2012 Registration document and annual financial report - BNP Paribas

5RISKSAND CAPITAL ADEQUACYCapital management and capital adequacyCAPITAL ADEQUACY AND CAPITAL PLANNINGCAPITAL ADEQUACY UNDER CURRENTREGULATIONUnder the European Union regulation transposed into French law byregulation 91-05, the Group’s capital adequacy ratio must be at least8% at all times, including a Tier One ratio of at least 4%. Under UnitedStates capital adequacy regulations, BNP Paribas is qualified as a financialholding company and as such is required to have a capital adequacy ratioof at least 10%, including a Tier 1 ratio of at least 6%.Ratios are monitored and managed centrally, on a consolidated basis.Where a French or international entity is required to comply with bankingregulations at its own level, its ratios are also monitored and manageddirectly by the entity.➤ TABLE 7: SOLVENCY RATIOSIn millions of euros 31 December 2012 31 December 2011TIER 1 CAPITAL 75,211 70,993Tier 2 capital 9,186 12,769Tier 3 capital 1,460 2,200REGULATORY CAPITAL 85,857 85,962Credit risk 411,151 446,674Securitisation 19,076 24,376Counterparty risk 20,533 23,624Equity risk 24,377 25,7755Market risk 25,548 38,501Operational risk 51,154 54,617RISK-WEIGHTED ASSETS (*) 551,839 613,567TIER 1 RATIO 13.6% 11.6%TOTAL CAPITAL RATIO 15.6% 14.0%(*) Until 31 December 2011, the transitional regulatory Decree was setting the floor for Basel 2.5 risk-weighted assets at 80% of the Basel 1 risk weightedassets. The floor had no impact at 31 December 2011. These transitional arrangements were not renewed in 2012.BNP Paribas Group is also subject to additional supervision as a financialconglomerate, in accordance with a European Directive transposed intoFrench law by the Order of 19 September 2005. Under this regulation,a financial conglomerate engaged in the insurance business mustcomply with an additional requirement with respect to consolidatedcapital adequacy: the margin requirement for entities with an insurancebusiness – known as the solvency margin – is added to the bank capitalrequirement and the sum of the two is compared to the total equity of thefinancial conglomerate to determine a surplus or a shortfall of capital.As of 31 December 2012, the capital surplus of the conglomerate wasestimated at EUR 37.9 billion (compared to EUR 32.5 billion as of31 December 2011).CAPITAL PLANNINGAs the sovereign debt crisis escalated during the summer of 2011 andin accordance with Basel 3 regulations as transposed in the CRD 4Directive and CRR Regulation published by the European Commissionon 20 July 2011, the BNP Paribas Group set a target of 9% for the fullyloaded Common Equity Tier 1 ratio as of 1 January 2013. The fully loadedscenario assumes that CRD 4 /CRR will become effective with no phasinginarrangements. The target ratio is based on a Core Tier 1 ratio of atleast 4.5%, a 2.5% capital conservation buffer and an additional marginfor the Group of 2%.At end December 2012, the pro forma fully loaded CRD 4 CET 1ratio was 9.9% versus 11.8% under CRD 3 , ahead of the target set inSeptember 2011. This was achieved through completion of the assetreduction plan announced in Autumn 2011 combined with strongorganic capital generation and an improvement in market conditions foravailable-for-sale assets during 2012, following the mid-year resolutionof the European sovereign debt crisis.2342012 Registration document and annual financial report - BNP PARIBAS