Annual report 2010 - Dexia.com

More documents

Recommendations

Info

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsEquityThe Value at Risk measurement approach is applied to assessthe portfolio’s vulnerability to adverse changes in equity prices,volatility or correlation. Inter alia, the market risk managementframework includes Earnings-at-Risk and Stress-Test measuresrepresenting the maximum accounting loss under differentscenario assumptions. The equity portfolios of the bankingentities are in run-off mode. Within the insurance perimeter,a warning system has been introduced from the perspectiveof reallocating assets for the potential occurrence of a stressand in order to preserve solvency ratios.(Structural) foreign exchangeAlthough Dexia’s reporting currency is the euro, assets,liabilities, income and expenses are also denominated inother currencies. The Group ALCo decides on hedging therisk associated with the evolution of these results in foreigncurrencies. In 2010, a systematic and ongoing hedge wasmade of these exposures.The structural risks associated with financing of participations(equity) in foreign currencies as well as the volatility of theGroup’s solvency ratio are also monitored regularly.Insurance companies and pension fundsSpecific reports on insurance companies and pensionfunds are presented to the Group ALCo. They cover riskfactors associated with interest rates, inflation and equities.Risk indicators are calculated on the basis of a Groupharmonised risk methodology complemented with specificrisk management factors.Balance-sheet exposureBalance-sheet exposure to interest-rate risk(sensitivity)Interest-rate sensitivity measures the change in the balancesheetnet economic value if interest rates move by 1% acrossthe entire curve. ALM long-term sensitivity amounted toEUR -148 million as at 31 December 2010 (againstEUR -104 million as at 31 December 2009), excludinginsurance companies and pension funds. Interest ratesensitivity limits was EUR -400 million/% as at 31 December2010 (the limit is unchanged compared to limit at year-end2009). This evolution is fully in line with the renewed BSMstrategy focusing on minimising P&L volatility while preservingoverall value creation.The Dexia Financial Products portfolio amounted toUSD 13.9 billion (EUR 10.4 billion) as at 31 December 2010against USD 15.5 billion (EUR 10.7 billion) as at 31 December2009. The interest-rate risk of this portfolio amounted toEUR -8.5 million/% (against a limit of EUR -42 million/%)as at 31 December 2010 against an exposure ofEUR -6.2 million/% (against a limit of EUR -42 million/%) asat 31 December 2009.Balance-sheet exposure to credit-spread riskBSM manages bond portfolios amounting to EUR 14.6 billion(banking entities) and EUR 14.9 billion (insurance) as at31 December 2010 against an exposure of EUR 17.5 billion(banking entities) and EUR 15.8 billion (insurance) as at31 December 2009.Part of the bond portfolios is classified in Loans & Receivables.The AFS reserve of these securities is insensitive to the marketspread evolutions. Regarding the other bonds portfoliosmanaged by BSM and classified in AFS, the sensitivity infair value (and in AFS reserve) after a basis point creditspreadincrease amounted to EUR -12.85 million (bankingentities) against EUR -15.62 million/basis point as at 31December 2009 and to EUR -10.18 million (insurance) againstEUR -11.09 million/basis point as of 31 December 2009.The spread sensitivity of the Financial Products portfolioclassified in AFS stood at EUR -1.31 million/basis point as at31 December 2010 against EUR -1.12 million/basis point as at31 December 2009.Balance-sheet exposure to equities (quotedshares)Equity Value at Risk (VaR with a 99% confidence level anda 10-day holding period) expresses the potential change inmarket value. Please note the banking equity portfolio iscurrently in run-off. As for insurance companies and pensionfunds, the equity portfolio amounted to EUR 1,359 million asat 31 December 2010.(in millions of EUR) 2009 2010Banking Insurance/PensionBanking Insurance/PensionVaR (10 days, 99 %)fundsfundsAverage 37.8 98.5 11 102Maximum 53 142 14 116End period 16 119 14 116Limit 70 160 15 15086 Dexia Annual report 2010
Risk managementLiquidityDexia PolicyIn 2010, Dexia completely revised its internal process formanaging liquidity risk, including its contingency fundingplan.The new framework aims at providing more effective andcoordinated liquidity management. The cornerstone of thisnew framework is the Funding and Liquidity Committee(FLC) (1) , a central committee of all those parties concerned byliquidity and funding, coordinating their actions.Dexia ensures that it maintains liquidity reserves proportionalto its future funding requirement under several scenarios, ina normal situation and in a stress situation. These liquidityreserves consist of assets eligible to refinancing with centralbanks to which Dexia has access (BCE, Fed and Central Bankof Turkey). Dexia’s expected funding requirements are assessedprudently, dynamically and fully, taking existing and plannedon and off balance sheet transactions into consideration. Themonitoring of short-term liquidity risk is organised on a dailybasis whilst the supervision of long-term liquidity risk is on aquarterly basis. Furthermore, liquidity is at the centre of thedefinition of Dexia’s annual business plan.Globally, Dexia’s internal framework for managing liquidityrisk allows a monitoring of short term liquidity on a dailybaisis and a prospective view of long term liquidity.The updated contingency funding plan modifies thegovernance structure to make it more reactive in the case ofliquidity stress requiring rapid measures to be taken.Risk measuresDexia’s new internal framework for managing liquidity riskalso defines a certain number of liquidity indicators which,alongside regulatory liquidity indicators, guarantee Dexia’sresistance to liquidity risk. These indicators include but are notlimited to normal “liquidity ratios” comparing liquidity reservesto liquidity deficits. They also include limits on the absolutesize of liquidity deficits. All of these indicators are assessedaccording to different scenarios, in the principal currenciesand at all relevant consolidation levels. They are part of theDexia Risk Appetite framework and are communicated to theManagement Board and to the Audit Committee on a regularbasis.Dexia liquidity risk is also monitored by regulatory liquidityratios. These ratios are communicated to the CBFA ona monthly basis and to the CREFS (Comité des Risques etEtablissements Financiers Systémiques) on an annual basis.Exposure to liquidity riskIn 2010, the Group raised EUR 44.4 billion of medium andlong-term wholesale funding. The funds raised consisted ofEUR 23.2 billion in State guaranteed debt, EUR 13.6 billion incovered bonds, EUR 4.4 billion in long-term secured fundingother than covered bonds and EUR 3.2 billion in seniorunsecured funding.The Group made considerable progress in reducing its shorttermliquidity gap. Short-term funding requirements fell byEUR 48 billion in 2010, to EUR 119 billion as at the end ofDecember 2010.This good performance was achieved by virtue of:• the sustained pace of deleveraging programme.EUR 22.4 billion of bonds and EUR 4.8 billion of Publicand Wholesale Banking run-off loans were sold in 2010.More detailed information on balance-sheet deleveraging isprovided in the chapter “Update on the Transformation Plan”(page 14) in this annual report;• the swift execution of the long-term funding programme;• the reduction of the Public and Wholesale Banking lendingactivity, this being aligned to the Group’s long-term fundingcapacity;• the increase of retail deposits, particularly in Belgium andTurkey. These were EUR 87.7 billion at the end of 2010,against EUR 81.5 billion at the end of 2009.Dexia also considerably improved its short-term fundingmix. Indeed, Dexia accelerated the decrease of central bankborrowings (EUR -32 billion compared with the end ofDecember 2009) and since June 2010 was no longer fundedby short-term guaranteed debt, in view of the repayment ofshort-term guaranteed loans. The shift towards longer-termfunding bilateral and tri-party repos was confirmed in 2010.As at 31 December 2010, the total amount of central bankeligible securities amounted to EUR 108 billion, of whichEUR 42 billion were unencumbered allowing for a majorliquidity buffer despite the Group’s active deleverage policy.With the reserves available within one month, EUR 66 billionare available to cover the one month liquidity gap.This significant reduction of the short-term fundingrequirement was under unfavourable interest-rate conditionsresulting in an increase of the amount of cash collateral ofEUR 8 billion in 2010 despite a very disrupted macroeconomicenvironment, marked by the sovereign crisis which weighedheavily on the funding of many European banks.In 2010, Dexia also ended transactions guaranteed by theBelgian, French and Luxembourg governments. In fact, on30 June 2010, considering the improvement of its liquiditysituation and in line with its undertakings to the EuropeanCommission, the Group ceased to issue guaranteed debt fourmonths before its formal end date of 30 October 2010. Totaloutstanding guaranteed debt amounted to EUR 44 billion asat 31 December 2010 (against EUR 50 billion at the end ofDecember 2009). This guaranteed outstanding will be totallywritten down in 2014 of which about 40% in 2011.More detailed information on Dexia’s liquidity profile isprovided in the chapter “Update on the Transformation Plan”(page 15).Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) This committee is described in the part “Governance – Balance sheetmanagement” of this chapter (page 79).Annual report 2010 Dexia87
Page 1:
A n n u a lr e p o r t2 0 1 0
Page 4 and 5:
4 Group profile8 Message from the c
Page 6 and 7:
Group profileManagement reportConso
Page 8 and 9:
Group profileRESULTS Dexia GAAP IFR
Page 10 and 11:
Message from the ChairmenManagement
Page 12 and 13:
2010 and early 2011 highlightsManag
Page 14 and 15:
2010 and early 2011 highlightsDecem
Page 16 and 17:
Update on the transformation planMa
Page 18 and 19:
Update on the transformation planMa
Page 20 and 21:
StrategyManagement reportConsolidat
Page 22 and 23:
Declaration of corporategovernanceM
Page 24 and 25:
Declaration of corporate governance
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39: Declaration of corporate governance
Page 70 and 71: Shareholder informationManagement r
Page 72 and 73: Shareholder informationManagement r
Page 74 and 75: Human ResourcesMEMBERS OF STAFFGEND
Page 76 and 77: Human ResourcesFinally, questions r
Page 78 and 79: Sustainable developmentEnergy perfo
Page 80 and 81: Risk managementManagement reportCon
Page 82 and 83: Risk managementThe Operational Risk
Page 98 and 99: Capital managementManagement report
Page 100 and 101: Capital managementEconomic capitalE
Page 102 and 103: Financial resultsConsolidated state
Page 104 and 105: Financial resultsManagement reportC
Page 106 and 107: Activity and results of the busines
Page 116: Activity and results of the busines
Page 119 and 120: C o n s o l i d a t e d f i n a n c
Page 121 and 122: Liabilities Note 31/12/09 31/12/10(
Page 123 and 124: Consolidated statementof changes in
Page 125 and 126: Gains and losses not recognised in
Page 127 and 128: Consolidated cash flow statement(in
Page 129 and 130: Notes to the consolidated financial
Page 133: Notes to the consolidated financial
Page 138 and 139:
Notes to the consolidated financial
Page 140 and 141:
Page 142:
Page 145:
Page 148 and 149:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 227 and 228:
Page 229 and 230:
Page 231 and 232:
Page 233 and 234:
Page 235 and 236:
Page 237 and 238:
Dexia saStatutory Auditor's reporto
Page 240 and 241:
240 Balance sheet241 Off-balance-sh
Page 242 and 243:
Balance sheet(before income appropr
Page 244 and 245:
Statement of incomeManagement repor
Page 246 and 247:
Notes to the annual financial state
Page 248 and 249:
Page 250 and 251:
Page 252 and 253:
Page 254 and 255:
Page 256 and 257:
Page 258 and 259:
Page 260 and 261:
Page 262 and 263:
Statutory Auditor's reportManagemen
Page 264 and 265:
Additional informationManagement re
Page 267 and 268:
Photographs: page 8: C. LEBEDINSKY/
show all

Annual report 2010 - Dexia.com

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?