contents - BNP Paribas

TRADING ACTIVITIES
Operational risk control is based
on several principles: accountability
of the hierarchy, written procedures
describing monitoring channels
and audit trails, continuous
rationalization of processing
software, a system for reporting and
handling incidents, and inspection
assignments by the specialized audit
departments. All of BNP’s banking
and computer organization teams,
from the Organization and
Information Systems division
(which plays a general role) to
the Systems and Back Office
Engineering departments of the
International Banking and Finance
division (in charge of organizing
execution services), help ensure
the security of procedures. These
entities have undertaken a major
quality certification program that
is now in progress. As the
foreseeable part of operational risk
is to be considered as an expense,
this program will enable BNP to
look into the possibility of insurance
coverage.
Due to rapid changes occurring in
the markets, continuous adjustments
must be made to control systems,
reporting procedures, and computer
applications in order to put these
principles into operation. BNP
develops new products and
businesses taking operational risk
into account.
BUSINESS AND RESULTS OF BNP’S MAIN DOMESTIC SUBSIDIARIES
BANQUE DE BRETAGNE
This regional bank mainly serves
Brittany (60 of its 66 offices), but
also has branches in the neighboring
départements of Loire Atlantique and
Mayenne and in the greater Paris
area. Its firm establishment in
Brittany’s economic fabric, the
permanence and competence of its
staff, and its decision-making
proximity earned it the title of
“leading bank to SMCs in Brittany”
(Dun & Bradstreet survey, published
in the February 1998 issue of
Challenge du Management). For the
past several years, the bank has also
been putting its business and
revenues back into balance through
a structured, offensive retail banking
approach to individuals and selfemployed
professionals.
In 1997 Banque de Bretagne
continued to innovate, launching
the linked product Duo Jeune
with Carte Plus. This event was a
premiere in France involving
Visa cards. It also updated its
videotex services and Duo
Sauvegarde (an IT vault for corporate
clients). It offered individual
customers a mortgage simulation
tool and began to market a
mortgage loan with rate cap. It
strengthened its product offering by
Model risk, arising from potential
gaps between a price or risk
model’s representation of reality
and the actual situation, has now
been integrated into operational
risk. Starting in 1998 it will be
covered by procedures aimed at
making the following processes
systematic:
• evaluating the robustness of model
calibrations, introducing new
variables and extensions to cover
new products,
• implementing a research and
maintenance program designed
to detect drops in quality,
incorporate the latest data, and
handle computer system updates.
% Change
Millions of French francs 1997 1996 1995 1994 1993 1997 1996 1995 1994
Customer loans
(average outstandings) 5,779 5,356 5,083 4,303 4,218 7.9 5.4 18.1 2.0
Originations 1,813 1,387 1,458 1,530 693 30.7 (4.9) (4.7) x 2.2
Customer deposits
(average balances) 5,185 4,876 4,866 4,324 4,076 6.3 0.2 12.5 6.1
continuing to market BNP Group
life/endowment insurance, mutual
funds, and other products.
Banque de Bretagne further
modernized its branch network by
renovating and repositioning certain
branches and by virtually doubling
its ATM fleet.
Positive developments in business,
and growth in volumes, enabled
Banque de Bretagne to keep its
financial performance and return on
equity at high levels despite
downward pressure on interest rates
and margins.
B O A R D O F D I R E C T O R S
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