2012 Registration document and annual financial report - BNP Paribas

CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on the manner of preparation and organisationof the work of the Board and on the internal control procedures implemented by the c ompany2PRODUCTION OF ACCOUNTINGAND FINANCIAL INFORMATIONAccounting policies and rulesThe local financial statements for each entity are prepared accordingto the accounting standards prevailing in the country where the entitycarries on business, while the Group consolidated financial statementsare prepared under IFRS (International Financial Reporting Standards)as adopted by the European Union.Within Group Finance, the Group’s Accounting Policies and StandardsDepartment defines the accounting principles to be applied on a Groupwidebasis, which are based on IFRS. It monitors regulatory changesand prepares new accounting principles with the necessary level ofinterpretation. A manual of the Group’s IFRS accounting principles isavailable to the Divisions/OE – Business Lines on the internal networkcommunication tools (Intranet) at BNP Paribas. It is regularly updatedto reflect regulatory changes.The Group’s Accounting Policies and Standards Department also handlesrequests for specific accounting studies made by the Divisions/OE –Business Line or accounting entities, particularly when a new financialproduct or transaction is designed or booked in the accounts.Finally, a department within Group Finance is also dedicated to thepreparation of management policies and standards. Its work is based onthe needs identified by the management channel. These principles andstandards can also be accessed using internal network tools (Intranet).The accounting principles and rules associated with solvency are withinthe remit of Group Risk Management (GRM), and those associated withliquidity are within the remit of ALM – Treasury.The process of preparing informationThere are two distinct reporting channels involved in the process ofpreparing information:■ The accounting channel: in particular, this channel handles productionof the entities’ financial and analytical accounts and preparation ofthe Group’s financial statements in accordance with accountingpolicies and standards. It also produces related information relevantto solvency and liquidity, while ensuring that it is reconciled with theaccounts at every level.■ The management channel: this prepares management information (inparticular organised by Divisions/OE – Business Lines and put togetheron the basis of data per entity) relevant to the financial managementof the businesses in accordance with the internal principles andstandards adopted. It ensures the consistency of the management datawith the accounting data, at every level. This channel is responsible forthe preparation of solvency and liquidity ratios and for their analysis.Group Finance designs, deploys and administers the reporting toolsof the two reporting channels, intended to provide information for thewhole Group, while taking their respective objectives and their necessarycomplementarity into account.Group Finance promotes the establishment of standard accountingsystems within the Group’s entities, which are designed at Group leveland are progressively being deployed. This approach promotes thesharing of information and facilitates the implementation of crossfunctionalprojects against the background of the development of pooledaccount processing and synthesis within the Group.With regard to liquidity, a specific programme was put in place in 2012in collaboration with the staff of ALM-Treasury. It is particularly intended,in the area of reporting:■ to define the applicable policies and methodologies having regard tothe regulations being prepared;■ to define and implement permanent tools and processes both at thelevel of the Group and at the level of the Divisions/OE – BusinessLines and entities.Its main work should be completed between now and the end of 2013, soas to be compatible with the expected opening of the ratio observationperiod in 2014.PERMANENT CONTROL OF ACCOUNTINGAND FINANCIAL INFORMATIONInternal control within the Finance functionTo enable it to monitor management of the risk associated with accountingand financial information centrally, Group Finance has a Group Control& Certification Department, which has the following key responsibilities:■ defining the Group’s policy as regards the accounting internal controlsystem. Under this system, the entities implement principles thatorganise the accounting internal control environment and key controlsintended to ensure the reliability of the information contained intheir consolidation reporting package. The Group has issued internalaccounting control guidelines for use by the consolidated entities and astandard accounting control plan listing the major mandatory controlsaimed at covering the accounting risk;■ ensuring the correct functioning of the accounting internal andfinancial information control environment within the Group, inparticular through the internal account certification proceduredescribed below; quarterly reporting to Executive Management andto the Financial Statements Committee of the Board of Directors on thequality of the financial statements being produced within the Group;■ jointly with GRM, ensuring the correct functioning of the systemsof collection and processing of consolidated credit risk reports, inparticular by means of a specific certification mechanism and qualityindicators;■ monitoring implementation by the entities of recommendations madeby the Statutory Auditors and the General Inspection relating to theaccounting risk, in conjunction with the Divisions/OE – Business Lines.This monitoring is facilitated by use of dedicated tools that enable eachentity to monitor the recommendations made to it and to regularlyreport on the progress made on the various action plans. Centralisedmonitoring of these recommendations enables Group Finance toidentify improvements to the accounting internal control system madewithin the consolidated entities, identify any cross-functional problemsand, if necessary, revise the Group-level procedures and instructions.In the case of the accounting channel, these missions are passed on tothe Finance Departments of the Divisions/OE by central control teams,who oversee the entities closely and, if necessary, implement accountingcontrol procedures geared to the specific needs of their scope.22012 Registration document and annual financial report - BNP PARIBAS 69