Annual report 2010 - Dexia.com

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Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAt Dexia SA level, the tasks performed by the Regulators in2010 related in particular to the following matters: ICAAP,Financial Products and Margin Calls.Moreover, regarding relations with the supervisory authoritiesand the corporate auditors, the audit departments ofsubsidiaries and branches of Dexia SA inform the auditdepartment of Dexia SA of planned meetings on the auditoperation, tasks performed by the prudential controlauthorities in their entities (throughout the task) and thematters deemed important arising from their regular meetingswith the corporate auditors and the supervisory authoritiesand submit the minutes. The audit management of Dexia SAmay attend these meetings when they so desire.Creation of an investigation and branchaudit unitOne of the guiding principles of the transformation of theaudit support line was the creation in 2010 of an Investigationand Branch Audit unit within Dexia SA, responsible forthe definition of transversal methodologies as well asinvestigations to be performed transversally (involving severalentities of the Dexia Group) and the periodical inspection ofthe branch network.The task of Investigations is, independently and objectively,to contribute to controlling the risks of fraud. Indeed the unitparticipated in the establishment of a governance structurefor the management of fraud risk. It intervenes in awarenessand fraud prevention activities. It takes measures for thedetection of fraud and deals with cases of fraud, and then itsuggests and monitors the remedy.The task of Branch Audit is, independently and objectively, togive Dexia an assurance as to the degree of control of risksassociated with activities in physical distribution channels.It systematically and methodically assesses the processes ofrisk management, control and governance in distributionchannels.Organisation and governanceIn terms of governance, the Investigation and Branch Auditunit is managed by the Group Head of Investigation andBranch Audit, reporting to the General Auditor of Dexia SA.It consists of:• an Investigation and Branch Audit unit reporting hierarchicallyand operationally to the Dexia SA audit department;• local Investigation and Branch Audit units reportinghierarchically to the audit departments of the entities butwhich nonetheless depend operationally on the Investigationand Branch Audit unit of Dexia SA.In order to manage and to steer the unit, it is coordinatedby a so-called Investigation and Branch Audit ExecutiveCommittee (IBAEC). On the basis of a fraud risk analysis, thiscommittee proposes the planning of joint activities, ensuresoptimum planning of transversal tasks, proposes necessarydevelopments in terms of the unit’s means, methodologyand tools, defines team training policy, analyses the results oftransversal tasks and validates activity reports. It also decideson the temporary placement of inspectors among entities.An Investigation and Branch Audit Charter sets out thefundamental principles governing the function, describing itsobjectives, roles, powers, duties and responsibilities, modesof operation and basic rules. This document assists in fixingobjectives for the unit and describes relations and conditionsof intervention by the Investigation and Branch Audit teamof Dexia SA vis-à-vis other entities of the Dexia Group takingaccount of the presence or not of local investigations teams.The Charter was presented to and approved by theManagement Board of Dexia SA in June 2010 and a meetingof the Internal Control, Risks and Compliance Committee inAugust 2010.Operational implementation of the Charter involves theconclusion of various service level agreements between DexiaSA and its subsidiaries. These agreements should be finalisedduring the first quarter 2011.Publication of the Investigation and Branch Audit Charterand its communication to employees of the Group will beorganised during the first half-year 2011. This will enableevery member of staff to understand the importance of thefunction in the internal control mechanisms and to assistmanagement of the Dexia Group.Activities in 2010Beyond the activities of elaborating and implementing theInvestigation Charter, the activity of the Dexia SA Investigationand Branch Audit Unit was aligned in 2010 to the followinglines:1. Actions involving awareness of fraud risk(s)On the request of the Operations and IT Systems support line,the Dexia SA team cooperated in the organisation of a FraudAwareness Workshop (presented by Deloitte) for the teams ofthat support line.2. The performance of tasksIn 2010 the Investigation and Branch Audit Unit was involvedin several tasks:• a transversal task, “Fleet Management”;• a joint task, performed in partnership between Dexia SAand Dexia Banque Internationale à Luxembourg, consistingof checking inter alia on advantages in kind, conflicts ofinterest, the operation of compliance functions and corporategovernance;• a task concerning assistance in the analysis of accountssuppliers and more precisely the exposure to financial riskassociated with double payments of supplier invoices;3. Inquiries and information to the judicial authoritiesIn 2010, 20 inquiries were made by the Investigation andBranch Audit department in Dexia SA. According to theclassification of fraud risks set out by the Basel II committee,the tasks performed or ongoing may be classified among thefollowing risk categories: internal fraud (12 tasks), externalfraud (4 tasks), clients, products and business practices (3tasks) and employment practices and workplace safety (1task).In addition to these inquiries, the team responded to severalrequests for information from entities and the judicialauthorities.56 Dexia Annual report 2010
Declaration of corporate governanceComplianceThe Compliance function is an independent and objectiveactivity. It carries on its activities without influence, interferenceor restriction likely to affect its independence, its integrity, itsimpartiality and its objectivity.The role and fields falling within the Compliance function aswell as the principles of governance underlying the approachadopted by Dexia regarding compliance are set out in thecompliance policy which was approved and entered into forcein 2009.The compliance fields are as follows:• the fight against money laundering and the financing ofterrorism;• market abuse and personal transactions;• the integrity of the markets in financial instruments;• integrity towards clients in all Dexia activities;• data protection and professional secrecy;• prevention of conflicts of interest;• external mandates;• the independence of the auditors;• whistleblowing;• prevention with regard to specific mechanisms (policyaimed at preventing specific mechanisms put in place for thepurposes of tax evasion as provided, if such should be thecase, by the applicable law);• any other field indicated by the Management Board or theBoard of Directors.In the fields of competence listed above, the Compliancefunction performs the following tasks:• It analyses legal and regulatory developments in order toanticipate and to assess possible consequences on Dexiaactivities. It ensures the correct interpretation of national andinternational legislation and regulations. It is also a first pointof contact with the regulators.• It identifies, analyses and measures non-compliance risksand reputation risks which might arise from activities andfinancial products, in particular:- existing activities and products;- new activities/services;- new products/segmentations;- new entities;- any new geographic perimeter.• It provides assistance to business lines in the developmentand implementation of compliance procedures and otherdocuments, for example compliance manuals, internal codesof conduct and practical guides. It assists and advises in orderto ensure the correct interpretation and implementationas well as the observance of these procedures and otherdocuments.• It develops and provides compliance training programs,adapted to the needs of business lines, promoting anappropriate compliance culture and an awareness andunderstanding of standards, procedures and lines ofconduct.• It checks the fulfilment of compliance obligations, inparticular taking account of risks incurred.• To the extent that it is required by local regulations,it communicates with the financial regulators or anyother competent authority about any suspect incident ortransaction.• It reports regularly to the Management Boards andCoordination Committees of Internal Control with regard toits activities and the status of any major shortcoming.Organisation and positioningThe Group’s Chief Compliance Officer reports to the memberof the Management Board of Dexia SA responsible forthe Legal, Compliance and Tax support line. A cascadingprocedure is in place to guarantee the right of the GroupChief Compliance Officer to report directly to the Chairmanof the Management Board of Dexia SA or to the Chairmanof the Internal Control, Risks and Compliance Committee ofDexia SA on any significant incident.This organisational mode was duplicated within the mainentities.Dexia SA Compliance was reorganised at the beginning of2010, and is now composed of two divisions reporting to theChief Compliance Officer of Dexia:• Permanent Control, the deployment of which began duringthe first quarter 2010 following the decision taken by theManagement Board to extend this function to the entireGroup. Since 1 March 2011, the team has been placed underthe responsibility of the Head of Operational Risk;• Dexia SA Compliance, the head of which took up the poston 1 September 2010. Compliance is subdivided into twopoles:- the “Policies and Guidelines” pole in charge of fieldsrelating to regulatory surveillance of compliance, marketabuse, conflicts of interest, client and private data protection,relations with entities directly reporting to Dexia SA (DexiaTechnology Services and DenizBank), and determination ofthe compliance framework applicable to the different businesslines;- the “Monitoring, Reporting and Tools” pole in charge ofadministration, global monitoring of the Compliance functionand specific monitoring in particular regarding MiFID. Thispole is also in charge of establishing the compliance risk mapand coordination of the AML and CTF mechanisms in Groupentities.GuidingThe Dexia Group has a Compliance Committee the tasks ofwhich are:• to distribute competences within the Group in compliancewithin business lines and competence centres;• to ensure an integrated approach is adopted.Its composition reflects all the activities and/or business lineswithin Dexia.Furthermore, there is periodic reporting by each Groupsubsidiary. A consolidated report is then drawn up andsubmitted to the Internal Control, Risks and ComplianceCommittee.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia57
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Annual report 2010 - Dexia.com

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