Annual report 2010 - Dexia.com

Capital managementWeighted risksWeighted risks consist of three elements: credit risk, marketrisk and operational risk. Each of these risks is described inthe chapter “Risk Management” in this Annual Report (pages78 to 80).At year-end 2010, Dexia’s total weighted risks amounted toEUR 140.8 billion against EUR 143.2 billion at year-end 2009.This fall of EUR -2.3 billion is essentially due to deleveragingefforts (EUR -3.2 billion) and impairments on the FinancialProducts portfolio (EUR -4.2 billion), partially offset byexchange effects (EUR +3.2 billion) and the increased assetbase (EUR +2.7 billion).(in millions of EUR) 31/12/09 31/12/10Weighted credit risks 129,758 128,240Weighted market risks 2,993 2,945Weighted operational risks 10,419 9,650TOTAL 143,170 140,834Solvency ratiosIn 2010, Tier 1 ratio further improved by 81 bps to 13.1%supported by organic generation of Tier 1 capital ofEUR 852 million (equivalent to 60 bps) and by a decrease oftotal weighted risks by EUR 2.3 billion (equivalent to 21 bps).The core Tier 1 ratio reached 12.1%, up by 79 bps comparedto the end of 2009, illustrating the Group’s solid solvencysituation.The capital adequacy ratio was 14.7% at the end of 2010, up51 bps on the end of 2009.Dexia was subject to the 2010 European Union-wide stresstesting exercise, coordinated by the Committee of EuropeanBanking Supervisors (CEBS). The conclusion of that stress test,based on various scenarios of credit quality deterioration (1) ,was that Dexia does not require any additional capital towithstand the CEBS two-year adverse scenario, including theadditional sovereign shock.More detailed information on the stress tests is providedin the section dedicated to stress tests in the chapter “RiskManagement” of this Annual Report (page 93).31/12/09 31/12/10Tier 1 ratio 12.3% 13.1%Core Tier 1 ratio 11.3% 12.1%Capital adequacy ratio 14.1% 14.7%Management reportConsolidatedfinancial statementsInternal capital adequacyIn 2010, Dexia had the Management Board and the Boardof Directors validate its internal capital adequacy mechanismthus responding to the requirements of Pillar 2 of Basel II.Beyond those external requirements, this process is at theheart of management of the bank and responds to itscapital adequacy target in line with its risk profile. It relieson a comparison between available financial resources andeconomic capital.(1) The test was conducted using the scenarios, methodology and keyassumptions provided by the CEBS, detailed in the aggregate report publishedon the CEBS website: http://www.c-ebs.org/EU-wide-stress-testing.aspxAdditional information Annual financial statementsAnnual report 2010 Dexia97