Annual report 2010 - Dexia.com

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Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsDexia holds financial collateral and physical collateral.The bulk of the financial collateral is composed of cashcollaterals and term deposits, and to a lesser extent, ofinvestment grade bonds (mainly AAA- AA sovereigns orbanking issuers).Physical collateral is mainly composed of mortgages onAs Dexia rating methodology is not yet fully implementedin DenizBank's organization, and as few external ratings areavailable on Turkish exposures, Dexia reports DenizBank in aseparate column. However, the preservation of the internalAAA to AA-A+ to BBBgrade31/12/09Non Unrated DenizBank (1) TotalinvestmentgradeFinancial assets available for sale(excluding variable income securities) 45,857 46,327 5,220 585 1,035 99,023Financial assets designated at fair value(excluding variable income securities) 82 238 20 149 0 490Financial assets held for trading(excluding variable income securities) 2,862 2,518 208 403 50 6,040Loans and advances (at amortised cost) 176,716 132,982 31,579 8,316 9,038 358,633Investments held to maturity 563 677 1 0 370 1,611Derivatives 3,250 3,764 555 434 39 8,042Other financial instruments 98 47 21 1,614 15 1,795Loan commitments granted 41,828 18,059 4,292 1,768 2,393 68,340Guarantee commitments granted 18,557 13,927 2,264 873 2,428 38,051Total 289,813 218,539 44,161 14,143 15,368 582,024AAA to AA-A+ to BBBgraderesidential or small commercial real estate and pledges onvarious other assets (receivables, business goodwill).Only financial collateral eligible under Basel II and directly heldby Dexia are considered.Collateral held mainly covers Loans and Advances and Offbalance-sheetcommitments.C. Credit quality of financial assets neither past due nor impairedscorings of DenizBank and of the credit risk monitoringsystems allowed to keep a complete view on DenizBank'sportfolio risks.31/12/10Non Unrated DenizBank (1) TotalinvestmentgradeFinancial assets available for sale(excluding variable income securities) 36,448 38,942 4,700 234 1,551 81,876Financial assets designated at fair value(excluding variable income securities) 61 252 21 28 0 361Financial assets held for trading(excluding variable income securities) 2,081 2,388 257 40 142 4,908Loans and advances (at amortised cost) 157,062 134,928 35,897 5,973 11,895 345,755Investments held to maturity 556 500 0 0 405 1,460Derivatives 3,536 4,495 797 56 78 8,961Other financial instruments 14 63 74 1,940 310 2,401Loan commitments granted 34,335 15,629 4,592 984 1,639 57,178Guarantee commitments granted 13,373 18,881 2,681 647 5,051 40,633Total 247,465 216,077 49,020 9,901 21,071 543,534(1) As the DenizBank portfolio is composed of 90% of Turkish assets, the majority of the DenizBank financial assets are therefore in the “Non-InvestmentGrade“ category.Ratings indicated are either internal or external ones. Indeed,Dexia applies the AIRBA (Advanced Internal Ratings BasedApproach) for the calculation of capital requirements forcredit risk within the context of Pillar I of Basel II. Except forABS positions for which credit risk is calculated within theRatings based Approach, based on external ratings (Fitch,Standard & Poors or Moody's) and, part of its portfolio,mostly DenizBank, for which credit-risk exposure is calculatedconforming the Basel II Standard method.216 Dexia Annual report 2010
Notes to the consolidated financial statementsCredit quality of DenizBank's financial assetsAs Dexia rating methodology is not yet fully implementedin DenizBank's organisation, and as few external ratingsare available on Turkish exposures, Dexia reports the creditquality in a separate column. The average credit quality ofDenizBank's financial assets remains closely linked to therating of the Turkish government (internal rating: BB+ stable(foreign currency) / BBB- stable (local currency)).In 2010, the management and monitoring of DenizBankcredit risks continued to be more integrated into Dexia'sglobal credit risk management, particularly with the ongoingdevelopment of internal rating systems specific to Turkishcounterparties aimed at covering the main asset categories, anincreased participation in the different committees at Grouplevel as well as the adaptation and integration of policies andguidelines of the Dexia Group.The average credit quality of DenizBank financial assetsremains closely linked to the rating – positive evolution in2010 – of the Turkish sovereign (internal rating 2010: BB+stable (foreign currency) / BBB- stable (local currency); internalrating 2009: BB- positive (foreign currency)/ BB+ positive (localcurrency)). In fact, a financial asset cannot have a higher ratingthan that of the State where it is issued. As the DenizBankportfolio is composed of 90% of Turkish assets, the majorityof the DenizBank financial assets remain therefore in the“Non-Investment Grade“ category.Detail on the credit quality of the most significant financialassets:• The Corporate & MidCorporate portfolio is entirely composedof Turkish counterparties or related to. The credit risk of thisportfolio is therefore closely linked to the evolution of theTurkish economy. Each of these counterparts is rated annuallywith a Basel II compliant internal rating system, specificallydeveloped for Turkish counterparts, the calibration of whichis on the basis of an average rating BB- area (in 2009 it hasbeen realised on the basis of an average rating between B+et BB-);• DenizBank's financial assets on financial institutions as at theend of 2010 are mainly on “Investment Grade“ internationalbanks. The remaining exposures are concentrated on Turkishbanks with an average rating between BB and BBB (averagerating of BB in 2009);• Exposure to the central government and assimilated to issolely associated with Turkish sovereign risk;• Exposure to the local public sector has a rating betweenB and BB+ (in 2009, the rating was between B and BB-), aconsequence of the rules set by the Dexia credit committeefor this type of assets;• The credit-risk profile of the Retail & PME portfolio ismonitored by the Retail Expertise Centre of the Dexia Groupand is also included in the quarterly risk reviews of thisactivity. Specific PD (Probability of Default) and LGD (LossGiven Default) models have been developed and are beingdeveloped for the Retail & PME parts (including agriculture)and will be completely deployed during the 2011 financialyear.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia217
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A n n u a lr e p o r t2 0 1 0
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4 Group profile8 Message from the c
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Group profileManagement reportConso
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Group profileRESULTS Dexia GAAP IFR
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Message from the ChairmenManagement
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2010 and early 2011 highlightsManag
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2010 and early 2011 highlightsDecem
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Update on the transformation planMa
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Update on the transformation planMa
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StrategyManagement reportConsolidat
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Shareholder informationManagement r
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Human ResourcesMEMBERS OF STAFFGEND
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Human ResourcesFinally, questions r
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Sustainable developmentEnergy perfo
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Risk managementThe Operational Risk
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Capital managementManagement report
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Capital managementEconomic capitalE
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Financial resultsConsolidated state
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Financial resultsManagement reportC
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Liabilities Note 31/12/09 31/12/10(
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Annual report 2010 - Dexia.com

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