Lyonnais’ commitments with regard to MACO in return
for Credit Lyonnais’ payment to Calyon of a sum covering
any loss resulting from the possible liquidation of MACO,
as estimated on the date the agreement was signed.
Calyon undertook, in the event that the loss borne by
Calyon upon liquidation of MACO should prove smaller
than the amount of the payment, to repay to Credit
Lyonnais 80% of the difference between the loss actually
borne and the sum paid to Calyon. Finally, Calyon took
on at par value the subordinated loans and bonds with
warrants issued to UBAF by Credit Lyonnais.
As the guarantee was not invoked during the year, no
impact was recorded in the accounts.
2.2.5 - C ounter-guarantees given to Crédit
Lyonnais by Calyon for CFP and CFG
issues
The assets transferred to Calyon by Crédit Lyonnais
included all the shares indirectly held by Crédit Lyonnais
in Calyon Financial Products (Guernsey) Limited (formerly
« CLFP ») and Calyon Finance (Guernsey) Limited (formerly
« CLFG »), governed by the laws of the Bailiwick of
Guernsey.
162 - 163
general information
The issues or issue programmes of the foreign subsidiaries
of Crédit Lyonnais, transferred to Calyon (formerly CAI)
on 30 April 2004 as part of the transfer of the CBI assets,
were guaranteed by the Crédit Lyonnais. Some of these
emissions are not covered by a clause enabling Calyon
(formerly CAI) to replace Crédit Lyonnais as guarantor;
Crédit Lyonnais will therefore remain guarantor of the
issues previously carried out by companies that are no
longer its subsidiaries following the asset transfer.
Calyon has therefore given Crédit Lyonnais a counterguarantee covering the latter’s guarantee relating to
commitments existing at the date of the asset transfer,
i.e. 30 April 2004. This counter-guarantee issued on 30
April 2004 is not remunerated.
The indicative amount mentioned in the agreement
does not represent the final amount of the risk to be
underwritten: many of the products are structured
products whose redemption amount includes the final
return paid to bearers (indexed to an interest rate or
option structure). Moreover, in some cases redemption
will take the form of the “physical” delivery of shares.
Calyon issued further guarantees on 4 May 2004 for
EMTN issues by CFP and CFG under their English-law
programme for a maximum value of 20 billion euros,
and on 10 May 2004 for issues under their French-law
programme for a maximum value of 2 billion euros and
as when they carry out issues for warrants or
certificates.
Finally, Calyon issued a guarantee for issues by CFP and
CFG under their « EMTN structured products» programme
set up on 30 July 2004, and for the warrants issued by
CFP under its « Hong Kong warrants » programme
established on 29 July 2004.
These guarantees are not remunerated.
Calyon’s guarantee concerning the issues carried out by
CFP and CFG under their « EMTN structured products»
programme was renewed on 27 September 2006.
The guarantee concerning CFP’s « Hong Kong warrants »
programme was renewed on 18 August 2006.
2.4 - With BANCA INTESA
As the counter-guarantee was not invoked during the
year, no impact was recorded in the accounts.
2.4.1 A
greements between Calyon and Banca
Intesa in private banking
2.3 - With CFP, CFG and CNA
2.3.1 G
uaranteed delivered by Calyon to these
subsidiaries on the occasion of their debt
issues
The issuance programmes of Calyon Financial Products
(Guernsey) Limited (formerly CFLP), Calyon Finance
(Guernsey) Limited (formerly CLFG) and Calyon North
America (formerly CLNA) concern the following securities:
Euro Medium Term Notes (EMTN), US Commercial
Paper (USCP), certificates and warrants.
Calyon issues guarantees to cover the payment of sums
(principal, interest, fees and related sums) due to the
holders of the aforementioned securities, issued between
1 May 2004 and 30 April 2007 by Calyon Financial Products
(Guernsey) Limited (CFP), Calyon Finance (Guernsey)
Limited (CFG) and Calyon North America (CNA).
Calyon issued a guarantee on 30 April 2004 for issues of
US commercial paper by CNA. The nominal value of such
paper in circulation can at no time exceed 10 billion
euros.
In accordance with decisions taken jointly by Crédit
Agricole S.A. and Banca Intesa and the strategy of
developing cooperation between Calyon and Banca
Intesa in private banking, approved by the CAI Board of
Directors on 26 November 2002, a proposal has been
submitted to the Board of Directors for the sale of the
Italian private banking entity, Crédit Agricole Indosuez
Private Banking Italia SpA, together with its subsidiary
IAF, to Banca Intesa, and subsequently the possible
acquisition by Calyon of a minority shareholding in the
domestic private banking subsidiary of Banca Intesa and
by Banca Intesa of a shareholding in CAI Suisse (now CA
Suisse).
A call option contract entitling Calyon to buy 10% of the
capital of the new private banking entity in Italy, on
terms to be specified, was signed on 14 January 2005
between Calyon and Banca Intesa.
A call option contract entitling Banca Intesa to buy 10%
of the capital of CA Suisse (formerly CAI Suisse), on terms
to be specified, was signed on 14 January 2005 between
Banca Intesa and CAI BP Holding, guaranteed by Calyon.
2.5 - With the corporate officers
2.6 - With SNC DOUMER
2.5.1 G
uarantee given by Calyon to individuals
relating to operations in the United
States
2.6.1 Loan granted by Calyon to SNC Doumer
The Board has authorised a guarantee by Calyon covering
risks relating to the financing of legal costs to which a
number of corporate officers or senior managers could
find themselves personally exposed on the occasion of
financial transactions having an impact particularly in
the United States.
The building at 9, quai du Président Paul Doumer, the
registered office of Calyon, is owned by SNC Doumer.
Calyon has granted SNC Doumer a margin-free loan.
The principal on the loan stood at 7,459,241.98 euros
at 31 December 2006. Interest amounted to 225,738.61
euros.
The beneficiaries of this guarantee are the Chairman
and the Chief Executive Officer, the Deputy Chief Executive
Officers and the Assistant Chief Executive Officers.
This guarantee remains in place for as long as the
persons in question remain in office and in any case for
as long as they are likely to subject to legal action or
complaints relating to their official capacity.
Valérie Meeus
164 - 165
general information
Persons responsible
for the shelf-registration
document and for auditing
the accounts
Responsibility statement
I hereby certify that, to my knowledge and after all due
diligence, the information contained in this registration
document is true and accurate and contains no omissions
likely to affect the import thereof.
I have obtained a letter from the statutory auditors,
PricewaterhouseCoopers Audit and Ernst & Young et
Autres upon completion of their work in which they
state that they have verified the information relating to
the financial situation and financial statements provided
in this registration document and read the document as
a whole.
Executed in Paris, 1 June 2007
The Chief Executive Officer of Calyon
Edouard Esparbès
Statutory Auditors
Statutory Auditors
PricewaterhouseCoopers Audit
Member of the Ernst & Young network
Member of the Versailles regional association
of statutory auditors
Member of the PricewaterhouseCoopers network
Company represented by:
Valérie Méeus
Head office:
41 Rue Ibry
92576 Neuilly Sur Seine
Gérard Hautefeuille
Head office:
63 Rue de Villiers
Alternate auditors
PICARLE ET ASSOCIES
Pierre Coll
Member of the Paris regional association
63 Rue de Villiers
Denis Picarle
Head office:
Faubourg de l’Arche – 11 allée de l’Arche
92400 Courbevoie
Mandates
Length of statutory auditors’ mandates
Ernst & Young et Autres (until 30 June 2006 known
as Barbier Frinault et Autres) was appointed Statutory
Auditor for six financial periods by the shareholders’
meeting of 10 May 2000.
This mandate was renewed for a period of six years
at the General Meeting of Shareholders on 16 May
2006.
PricewaterhouseCoopers Audit was appointed
Statutory Auditor by the General Meeting of
Shareholders of 30 April 2004, to replace Cabinet
Alain Laine, which had been appointed at the
Meeting of 10 May 2000 for six financial periods
and has since resigned.
This mandate was renewed for a period of six years
at the General Meeting of Shareholders on 16 May
2006.
Length of alternate auditors’ mandates
The General Meeting of Shareholders of 16 May 2006
appointed Picarle et Associes as alternate auditors
to Barbier Frinault et Autres for a period of six years
(replacing Mr Peuch-Lestrade whose mandate expired
at the end of the 16 May 2006 Meeting).
Mr Pierre Coll was appointed Alternate Auditor to
PricewaterhouseCoopers Audit by the General Meeting
of Shareholders of 30 April 2004 for the duration of
the mandate of his predecessor, Mr Olivier Peronnet,
who had been appointed by the Meeting of 10 May
2000 and has since resigned. This mandate was
renewed for a period of six years at the General
Meeting of Shareholders on 16 May 2006.
166 - 167
Cross-reference table
The following table indicates the page references corresponding to the main information headings required by
regulation EC 809/2004 (annex XI) enacting the terms of the “Prospectus” Directive.
Headings required by regulation EC 809/2004 (annex XI)
Page number
1. Persons responsible
166
2. Statutory Auditors
167
3. Risk factors
61 to 71 – 104 to 122- 137
general information
4. Information about the issuer
4.1
History and trend of the Society
6 to 7 – 10 – 79 – 158
5. Business overview
5.1
Principal activities
5.1.3
Principal markets
6. Organisational structure
6.1
Brief description of the Group and the issuer’s position
6.2
Dependence relationships within the Group
11 to 16
11 to 16 – 127 to 128
80
I – II
81
7. Trend information
158
8. Profit forecasts or estimates
N/A
9. Administrative, management and supervisory bodies
9.1
9.2
Information concerning members of the administrative and management
bodies
Conflicts of interest at the administrative, management and supervisory
bodies
10. Major shareholders
34 to 40
40
137
11.Financial information concerning the issuer’s assets and liabilities, financial
position and profits and losses
11.1
Historical financial information*
78 to 155
11.2
78 to 147
11.3
Auditing of historical annual financial statements
11.4
Age of latest financial information
11.5
Interim and other financial information
11.6
Legal and arbitration proceedings
11.7
Significant change in the issuer’s financial or commercial position
148 to 149
78
N/A
70
158
12. Material contracts
158
13. Third party information and statements by experts and declarations of any interest
N/A
14. Documents on display
158
* In accordance with article 28 of EC regulation 809/2004 and article 212-11 of the AMF’s general regulations, the following are incorporated for reference
purposes: the consolidated financial statements for the period ended 31 December 2005, the statutory auditors’ report on the consolidated financial
statements for the period ended 31 December 2005 and the Group’s management report as presented on pages 76-153, 154-155 and 42-74 of Calyon’s
shelf-registration document registered by the AMF on 31 May 2005 under number R.06-078.
www.calyon.com
9, quai du Président Paul Doumer
92920 Paris La Défense cedex
Tél : 33 (0) 1 41 89 00 00
Fax : 33 (0) 1 41 89 12 77
Calyptus - Design by : www.profil-design.com - Crédit photos : Fico ; Patrick Sordoillet

CALYON anglais entier.indd

Transcription

Similar documents

Profile - Crédit Agricole CIB

Business premises for sale in Javea 40,000 € Ref: L-1293

calyon (china) limited

The Grameen Crédit Agricole letter

Shareho Club des actionnaires Shareholders`Club

changing landscape in portugal - Noticiaria – Um espaço de

ACCOMMODATION Wyższa Szkoła Języków Obcych w Szczecinie

Julie Jones ESSENCE Therapeutics 0641474613 julie

the brochure

2015 at a glance