A nnua l re p o r t 2 010
Dexia Bank Belgium Annual Report 2010 Dexia Bank Belgium 3 Annual Report 2010 Dexia Bank Belgium 3 Co nte nt s
4 Group profile 6 Key figures 9 Management report 59 Consolidated financial statements 185 Non-consolidated financial statements 236 Additional information
Annual Report 2010 Dexia Bank Belgium 3 Group profile
Dexia is a European banking group with a staff of 35,200 emplo The Group aims to continue to expand its commercial fran- yees and a core shareholders’ equity of EUR 19.2 billion as chises in Belgium and Luxembourg and to tap into the enormous at 31 December 2010. The Group operates mainly in Belgium, growth potential offered by Turkey, the purpose being to Luxembourg, France and Turkey. increase the share of its high-street banking activities in its overall income (around 60% of total income with around 29% Dexia’s shares are listed on Euronext Brussels and Paris and on being generated in Turkey) and to achieve a customer base of the Luxembourg Stock Exchange as well as on the BEL20, the 10 million (4 million in Belgium and Luxembourg and 6 million benchmark index of the Brussels Stock Exchange and the Dow in Turkey) by 2014. Jones EuroStoxx Banks. 2. Public and Wholesale Banking Dexia Bank is a public limited company under Belgian law collecting the savings of the general public. It is a subsidiary of Dexia is a major provider mainly in Belgium and France of Dexia SA and one of the principal retail banks in Belgium. It is funding for local authorities and infrastructure, the health and also the financial partner of choice for local authorities, social social housing sectors and the social economy. profit organisations and businesses. Other areas of activity include:
●● the funding of selected projects in sectors like infrastructure
Managementreport Dexia 2014 : a high-street bank and renewable energy in Europe and North America; serving 10 million customers ●● corporate banking in Belgium where Dexia focuses on medium-sized businesses, while keeping an eye open for The Dexia Group has set the year 2014 as its strategic target opportunities to serve big businesses. date by which to: Apart from that the Group has offices in Germany where it has ●● complete its financial restructuring with most of its income access to long-term refinancing sources (through thePfandbriefe being derived from its commercial franchises; market). ●● consolidate and build up strong commercial franchises by focusing its business lines on its retail and commercial Close to its clients and fully in tune with their requirements, operations and by taking advantage of the opportunities Dexia is constantly developing and broadening its range of
statements for growth afforded by the Turkish market; products and services. The aim is to reach beyond the role of ●● adopt a highly effective business model based on the search specialist lender and to offer its Public and Wholesale Banking for synergies and gains in efficiency. customers integrated solutions (cash management, efficient Consolidated financial budgeting, IT solutions ...) that are tailored to their needs. This return to basics brought about by the recasting of the Group’s strategy can be seen in Dexia’s values of respect, 3. Asset Management and Services excellence and agility which inform the focus of its staff on its shared objectives. This business line consists of three activities (asset management, investor services and insurance) with attractive growth prospects based on a diversified customer base and close collaboration Dexia’s business lines with the other commercial franchises of the Group.
With EUR 86.4 billion in assets under management as at 1. Retail and Commercial Banking 31 December 2010, Dexia Asset Management is the Group’s statements asset management centre. Its four management centres (based Dexia offers a wide range of retail, commercial and private in Belgium, France, Luxembourg and Australia) serve a broad banking services to over 8 million customers. customer base. Non-consolidated financial Dexia ranks among the three largest banks in Belgium and The investor services business is conducted by RBC Dexia Luxembourg. In Belgium, it serves its four million customers Investor Services, a joint venture with Royal Bank of Canada, through a network of around 850 branches. In Luxembourg, which offers its expertise in global custody, fund and pension the Group has built up its international centre for asset manage- administration and shareholder services to institutions all around ment, and a network of branches covers the country. In addition the world. Total assets under administration amounted to EUR to that Dexia has a strong position in Turkey through DenizBank, 2,101 billion as at 31 December 2010. which is the sixth largest private sector bank in the country and has a network of around 500 branches. As well as its retail and Dexia’s insurance activities are concentrated mainly on the commercial operations, DenizBank also serves big businesses Belgian and Luxembourg markets. The Group offers a complete and offers its clients asset management and insurance services. range of contracts to retail, commercial and private banking
4 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 5 Group profile
customers (for both life and non-life insurance) as well as to Dexia’s public and semi-public sector clients. This is done both through a bancassurance approach and through a network of tied agents.
Ratings
The principal business units of the Group that operate on the long-term capital markets – Dexia Bank Belgium, Dexia Crédit Local and Dexia Banque Internationale à Luxembourg – are rated A+ by Fitch, A1 by Moody’s and A by Standard & Poor’s. Three European subsidiaries of Dexia (Dexia Municipal Agency, Dexia Kommunalbank Deutschland and Dexia LDG Banque) issue AAA-rated covered bonds. Managementreport statements Consolidated financial statements Non-consolidated financial
4 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 5 Key figures for Dexia Bank Belgium
Consolidated statement of income – key figures Evolution (in millions of EUR) 31/12/09 31/12/10 Change in % Result of the period
Income 2,252.4 2,447.4 195.0 8.7% Expenses (1,685.0) (1,657.0) 28.0 -1.7%
GROSS OPERATING PROFIT 567.4 790.4 223.0 39.3% Cost of risk (184.0) (26.4) 157.6
NET INCOME – GROUP SHARE 421.5 678.3 256.8 60.9%
KEY RATIOS Cost-income ratio(1) 74.8% 67.7% -7.1% Return on equity (ROE)(2) 6.0% 9.3% 3.3%
(1) The ratio between the expenses and the income. (2) The ratio between the annualised net income – group share and the weighted average of core shareholders’ equity (estimated dividend for the period
Managementreport deducted). statements Consolidated financial statements Non-consolidated financial
6 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 7 Key figures for Dexia Bank Belgium
Consolidated balance sheet – key figures Evolution (in millions of EUR) 31/12/09 31/12/10 Change in % TOTAL ASSETS 253,771 247,902 (5,869) -2.3% of which Loans and advances to customers 103,007 99,472 (3,535) -3.4% Loans and securities 47,920 42,795 (5,125) -10.7%
TOTAL LIABILITIES 248,096 242,450 (5,646) -2.3% of which Customers borrowings and deposits 77,799 82,877 5,078 6.5% Debt securities 29,437 28,958 (479) -1.6%
TOTAL EQUITY 5,675 5,452 (223) -3.9% of which Core shareholders’ equity 7,270 7,950 680 9.3% Total shareholders’ equity 5,643 5,432 (211) -3.7% Managementreport Solvency ratios – key figures (in millions of EUR) 31/12/09 31/12/10 Change SOLVENCY RATIOS Tier 1 ratio 13.8% 14.6% 0.8% Capital adequacy ratio 15.5% 15.7% 0.2% Total regulatory capital 7,748 7,780 32 Risk weighted assets 49,929 49,551 (378)
Ratings Dexia Bank Belgium (situation as at 31/12/10) statements Long term Outlook Short term Consolidated financial Fitch A+ Stable F1+ Moody’s A1 Stable P-1 Standard & Poor’s A Negative A-1 statements Non-consolidated financial
6 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 7 8 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 9 Management report
10 Transformation plan 12 Strategy 13 Corporate governance 21 Activity report 30 Evolution of the consolidated balance sheet and statement of income 33 Evolution of the non-consolidated balance sheet and statement of income 35 Risk management 50 Capital management 54 General information 57 Transparency declaration
8 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 9 Transformation plan
Throughout 2010 Dexia continued to put its transformation Reduction in the balance sheet plan into effect. At the beginning of the year the European Commission acknowledged the considerable progress made with the plan since it was launched in November 2008. On In 2010 the Dexia Group continued the balance-sheet delever- 5 February 2010 the Belgian, French and Luxembourg authori- aging policy it had begun in 2008. ties reached an agreement in principle with the European Commission regarding the Plan to restructure the Dexia Group As at 31 December 2010 the Legacy Portfolio amounted to which was approved by the new Commission on 26 February EUR 29 billion and included, among other things, the run-off 2010. bond portfolio of EUR 26 billion. Dexia Bank consolidated cut that portfolio by EUR 7 billion mainly through the sale of The impact for the bank of the undertakings made to the EUR 5.5 billion in bonds. European Commission, as well as the progress achieved through- out 2010 and at the beginning of 2011 are set out in detail Through natural depreciation in bonds combined with the ab- below. sence of new issues, it was possible to reduce the balance sheet of Dexia Bank consolidated’s Legacy Division by EUR 5.9 billion. The work of implementing the Plan last year enabled the Bank, in an unfavourable economic environment, to cut its short-term Within the Core Division, Dexia Bank consolidated also sold off funding requirements and reduce its risk profile. EUR 2 billion-worth of bonds from the ALM-portfolio. Managementreport
In total therefore EUR 7.5 billion in bonds were sold in 2010 at Disposals a loss of 0.5% on the face-value of the assets sold, resulting in a loss of EUR 34 million on the statement of income.
Under the Dexia Group’s strategy, Dexia Bank has sharpened The balance-sheet total of Dexia Bank consolidated amounted to its focus on its core activities and traditional markets. EUR 247.9 billion as at 31 December 2010, against EUR 253.8 bil lion as at 31 December 2009. In June 2010 Dexia Bank reached an agreement with EDF for the sale of its 6.13% stake in SPE which operates in the Belgian energy sector, and an agreement with Network Research Cost cutting
statements Belgium for the sale of its 51% holding in Adinfo which provides IT services to Belgian local authorities. The gains (after tax) from these sales amounted respectively to EUR 69 million in the case In order to maintain the focus of the Group’s profitability on its Consolidated financial of SPE and EUR 14 million in that of Adinfo. These transactions main branch networks, Dexia Bank has announced its aim of were part of the Agreement reached with the European reducing its cost base by EUR 116 million by the end of 2011. Commission which stipulated that the holdings should be sold before 31 December 2010. At the end of December 2010, costs amounted to EUR 1,421.9 mil lion (not including Dexia Insurance Services), down by EUR 115 mil lion since the end of December 2008. Costs in 2008 and in Legacy Portfolio Management 2010 were seriously affected by the costs of restructuring. Those Division apart, costs have fallen by EUR 107 million.
At the beginning of 2010 Dexia brought its run-off portfolios
statements Other commitments together within a single specific division, the Legacy Portfolio Management Division. The assets of the Division remain on the Bank’s balance sheet and enjoy clearly identified and allocated 1. Commitment regarding Public and
Non-consolidated financial funding. State-guaranteed funding is allocated in full to it. Wholesale Banking (PWB)
This new analytical segmentation which complies with the Dexia has undertaken to bring the lending activities of Public undertakings made to the European Commission has enabled and Wholesale Banking into line with its capacity to issue Dexia Bank substantially to improve the visibility of its main covered bonds and to maintain the level of risk-adjusted return business lines. on capital (RAROC) at not less than 10%. In 2010, the new commitments amounted to EUR 4.6 billion (for Dexia Bank, subsidiaries included) and to EUR 4.1 billion (for Dexia Bank, subsidiaries non included) and, for the business line as a whole, the 10% RAROC level was observed.
10 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 11 Transformation Plan
2. Restrictions on dividends and hybrid instruments
The Agreement with the European Commission imposes certain restrictions on dividends and hybrid instruments.
Thus until the end of 2011 Dexia may not pay out any cash dividends: any dividends it pays out must be in the form of new shares.
Likewise, until 31 December 2011 Dexia may not approve the distribution of dividends by companies over which it has direct or indirect control where such distribution of dividends might result in the payment of a coupon on hybrid Tier 1 or Tier 2 instruments to anyone other than Dexia or its subsidiaries. That implies that for the accounting year 2010 Dexia Bank may not pay its shareholders any dividend. Naturally the Bank must honour its commitments to holders of financial instruments where it has a contractual obligation to pay a dividend, subject however to the restrictions imposed by the European Commission. Managementreport statements Consolidated financial statements Non-consolidated financial
10 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 11 Strategy
Dexia Bank’s strategic objectives: ●● In the field of Public Banking: Dexia Bank aims to confirm far-reaching aims for 2014 its position as market leader through a business model offering a full range of products and a sound branch net- work. Dexia Bank’s strategy follows that of the Dexia Group. Under ●● In the field of Corporate Banking: its aim is to become the the new banking environment, Dexia Bank has set itself partner of choice for medium-sized businesses with a turn- the target by 2014 of completing its financial restructuration, over or balance sheet of between EUR 10 million and EUR consolidating and expanding its dense network of commercial 1 billion and to become a major operator for big businesses franchises and giving itself an improved business model. with a turnover or balance sheet of EUR 1 billion or more. ●● In the field of project finance: to consolidate the company’s Dexia Bank’s far-reaching plan seeks to establish: franchises in the public-private partnership (PPP), transport, energy and environment sectors. ●● a retail and commercial bank at the service of its customers and a financial partner of choice for local authorities, the Refinancing will be mainly achieved through the issue of covered social profit sector and the business community; bonds and by customer deposits. ●● a bank with a robust financial structure; ●● a bank committed to business excellence. 2. A robust financial structure and a greatly reduced Legacy Division Managementreport 1. A portfolio of business lines that have been recast around the retail and In order to meet the undertakings made in the Agreement commercial bank supported by a sound between Dexia SA and the European Commission on the franchises reduction of its balance sheet, Dexia Bank helps in the imple- mentation of the assets sale plan, subject to market conditions. Dexia Bank ranks among the top three retail and commercial Between the end of 2008 and the end of 2014, the Legacy banks and has a branch network that covers the entire country. Division will be reduced through a combination of substantial It is also the bank of choice when it comes to asset management. deleveraging and natural depreciation. By 2014, the assets still in the portfolio will be mainly long-term assets for which In the new banking environment, the retail and commercial Dexia has an acknowledged expertise – loans to the public bank aims by 2014 to: sector, the utility sector and project finance – and good credit
statements quality. ●● free up its growth potential; ●● recover its market share, in particular with regard to asset At the same time, Dexia Bank takes whatever measures are Consolidated financial management and small and medium-sized businesses; necessary to reduce its short-term funding needs. ●● become a benchmark for bank customer satisfaction. Dexia Bank will continue to seek to reduce its costs in order to To achieve that objective, an investment plan was drawn up in achieve an operating ratio of below 65% by 2014. 2009 involving different aspects: 3. A business model that has undergone ●● the deployment of a new branch model based on the “open profound change branch” concept which makes it possible to improve the specialised service provided in the branch thanks to a cash Various measures have been taken to reduce the cost base, management system that uses the latest technology; including: ●● the realignement of the Dexia brand focusing on trans statements parency both in products and customer relations and on the ●● the sale of or cut-back in non-strategic activities and, in adaptation of the system of customer segmentation; particular, the geographical focus of the Public and Whole- ●● a new sales approach adapted to the specific needs of sale Banking business line;
Non-consolidated financial customers and based on specialist sales teams; ●● the search for gains in efficiency and the strengthening of ●● an approach involving the development of Direct Sales. synergies within the Dexia Group.
There is still a place for the Public and Wholesale Banking Improving the operational efficiency of the various business business line in the company within the limits imposed by lines remains a priority. the geographical focus on traditional markets and subject to compliance with strict profitability standards. In that respect Dexia Bank has set itself the following targets for 2014.
12 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 13 Corporate governance
Composition of the Management At 31 December 2010 the Board of Directors had the following Board and the Board of Directors membership: Chairman 1. Management Board Marc Deconinck Mayor of Beauvechain 1.1. Composition The Management Board has a maximum of nine members who Vice-Chairman have all acquired experience in the banking and financial sector. Jean-Luc Dehaene The members of the Management Board form a college. Chairman of the Board of Directors of Dexia SA
At 31 December 2010, the Management Board of Dexia Bank Members had the following membership: Stefaan Decraene Chairman of the Management Board of Dexia Bank SA, Chairman Member of the Management Board of Dexia SA Stefaan Decraene Xavier de Walque Vice-Chairman Vice-Chairman of the Management Board of Dexia Bank SA, Xavier de Walque Chief Financial Officer, responsible for Finance, Research and Managementreport Balance-Sheet Management Members Ann De Roeck Ann De Roeck Benoît Debroise Member of the Management Board of Dexia Bank SA, Dirk Gyselinck Secretary General, Head of the Compliance, Legal and Tax Marc Lauwers Departments, the Department for Wealth Analysis & Planning Roger Leyssens and the General Secretariat & Participations Jean-François Martin Luc Van Thielen Benoît Debroise Member of the Management Board of Dexia Bank SA,
1.2. Responsibilities Head of Treasury and Financial Markets statements The Board of Directors has delegated the management of banking business to a Management Board created among its Dirk Gyselinck members. The Management Board operates as a college and Member of the Management Board of Dexia Bank SA, Consolidated financial can distribute its tasks among its members. Head of Public and Wholesale Banking
The Management Board is responsible for the effective leader- Marc Lauwers ship of the Bank within the general policy guidelines laid down Member of the Management Board of Dexia Bank SA, by the Board of Directors and in accordance with the strategy Head of Retail and Commercial Banking of the Dexia Group. Roger Leyssens 2. Board of Directors(1) Member of the Management Board of Dexia Bank SA, Head of Human Resources Management 2.1. Composition In accordance with the Articles of Association, the Board of Jean-François Martin statements Directors has a maximum of twenty-seven members, of whom Member of the Management Board of Dexia Bank SA, nine at the most are also members of the Management Board. Chief Risk Officer Non-consolidated financial At 31 December 2010 the Board of Directors of Dexia Bank Luc Van Thielen consisted of twenty-six members, of whom nine are members Member of the Management Board of Dexia Bank SA, of the Management Board. The Board of Directors includes Chief Operations Officer, Head of IT, Operations, Facility an independent director who is also a member of the Audit Management and Organisation Committee.
(1) Article 2 of the law of 6 August 1931 (Belgian Gazette of 14 August 1931) forbids ministers, former ministers and State Ministers, as well as members or former members of Legislative Assemblies to mention their status as such in the deeds and publications of profit-making companies.
12 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 13 Corporate governance
Robert de Metz In addition, the Board of Directors carries out the following Executive Director of La Fayette Management Ltd functions required by law and under its Articles of Association:
Wivina Demeester ●● the appointment of the Chairman, Vice-Chairman and Consultant, independent director and, since 2 August 2010, members of the Management Board and the co-opting of Chairman of the Audit Committee in succession to Bruno Flichy directors to the Board of Directors; ●● the decision to grant discharge to the members of the Patrick Develtere Management Board and the advisory committees set up by Chief Executive Officer of the ACW it (in particular the Audit Committee); ●● the decision to pay an interim dividend; Thierry Jacques ●● the fixing of the compensation package for the members President of the Mouvement ouvrier chrétien of the Management Board and the aforesaid advisory committees; Patrick Janssens ●● the drafting of the agenda for the Ordinary Shareholders’ Mayor of Antwerp Meeting and for any Extraordinary or Special Shareholders’ Meetings; Marc Justaert ●● the decision to convene the Shareholders’ Meeting. President of the Fédération des mutualités chrétiennes The Board of Directors also carries out tasks relating to the Serge Kubla company, and in particular: Mayor of Waterloo ●● the drawing up of the financial statements which must give Patrick Lachaert a true and fair view of the assets, the financial situation and Lawyer and Municipal Councillor for Merelbeke the annual results of Dexia Bank; ●● the assessment of how the Board of Directors functions; Pierre Mariani ●● the supervision of the management and the evaluation of Chief Executive Officer and Chairman of the Management Board the management structure and the organisation; of Dexia SA ●● through activity reports, the examination of the findings of Managementreport the audit, compliance and risk departments and the findings Luc Martens of the Banking, Finance and Insurance Commission and the Mayor of Roeselare Auditor; ●● the evaluation of the existence and functioning of internal Claude Rolin audit systems, including the proper identification and Secretary General of the Confédération des syndicats chrétiens management of risks and the reliability of the financial de Belgique reporting system; ●● monitoring the existence and operations of the functions of Francine Swiggers proper independent supervision, internal audit, compliance Chairman of the Management Board of the ARCO Group and risk; ●● ensuring that the Auditor is able to do his job properly;
statements Bernard Thiry ●● the evaluation of the performance of Dexia Bank against Chairman of the Management Board of Ethias plans and budgets. Consolidated financial Tony Van Parys For particular tasks the Board of Directors may seek the Lawyer and Municipal Councillor for Ghent assistance of the Audit Committee.
Jean-Jacques Viseur 2.3. Activities of the Board of Directors Mayor of Charleroi In addition to the business for which it is normally responsible (such as the monitoring of the quarterly results, the co-option 2.2. Remit of directors, the decision to convene the Ordinary Shareholders’ The Board of Directors is a collegial body with the task of Meeting, the minutes of the meetings of the Audit Committee), defining the general policy of the Bank on the one hand and the matters considered by the Board of Directors during 2010 of properly supervising the business of the Bank and the included the following: management carried out by the Management Board on the statements other. ●● the strategy concerning Public & Wholesale Banking for Dexia Bank; “General policy” means: ●● the transformation plan and its impact on the Bank;
Non-consolidated financial ●● the progress of negotiations between the social partners ●● defining the strategy of Dexia Bank within the strategy guide- over the transformation plan; lines drawn up by the Board of Directors of Dexia SA and ●● the policy regarding human resources; determining aims and values; ●● the Agreement with the European Commission on the ●● approval of projects, financing plans and budgets; restructuring of Dexia; ●● approval of major legal structural changes; ●● the Dexia Group’s compensation policy; ●● responsibility for relations between the company and its ●● the Code of Ethics and the rules governing personal transac- shareholders. tions in Dexia financial instruments;
14 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 15 Corporate governance
●● Dexia Compliance Policy : charter and integrity policy; Dexia Bank has requested the Committee for Systemic Risks ●● the sale of Crédit du Nord; and System-relevant Financial Institutions (CSRSFI) to exempt ●● the closure of the London branch; it from the need to set up a Compensation Committee within ●● the transfer of the subsidiary Dexia Real Estate Capital Dexia Bank, empowering, instead, Dexia SA’s Compensation Markets to Dexia Crédit Local; Committee to carry out the Bank’s Compensation Committee ●● the sale of Adinfo; duties and to regularly report back to the Bank. The Bank’s ●● the Bank’s Risk Appetite Framework; Board of Directors decodes on compensation for the Bank’s ●● insurance: business plan and results; Management Board on the basis of advice submitted to it by ●● the update of the Memorandum of Good Governance; the Compensation Committee and the Banking, Finance and ●● the update of the Group’s policy to guarantee the inde- Insurance Commission (the CBFA). pendence of auditors; ●● the Bank’s liquidity situation; Dexia Bank has no Appointment Committee. In order to meet ●● Dexia Bank’s budget for 2011; its responsibilities in that regard, the Board of Directors itself ●● monitoring the progress of the most important cases. takes care to avail itself of directors possessing the qualities essential to the running of a financial institution. The Board of Directors presents to the Ordinary Shareholders’ Meeting the Changes to the composition of the prospective directors it has selected on the basis of a defined Board of Directors skills profile. 1.2. Composition Mr Jozef Gabriels tendered his resignation as vice-chairman The Appointment and Compensation Committee of Dexia SA and director of Dexia Bank with effect from 1 January 2010. consists of 3 to 7 non-executive directors including the Chair- On 26 February 2010 the Board of Directors decided to co-opt man of the Board of Directors of Dexia SA. Most of the members Mr Luc Martens as a director of Dexia Bank to replace Mr Jozef are independent directors. Gabriels. Mr Luc Martens was appointed definitively at the Ordinary Shareholders’ Meeting on 28 April 2010 for a maximum That Committee has the requisite expertise regarding the term of office of 4 years ending after the Ordinary Shareholders’ compensation policy. The Chief Executive Officer of Dexia SA Meeting of 2013. may attend the meetings of the Committee but he cannot be a member of it (since he has an executive function). Managementreport Mr Bruno Flichy tendered his resignation as an independent director of Dexia Bank with effect from 27 May 2010. The Board At 31 December 2010, the Appointment and Compensation of Directors decided to appoint in his place for a temporary Committee of Dexia SA had the following members: period Mr Robert de Metz as a director of Dexia Bank with effect from 27 May 2010. Mr Robert de Metz’s definitive Chairman appointment will be submitted for approval by the shareholders Jean-Luc Dehaene at the Ordinary Shareholders’ Meeting of 2011. Chairman of the Board of Directors of Dexia SA and an independent director of Dexia SA Mr Jan Renders tendered his resignation as a director of Dexia Bank with effect from 6 September 2010. On 14 September Members
2010 the Board of Directors decided to co-opt Mr Patrick Christian Giacomotto statements Develtere as a director of Dexia Bank to replace him with effect Independent director of Dexia SA; from 14 September 2010. Mr Patrick Develtere’s definitive Consolidated financial appointment will also be submitted for approval by the share- Francine Swiggers holders at the Ordinary Shareholders’ Meeting of 2011. Director of Dexia SA and Dexia Bank SA;
Augustin de Romanet Advisory committees set up by the Director of Dexia SA;
Board of Directors Francis Vermeiren Director of Dexia SA; 1. Compensation Committee Catherine Kopp 1.1. Derogation Independent director of Dexia SA. On 26 February 2010 the Board of Directors approved the statements Dexia Group’s new compensation policy in pursuance of the 1.3. Compensation of members of the Circular of 26 November 2009 by the Banking, Finance and Management Board
Insurance Commission on the recommendation regarding the 1.3.1. Introduction Non-consolidated financial adoption of a sound compensation policy in the banks. That 1.3.1.1. Procedure compensation policy was adapted to the new Circular by the The compensation of members of the Management Board is Banking, Finance and Insurance Commission of 14 February fixed by the Board of Directors of Dexia Bank SA on proposals 2011 and approved by the Board of Directors on 3 March 2011. from the Appointment and Compensation Committee.
The Appointment and Compensation Committee analyses the levels of compensation of members of the Management Board having regard to compensation granted in other companies in the sector.
14 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 15 Corporate governance
In this respect, compensation consultants are used to obtain The compensation policy applicable to compensation paid from information on salary developments on the labour market for 2011 on the one hand states the general principles applicable the financial sector. to all members of staff of the Dexia Group. On the other hand, observing the principle of proportionality, it contains specific In order to offer compensation in line with the market, every provisions, exclusively applicable to an identified group as being two years the Appointment and Compensation Committee asks likely to impact the risk profile of the Dexia Group by virtue of for a benchmarking study. This study was carried out in 2010 the nature or level of their functions and/or compensation. with the support of Towers Watson, a specialist external consultant. 1.3.1.3. Orientations adopted by the Board of Directors in accordance with the regulations The Appointment and Compensation Committee determines Considering the guidelines in particular included in the Royal the reference group of companies to be included in the bench- Decree of 22 February 2011(1), the Board of Directors reviewed mark and the positioning of Dexia vis-à-vis that reference group. the balance of the compensation packages of executives and senior management of the Group. On analysing this benchmark, as regards members of the Management Board of Dexia Bank SA, the Appointment and That revision aimed to reduce the incentive to take excessive risks Compensation Committee makes a proposal to the Board of which might assume recourse to variable compensation which Directors on any increases in fixed compensation and, if neces- is disproportionate in comparison to the fixed compensation. sary, adjustment of the extent of variable compensation and any changes justified by market developments. It will also enable the extent of variable compensation to be reduced considerably, without any increase of costs, whilst The year when the Appointment and Compensation Committee maintaining a competitive package for Group executives. does not require a benchmark, it will be informed by its external advisor (compensation specialist) of the evolution of the 1.3.2. Compensation executive compensation market. 1.3.2.1. Fixed and variable compensation The compensation of members of the Management Board 1.3.1.2. Regulatory context consists of a fixed part and a variable part. The compensation of executives of companies in the financial Managementreport sector has been subject to numerous regulations over the last The fixed and variable compensation of members of the two years. Management Board constitutes a whole from which will be deducted any director’s fees or percentage paid to a member The Board of Directors immediately undertook to observe this of the Management Board by a company in the Dexia Group regulatory framework as it evolved on the basis of national and or by a third-party company in which a mandate is performed international provisions aimed at strengthening Corporate in the name and on behalf of Dexia. Governance particularly in terms of compensation, as well as Circulars from the Banking, Finance and Insurance Commission. 1.3.2.2. Compensation for the year 2010 Fixed compensation Against that background, last year Dexia Bank even anticipated Fixed compensation is determined considering the nature and the obligations weighing on the financial sector in particular importance of the responsibilities assumed by each (and taking
statements regarding the deferment of variable compensation. account of market benchmarks for comparable posts).
During the year 2010, Dexia reviewed its compensation policy Bonus package Consolidated financial in the light of recent initiatives in the matter and sent the In accordance with the above, the Board of Directors decided Banking, Finance and Insurance Commission details of a global to reduce the variable compensation dependent on the perform- compensation policy for the Dexia Group complying with Belgian ance of members of the Management Board in order to reduce and European regulations as well as recent principles of sound the potential incentive to take excessive risks. compensation practice. As a consequence, the Board decided to grant a bonus package, In accordance with the regulations, Dexia Bank retroactively not affected by performance, paid quarterly to members altered the conditions for variable compensation for 2010 paid of the Management Board. This bonus will be paid for the in 2011 and as a consequence amended its compensation first time (2) on 1 April 2011 (year n+1) for the year 2010. policy with retroactive effect. The variable compensation and its extent will be reduced accordingly. statements Dexia’s compensation policy has been prepared by the Human Resources department in collaboration with the Audit, Risk and As a result, and in accordance with Article 7 of the Royal Decree Legal, Compliance & Tax departments and submitted to the of 22 February 2011, the Board is increasing the compensation
Non-consolidated financial Appointment and Compensation Committee of Dexia SA. not linked to performance which must be a significant propor- tion of the entire compensation. The proposals of the Appointment and Compensation Committee (1) Royal Decree approving the Regulations of the Banking, Finance and were submitted to the Board of Directors of Dexia SA and Insurance Commission dated 8 February 2011 concerning the compensation Dexia Bank SA which validated the Group compensation policy. policy of financial institutions. (2) This bonus will be paid, recurrently, quarterly for 2011.
16 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 17 Corporate governance
Variable compensation for the year 2010 Conditions for allocation and payment of the variable ●● Principles compensation Variable compensation will be granted up to at least 50% For 2009, the allocation and payment of variable compensation in the form of equity instruments. to members of the Management Board was subject not only These instruments will be reflected, at the beneficiary’s to maintenance of a level of performance and fulfilment of choice, by: undertakings made to the European Commission, but also to ■■ a payment in cash indexed to the share price; the non-renewal of the State guarantees on interbank loans ■■ a payment in hybrid Tier 1. and bond issues beyond 30 June 2010. ●● Deferment of variable compensation The deferred part of the variable compensation corresponds Deferment of variable compensation at a minimum to 40% of the total amount of the variable In line with the principles stated above, the variable compensa- compensation. tion of members of the Management Board for 2009 was The principle of deferment of the variable compensation is deferred over three years, the deferred part determined under applicable to the total variable compensation. the following conditions: The period of deferment is three years following the financial year during which the variable compensation is due. The ●● In n+1 (i.e. 2010), the member of the Management Board deferred part of the variable compensation will be granted receives: in the years 2012, 2013 and 2014, at one third each year, ■■ for the part not exceeding EUR 50,000: 100%; provided that the following conditions are met: ■■ for the part exceeding EUR 50,000 but not EUR 100,000: ■■ On a proposal of the Appointment and Compensation 50%; Committee, the Board of Directors will verify on each date ■■ for the part exceeding EUR 100,000: 33%. of payment of a deferred part that the performance of the Management Board has not deteriorated; ●● The member of the Management Board is likely to receive ■■ The member of the Management Board is still in the the balance, under the conditions described above, in n+2 service of the Group at the time of payment of the (i.e. 2011) and in n+3 (i.e. 2012), provided he is still in the different amounts. The deferred parts will be lost if the service of the Group on payment of the deferred amounts. beneficiary leaves the Group voluntarily or if there is a The deferred parts are lost if the beneficiary leaves the Group termination on serious grounds, unless the Board of voluntarily or there is a dismissal on serious grounds, unless Directors decides otherwise on a proposal of the Appoint- the Board of Directors decides otherwise, on a proposal Managementreport ment and Compensation Committee. from the Appointment and Compensation Committee. ●● Retention In order to index the deferred part to the share price over The instruments representing the capital in the form of which the deferment period and thus closely linking the interests the variable compensation is partially granted have a of members of the Management Board to those of the share- maximum retention period of one year. holders (from a long-term perspective), the deferred part ●● A posteriori adjustment of the variable compensation was converted into a number of Dexia shares, on the basis The variable compensation may be adjusted in the case of of a benchmark price of EUR 4.253, corresponding to the poor individual or collective performance. average closing price of the Dexia share on Euronext Brussels ●● Application of these principles for 2010 over the thirty days preceding 1 March 2010. The Board of Directors has noted that the objectives of the At the time of payment of the deferred part, it is valued on
transformation plan were achieved and even exceeded in the basis of a benchmark price corresponding to the average statements 2010. closing price of the Dexia share on Euronext Brussels over As in 2009, the Board of Directors reaffirms that variable the thirty days preceding 1 March of the year of payments. compensation, for the year 2010, must be lower than Consolidated financial practice prior to the crisis for the equivalent post. Changes with regard to recent corporate governance The Board recalls that there was no stock option or free initiatives allocation of shares during 2010. As the Board of Directors reserved the right, the terms of In line with the compensation policy rules adopted by payment of the deferred part of the variable compensation the Board of Directors, the part paid immediately in cash for 2009 were revised with regard to recent principles and represents 30% of the variable compensation. The balance provisions adopted in respect of good governance and sound is deferred. compensation practice.
1.3.2.3. Deferred part of the variable compensation for Under the provisions of European Directive CRD III (1) as stated 2009 due in 2011 by the recommendations of the Committee of European Principles Banking Supervisors, the principle of indexation of variable statements The Board of Directors decided in 2009 to apply principles compensation to the share price may be limited to one half of enabling variable compensation to be linked to long-term total variable compensation.
performances. To do so, the payment of variable compensation Non-consolidated financial will be deferred and subject to certain conditions to be met (1) Directive amending Directives of the European Parliament and Council over several years. The deferred part is thus linked to the dated 14 June 2006 No 2006/48/EC relating to the taking-up and pursuit of share price and is liable to adjustment in the case of poor the business of credit institutions and No 2006/49/EC on the capital adequacy performance. of investment firms and credit institutions.
16 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 17 Corporate governance
It was therefore decided that one half of the shares representing 2.3. Tasks and remit the capital to which the deferred part of the variable compen- The Audit Committee assists the Board of Directors in its task sation for 2009 relates will be valued at the benchmark price of carrying out prudential controls and exercising general on the basis of which the conversion into capital shares was supervision. initially made. 2.3.1. Financial reporting Considering the adjustment following the issue of bonus shares The Audit Committee monitors the integrity of the financial decided by the Extraordinary Shareholders’ Meeting on 12 May information provided by the company, in particular by evaluating 2010 and the evolution of the share price, the amounts paid to the accounting standards used and the criteria governing the members of the Management Board in March 2011 are reduced scope of the consolidation. It also oversees the follow-up of by 13% on their initial value. regular financial information before its submission to the Bank’s Board of Directors. 2. Audit Committee 2.3.2. Internal audit and risk management The Audit Committee, set up on 18 December 2002, is an At least once a year the Audit Committee examines the effi- advisory subcommittee of the Board of Directors consisting of ciency of the internal audit and risk management systems set three non-executive directors. up by the executive management to ensure that the main risks (including the risks linked to compliance with current laws and In 2010, Mr Bruno Flichy chaired the Committee on behalf regulations) are properly identified and managed. To that end of the Board of Directors until 20 May 2010, and Mrs Wivina the Management Board submits to the Audit Committee a Demeester from 2 August 2010. report on the internal audit system and risk management.
2.1. Composition During 2010 the Audit Committee received reports on the Chairman activities of the Legal Department and on outstanding legal Mr Bruno Flichy until 20 May 2010 disputes, on the activities of the Compliance Department and Mrs Wivina Demeester from 2 August 2010 on those of Audit and Supervision, on the monitoring of credit, market (including liquidity) and operational risks, and on the Members security of the IT system. It was also regularly informed about Managementreport Mr Marc Deconinck and consulted over the transformation plan of the Dexia Group Mrs Wivina Demeester and over its implementation. Mr Robert de Metz from 2 August 2010 2.3.3. Internal audit 2.2. Independence and expertise The Audit Committee assesses the operational efficiency and In addition to having among its members an independent independence of the Internal Audit division. It also verifies the director with the individual expertise required for accountancy extent to which the management responds to the findings of and/or auditing, the Audit Committee also has within its current the Audit Department and its recommendations. In 2010 the membership a collective expertise in the fields of banking, as Audit Committee examined and approved the Annual Report well as accounting and auditing. for 2009, the Audit Plan for 2010, the Half-Yearly Activity Report for 2010 and the regular follow-up reports on the implementa-
statements On 2 August 2010, the Board of Directors decided that tion of recommendations. It also approved the updated version Mrs Wivina Demeester met the criteria of an “independent of the Dexia Internal Audit Charter and the Charter of the new director” within the meaning of Article 526ter of the Companies Investigations & Branch Audit support line. Consolidated financial Code. The Board of Directors considered that, in the light of her training and the professional experience she had gained 2.3.4. Statutory auditing of the financial in the field of accounting and/or audit when carrying out her statements and the consolidated financial past and current duties and professional activities, Mrs Wivina statements Demeester had the requisite individual skills in the field of In 2010 the Audit Committee reported to the Board of Directors accounting and/or audit. on the consolidated financial statements of Dexia Bank as at 31 December 2009, 31 March 2010, 30 June 2010 and The Board of Directors is of the opinion that the members of 30 September 2010. After considering the comments received the Audit Committee possess collective expertise in the field from the management of the Bank and the auditors, the Audit of banking as well as accounting and audit. Both Mr Marc Committee delivered a favourable opinion on the financial results Deconinck and Mr Bruno Flichy have among other things and on the facts that had influenced them. statements acquired auditing experience as members of the Audit Com- mittee of the Bank. Mrs Wivina Demeester has experience in 2.3.5. External audit function and monitoring of auditing acquired when carrying out her past and current duties auditor independence
Non-consolidated financial and professional activities. In addition, Mr Robert de Metz has The Audit Committee verifies that the auditors carry out their a thorough knowledge of the business of banking following external audits satisfactorily. the professional experience in the French banking sector he has gained in the past in different executive management roles. He The Audit Committee delivers opinions to the Board of Directors also has experience in accounting and auditing as a former on the appointment or re-appointment of auditors by the Inspector of Finances (in France) and as a member of the Ordinary Shareholders’ Meeting and on their independence Accounts Committee of Dexia SA. Mr Marc Deconinck has and pay. acquired experience in accounting and auditing through his previous position in a public utility company and through his The Audit Committee monitors the independence of the experience as Chairman and member of the Board of Directors auditors and their auditing programmes. of Dexia Bank.
18 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 19 Corporate governance
2.3.6. Supervision of the financial reporting accounting ledger at the end of the month. Amounts which process, the internal audit and risk management are not reconciled are the subject of an automatic report using systems, the financial statements and the a special programme. The decentralised accounts department independence of the auditor of Dexia Funding analyses the differences and makes any adjustments that may Netherlands be required. Since the end of August 2009 the Audit Committee has, pursuant to European Directive 2006/43/EC, assumed the role The (Belgian GAAP and IFRS) accounts are closed each month. and responsibilities of the Audit Committee of Dexia Funding An initial level of supervision is carried out by the Accounting Netherlands, a wholly-owned Dutch subsidiary and issuing Competence Centres (which have full responsibility for the vehicle for Dexia Bank. accounting ledger and the inventory). As to the activities of the Treasury and Financial Markets division, the market risk 2.4. Functioning of the Audit Committee management department is responsible for validating the The Audit Committee may demand to see any useful informa- profit and loss accounts and other items of overall income. The tion or supporting evidence and may carry out any inspection Accounting Competence Centre concerned is responsible for whatsoever. To that end it calls on the services of the Internal on-balance-sheet and off-balance-sheet accounts and for Audit department of Dexia Bank which reports to the Manage- the inventory. The auditing procedures and activities are ment Board. documented by each department concerned.
In 2010 the Audit Committee met nine times. At those meetings, A second level of supervision is carried out by the Financial Data which were held prior to the meetings of the Board of Directors, and Cost Control department in order to oversee the closure the Audit Committee examined among other things the process and ensure the centralisation and final validation of all quarterly, half-yearly and annual financial statements. the accounting data and relevant information for reporting purposes. A risk-based approach is used to determine the type Several extraordinary meetings were held in order to examine of supervision and how far it should go. For the most part the progress made with the Dexia Group transformation plan audits analyse the difference between balances and ratios, and to deliver opinions thereon to the Board of Directors. In carry out sample-based tests, examine supporting evidence and addition, a joint working party was organised with the Audit perform likelihood tests. The findings are set out in a progress Committee of Dexia SA. report to the management. The auditing procedures and activities are recorded by each department. Managementreport 2.5. Internal audit Informed by its group vision and strategy, the Dexia financial The first and second levels of supervision provide a reasonable group has established a uniform and integrated audit function level of assurance regarding the exhaustiveness, accuracy and with a support line of auditing departments in the different appropriate presentation of the accounting data in accordance business units. It applies the most exacting standards consist- with financial and prudential requirements. ently for all Dexia’s activities. The methodology and audit plan are integrated throughout the entire Group. At the level of the Dexia Group, the Finance Supervision depart- ment has been set up with the remit of financial supervision for The remit of the audit function is to promote internal supervision the entire Group. and constantly to ensure that existing auditing systems perform
effectively and are efficiently applied. statements External activities of directors – The audit function helps uphold the good reputation of Dexia Bank and maintain the effectiveness and integrity of its Article 27(2) of the law of 22 March Consolidated financial structures – values to which it attaches particular importance. 1993 on the Status and Supervision of Credit Institutions Internal Audit verifies that the risks that Dexia Bank takes in the course of all its activities are duly identified, analysed and covered. Under the Regulation by the Banking, Finance and Insurance Commission (CBFA) on the pursuit of external activities by bank directors, approved by Royal Decree on 19 July 2002, Dexia Internal audit and risk management Bank is required to disclose any external appointment held by its directors and senior managers. Dexia Bank has chosen to systems applied to financial publish such appointments in the Bank’s Annual Report, which statements is deposited with the National Bank. statements
Dexia Bank applies various internal audit and risk management
systems to its financial statements. These audits are carried out Non-consolidated financial at different levels.
Each day the inventory is automatically reconciled with the balances on the accounting ledger. This is carried out both in the set of accounts drawn up in accordance with the Belgian accounting standards and in the set of accounts drawn up in accordance with recognised international accounting standards (IFRS). The amounts of the inventory of on-balance-sheet and off-balance-sheet accounts are adjusted to those of the
18 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 19 Corporate governance
Auditor
The task of auditing the financial situation and financial state- of Deloitte as auditor for a renewable period of three years ments of the Bank has been entrusted to Deloitte Reviseurs until the close of the Ordinary Shareholders’ Meeting on d’entreprises, SC s.f.d. SCRL, represented by Messrs Frank 30 April 2014. Verhaegen and Bernard De Meulemeester. Their term of office terminates at the close of the Ordinary Shareholders’ Meeting The following table gives a breakdown of the fees paid during on 27 April 2011. The Board of Directors proposes to the 2010 to the Auditor for services to Dexia Bank and to Belgian Ordinary Shareholders’ Meeting to renew the term of office companies linked to Dexia Bank or to its foreign subsidiaries.
Deloitte Services to Dexia Bank Services during 2010 during 2010 for Belgian companies linked to Dexia Bank or for its (in EUR) foreign subsidiaries 1. Auditing of the accounts 1,309,400 2,382,612 2. Certifications - 10,000 3. Tax advice - 14,514 4. Due diligence - - 5. Other assignments (non-certification) - 21,775
TOTAL 1,309,400 2,428,901
Compliance
Dexia Bank Belgium has a centralised compliance function that In addition to its traditional task of advising the management focuses on pursuing the fight against money laundering, on and the business lines, Compliance is involved in developing its Managementreport providing advice to the management and the business lines over prudential controls which are based on a methodology that has the risks associated with their areas of activity that fall within established good track record over the past year and which its remit, and on monitoring the effectiveness of procedures are no longer confined just to the rules of conduct governing and policies in those areas. The compliance function is backed transactions in financial instruments. by a specific unit that examines projects from an IT and organisational standpoint and by correspondents in various Given the importance of the rules governing personal data – departments. from the point of view of the ever-present risk to the Bank’s good name in its business dealings – a Privacy Officer, who is The Bank is constantly on its guard against the risks of money also responsible for matters relating to professional ethics, has laundering and its related risks. Steps have been taken to bring been appointed to the Compliance department. existing procedures into line with the provisions of the new
statements “anti-money-laundering” law and with the new “anti-money- laundering” circular by the Banking, Finance and Insurance Commission (CBFA). Consolidated financial
2010 brought with it an update of the analysis of compliance risks inherent in the activities of the Bank in the different business lines. While taking into account the progress achieved with the implementation and formalisation following the entry into force of the MiFID Directive in 2007, this year will see the establishment of the priorities for the compliance function over the years to come. statements Non-consolidated financial
20 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 21 Activity report
Activity report per segment transfers and governed by Service Level Agreements based on normal commercial and market terms and conditions. An activity segment is a part of Dexia Bank that: The results of each business line also include: ●● is devoted to activities that can generate income and incur costs; ●● the commercial margin; ●● the Chief Operating Decision Maker regularly evaluates in ●● interest on operating capital: operating capital is allocated order to estimate performance and take decisions regarding to the business lines to meet their internal needs and the the allocation of resources. yield on the operating capital is used to measure each business line’s performance. Dexia has seven activity segments which are defined by their managerial approach. These segments reflect Dexia’s internal 1. Core Division organisational structure and are used by the management to make business decisions. 1.1. Retail and Commercial Banking (RCB) 1.1.1. Savings remain high On 1 January 2010 Dexia Bank changed its activity report which The economic recovery begun in the second half of 2009 is now broken down into two divisions: continued throughout 2010. However growth was modest in comparison with the spectacular collapse in 2009. The recovery Core Division, comprising the following business lines: was pulled up short by the debt crisis that assailed Greece and Managementreport Ireland and forced Spain and Portugal to introduce draconian ●● Activity segment 1 – Retail and Commercial Banking (RCB); measures to restore the health of their national budgets. The ●● Activity segment 2 – Public and Wholesale Banking (PWB); European Central Bank continued to apply a very easy-going ●● Asset Management and Services (AMS), subdivided into monetary policy and broadly provide liquidity as and when Asset Management (activity segment 3), Investor Services required. Long-term interest rates began by falling sharply but (activity segment 4) and Insurance (activity segment 5); recovered at the end of the year to the levels at which they had ●● Activity segment 6 – Group Center. been at the start. The equity markets made irregular progress throughout the year but ended it with a modest return, except Legacy Portfolio Management Division (activity segment 7), in Frankfurt where they performed exceptionally well, buoyed which brings together the run-off portfolios (PWB non-core up on the wave of strong German economic growth. Long-term
loans, bond portfolios and portfolios of run-off financial interest-bearing assets initially benefited from the fall in rates statements products). but lost a lot of ground later on. Spreads on corporate bonds narrowed considerably while those on government bonds of The Legacy Portfolio Management Division is entered on the countries suffering from extensive budget deficits and/or Consolidated financial balance sheet as a separate non-core entity with clearly identi- runaway public debt widened substantially. Small wonder then fied and allocated funding. State-guaranteed funding is that the propensity of households to save remained fairly high, allocated to this division, which means that the Core Division close to 17% of disposable incomes in Belgium. is no longer affected by it. Savings accounts are once again the favourites. But the ways The interest allocated by the Group Center to the other key savers use them differ widely. To meet their needs better, business lines and to the Legacy Division, is now related to the Dexia launched two Fidelity savings accounts: the Fidelity allocated capital and reserves, i.e.: savings account and the Dexia Internet Fidelity savings account which offers a slightly higher return but is not available from ●● operating capital in core business; branches. The particular feature of these accounts is that the statements ●● statutory own funds in the Legacy Portfolio Management fidelity premium is higher than the basic rate of interest which Division. Statutory own funds amount to 12.5% of weighted makes it more attractive to savers who can do without their risks; savings for twelve months or more. Since they were launched
●● the yield on allocated own funds measures the performance on 1 October, 32,660 such accounts have been opened with Non-consolidated financial of each key business line. balances totalling EUR 0.9 billion. This is a product that is suitable for all investor portraits. Tangible and intangible assets are allocated to the Group Center, unless they are managed directly by a commercial or Balances on all types of savings account with Dexia Bank rose financial business line. by 10% to EUR 32 billion; this represents an increase of 8% in the total investment portfolio. The fact is that most investors Relations between the business lines and in particular the are steering clear of long-term investments for the time being commercial business lines, the financial markets and the because of low interest rates. “production and services centres” are subjected to analytical
20 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 21 Activity report
Savings bonds and long-term accounts meant putting money responsibilities of each have been clearly defined, with basic away for long periods, so balances fell by EUR 1 billion to and more detailed services being provided by the Private EUR 12 billion and EUR 1.5 billion respectively. Banking Officers in the branches, assisted by experts at regional level. In other words, a strategy based on local skills Confidence in the financial markets has not yet returned, as can with regional expertise. be seen from the persistent fall in funds invested in unit trusts and Branch 23 products (EUR -1.6 billion). Sales of Branch 21 2010 was a good year for Private Banking: 47,000 customers products reflected the demand for security, with balances enabled the volume of assets under management to increase increasing from EUR 8.5 billion to EUR 9.6 billion, mostly during by EUR 1.5 billion to EUR 26 billion. The lion’s share in the the period of reduced entry fees (April 2010). product-mix is still taken by cash investments, representing 24% of the total. Bond issues (through Dexia Funding Netherlands) also did well (+17%) reaching EUR 12 billion as at 31 December 2010. Since 1.1.4. Lending up, thanks to low interest rates October, sales of structured products have steamed ahead. As The continued application of the easy-going monetary policy far as the customer is concerned, the portrait-based range offers made it possible to keep short and long-term interest rates very a viable alternative to the persistent sluggishness of interest low. This was good for lending because demand for loans rose rates. as the economy improved. Loans to businesses showed a modest rise (up 7.8% until November) after the sharp decline Young parents are regularly kept informed of the benefits of in growth in 2009 and the increase of over 15% in 2008. It opening a savings account for their child and of the ways in was above all small and medium-sized businesses which which they can build up a longer-term capital for their children traditionally rely more heavily on bank lending that increased when they reach the age of maturity. These include Astera their demand, unlike big businesses which have easier access Junior (an automatic safe investment in savings bonds), Dexia to the international money and bond market. Mortgages rose Life Junior (savings insurance) and Save Plan (a dynamic invest- strongly (by 6.3% until November) thanks to low interest rates, ment in unit trusts without any capital guarantee). the fall in VAT on residential housing, energy-saving premiums, the maintenance of tax benefits as well as to the absence of 1.1.2. Investor portraits simplify investments any serious correction to house prices, or tax increases and/or Since investment is a complex issue, Dexia Bank launched a new benefit cuts in an endeavour to restructure the budget. The Managementreport approach to it on 7 June 2010. Not only is the new approach increase in consumer loans was moderate, reflecting the much more attuned to the way in which investors regard their relatively low level of spending by households and the still very investments, it also responds to the requirements of the law high savings ratio. (including the MiFID regulations (Markets in Financial Instru- ments Directive)). There are different degrees of risk appetite With the recovery in the mortgage market, Dexia Bank adopted when it comes to capital and returns. These have been reduced an aggressive strategy to highlight its role as a specialist in such to four “investor portraits” which reflect an ascending order lending, offering new mortgage customers in September an of risk appetite: fixed, protected, tactical and dynamic. An opportunity, under certain conditions, to win a cheque for investor opting for a particular portrait, therefore automati- EUR 500 to complete their house or carry out an energy audit. cally accepts a lower portrait. The volume of outstanding mortgages rose from EUR 18 billion at the end of 2009 to EUR 19 billion at the end of 2010. Whereas
statements Each investment product is from now on tagged with an variable-rate mortgages were a popular option at the beginning indication of the investor portrait to which it is best suited. The of the year, most borrowers went for fixed-rate mortgages customer can thus assess exactly what investments in the full during the last quarter. Consolidated financial range of Dexia Bank products might correspond to his portrait – and therefore his risk appetite. At each transaction in the On 4 November 2010 a campaign was started to promote branch, a proposal tailored to the customer’s portrait can be environmentally friendly investment with the emphasis on green made reflecting his investment aims and horizon. Before selling loans and eco car loans. As regards green loans, customers it to him, the branch makes an explicit assessment of the could take part in a competition on the Dexia.be website to win customer’s knowledge and experience of the proposed product. a cheque from one of our green partners (Izen, Invictus, Planet Note however that a customer wanting to subscribe to a eco, Sunswitch) and enjoy exceptional benefits offered by them. financial product through Dexia Direct Net does not receive the A “green loan” is a tailor-made loan granted to enable the advice he can get by doing so in the Dexia Bank branch. borrower to invest in one or more listed measures(2) designed to save energy in the home, provided that a registered business Since the launch, 250,000 customers have already determined carries out the work. Since the March 2009 law on the relaunch- statements their portrait; indeed, at the end of the year the number doing ing of the economy, the government has been granting a 1.5% so accelerated thanks to the advertising campaign on the radio, interest rebate on such loans. Throughout the year a series of in the papers and on the internet. local (mini) Green Days were organised to provide customers
Non-consolidated financial with information about green investments and how they can 1.1.3. Tailor-made service for Private Banking be funded. Contracts from Private Banking customers reported a record year: up 22% to close at EUR 3.8 billion. The website has an interactive tool to help customers choose the loan that suits them best. In addition there are 630 specialists In Private Banking 2010 was marked by the launching of new on hand to help in the branch and wage-earning network. services and a reorganisation of the sales structure. In practical terms the service is founded on four pillars: estate management, (1) A green loan may finance only one or more expenses mentioned in Article financial planning, investment and lending. The roles and 145/24, §1 CIR 92 as applied to the 2010 tax year.
22 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 23 Activity report
Some periods of the year can weigh more heavily than others Dexia Direct Alert is a paying service that has existed since 2007. on the family budget and a consumer loan can help overcome It sends out text messages about three areas: accounts, cards this. If a customer needs a loan, it is important he knows he and investments. The most popular message is the one providing can turn to Dexia Bank. In that respect, Dexia endeavours the account balance. Customers have to register their mobile to adopt a considered approach to the would-be borrower phone numbers and receive free operational text messages, and supports political and social measures to prevent over- e.g. when their new debit or credit card is ready for them to indebtedness, such as the European directive that came into pick up from the branch or to remind them of an appointment force on 1 December 2010. Outstanding consumer loans they may have with the Bank. amounted to EUR 1.3 billion. 1.1.7. Relationship banking at the core of our 1.1.5. Business Banking on the right track business Dexia does everything it can to offer its business customers The new distribution model introduced in 2008 continued to full financial support in their short and long-term funding, in be applied in 2010. The major part of Dexia Bank’s journey their cash-flow management and in keeping track of their towards a relationship and specialist-based bank is already financial results at all key moments. The segment currently has behind it. 187,000 customers, while the volume of outstanding Business loans rose this year from EUR 8.4 billion to EUR 8.9 billion, an A great deal of energy has been spent merging and transferring increase of 6%. branches between the networks, with 25 SCRL branch mergers taking effect on 1 January 2010 in the self-employed network. Each Business customer is placed in the hands of a “Profes- Each day Dexia Bank works to pursue its strategy through its sional Clients Advisor” who takes care of both his professional self-employed and wage-earning branch networks (846 at and private needs, such as investments, or of a “B2B Advisor” the end of 2010). Its 300th open branch was inaugurated on (business to business). 17 December 2010, designed without counters but with an open-plan information and service area to foster personalised As a longstanding partner of the health-care sector, Dexia Bank contact with the customer. is also the banker of choice for numerous doctors, pharmacists, veterinary surgeons and other health-care providers, supporting This year over 98% of investors were allocated their own its customers throughout the different stages of their private “Personal Advisor”, thereby enabling Dexia Bank to live up to and professional lives, from studies to retirement, and offers a its claim to be a relationship banker. Personal Advisors are Managementreport range of tailor-made products and services that meet their assisted by Assistant Advisors who ensure proper planning and specific requirements and so enables them to concentrate on follow up contacts with customers. their business. The “Dexia for Medical” roadshows organised in October were outstandingly successful. The Medical Contact Local satisfaction surveys showed once again this year the extent Centre is also available outside branch opening hours and can to which customers appreciate personalised contact. Where be contacted to answer practical questions. necessary the customer can be put in the hands of a specialist.
Existing cards linked to Business accounts have been converted Specialists in mortgages and insurance used their expertise to MasterCard Business cards and offer the customer greater to handle the high demand for housing loans. The main benefits, such as the combination of cards for professional and challenges for consumer credit and insurance specialists were
private use. regional organisation and the acquisition of experience in the statements new “green” product range. 1.1.6. Better management of electronic payments Under the Payment Services Directive (PSD), Europe has estab- The sales staff are responsible for seeing to it that, amid all Consolidated financial lished a series of rules governing payments in Europe. As these organisational changes, customers are properly received a result, since 1 January 2010 it is the practice to inform customers and attended to at all times. Measures have also been introduced each month of the monthly charges for their sight accounts and to contact customers with offers of basic packages appropriate additional services and to debit them each month rather than to each stage of their life: at birth, on their 12th, 16th or 18th quarterly or annually. birthday, or if they are a new customer, ...
Dexia Bank has been a full supporter of the Zoomit campaign, 1.1.8. Together to the essence the free service that enables invoices to be received and paid “Together to the essence” is one of the cornerstones of Dexia electronically. It offers several advantages including speed, ease Bank’s new customer approach, alongside the new branch of use, efficiency and respect for the environment. design and the launching of investor portraits, demonstrating how Dexia Bank’s focus is centred more than ever on the statements Online sales through Direct Sales and Services have developed customer, his needs, his dreams and his projects. rapidly. 25% of credit card applications are currently made
through Dexia Direct Net (DDN) or by telephone. There is The media campaign “Together to the essence” which was Non-consolidated financial also an interactive programme that enables the customer to launched in the spring sought to highlight certain fundamental identify the investment product in a monthly offer that fits his questions for our customers (e.g. What do you mean by “later”?). portrait. Listening to customers and meeting their essential needs form the basis of any sustainable relationship. “Together to the At Dexia Bank it is now possible to become an online customer. essence” also means that we look for solutions together – New customers are always offered the basic package comprising solutions that are made to measure, based on our knowledge a sight account, a credit card, a savings account, a standing and our expertise, that we offer in the form of no-nonsense order facility and Dexia Direct Net (DDN). products and services.
22 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 23 Activity report
1.2. Public and Wholesale Banking (PWB) People Line Public and Wholesale Banking (PWB) is the business line that had a remarkably successful year. In collaboration with its manages relations with customers in the public and the social colleagues from Ethias, Dexia Bank cornered two of the main profit sectors as well as the Bank’s Corporate Banking activities. pension insurance markets. In addition it reported some In a turbulent market environment, it produced good results as handsome successes in the hospital sector. the first signs of recovery became apparent in 2010 following the world economic and financial crisis in 2008 and 2009. The ageing of the population and its social and financial consequences is a matter of some concern to the Bank which Although the market has made a cautious recovery, pre-crisis has responded by introducing the Silver Line. It provides a levels have yet to be reached. Investments have recovered framework under which this year the Bank drew up for the slightly. Businesses took advantage of the low interest rates to benefit of the local authorities a particularly well documented (re)finance themselves (in part) through the financial markets. Socio-Demographic Profile setting out in detail the infrastruc- The public and the social profit sectors continued to invest and tural developments that will be required to meet the needs had little difficulty in raising the funds they required. of their respective populations over the next fifteen years. A similar profile intended for institutions in the social profit Given its concern for sustainable development and its desire to sector is also in preparation. Here again, Dexia Bank demon- remain a loyal partner on the Public and Wholesale Banking strates its wide-ranging financial commitment to society in the market, Dexia Bank provided solutions that met the investment long term. needs of the local authorities, the social profit sector, the business sector and project sponsors. With our PWB customers With regard to conventional products, Dexia Bank achieved we seek to tackle their core requirements and partner them in good results in 2010 in collecting funds and granting loans. their endeavour to bring about the long-term development of society and the advancement of those who operate in it. Demand for lending on the other hand was down on previous years because of the budgetary restrictions imposed by locally 1.2.1. Public Banking and the social profit sector elected representatives. As a result the volume of outstanding The teams of bankers continued their personalised approach loans increased by less than anticipated. to customers. With the help of experts in the Bank and its subsidiaries, they are able to offer customers the full range of 1.2.2. Corporate Banking Managementreport conventional and innovative products and services they need On the corporate market, too, the initiatives launched by to manage their finances and projects effectively. the Bank did much to further its progress. The well-balanced management of risk helped cut lending losses, while income In 2010 the range of innovative products and services was increased, sustained by a recovery in (international) commercial structured into six “Lines” reflecting Dexia Bank’s commitment business with corporate customers. The excellent cross-selling to sustainable and social development. strategy combined with a pro-active, targeted approach to the market enabled us to differentiate between lending and Immo Line non-lending income. covers a wide assortment of mechanisms for financing real estate, ranging from conventional funding solutions to public- Dexia Bank was able to continue to enjoy the full confidence private partnerships (PPP) that are tailored to the size of our of its corporate customers, thereby achieving a substantial
statements public and social profit sector customers and the level of support increase in overall funding; this could be attributed in no small they require. A number of so-called “alternative” funding measure to the new flexible forms of investment offered to mechanisms were inaugurated in 2010 and their success should corporate customers. Consolidated financial continue throughout 2011. Dexia Bank also confirmed its loyalty to the business sector and Energy Line saw its overall lending portfolio increase, even though many has been gradually building up to its cruising speed and at the large customers financed themselves in part on the financial very end of the year launched a new product to promote markets. energy efficiency in buildings. The 100th Green IT deal was also concluded in 2010 – a form of leasing for sustainable The level of international business increased in 2010. The impact IT equipment which Dexia Bank pioneered two years ago. of the crisis could still be seen, but it also created opportunities. Imports and exports by corporate customers gradually picked Social Line up and there is every reason to believe that the trend will be is a range of products which provides 200,000 socially dis- continued throughout 2011. statements advantaged people in Belgium with modified banking services that are every bit as effective and user-friendly as those offered In that connection, there was an increase in dealing room to the general public. 2010 merely served to confirm the success activities.
Non-consolidated financial encountered by Social Line, use of which is regrettably – because of the present crisis – set to increase in 2011. The efforts deployed by the Bank to help its customers enabled it to develop its asset-funding business (leasing, commercial IT Line finance, autolease). once again this year produced a string of innovations in the field of investment and decision-making through the Messaging and 1.2.3. Specialised activities within PWB Market Rates Watch communication tools. 2011 will enable 1.2.3.1. Real Estate Dexia Bank to consolidate their success and continue the In 2010 special attention was given to enhancing support for support it gives its customers in the new environment of the public and private sector initiatives of whatever kind in the Single Euro Payments Area (SEPA). property sector, particularly with reference to the trend in
24 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 25 Activity report
sustainable development. Sustainable development was also a infrastructure projects and ship mortgages as well as export major factor in many of the real-estate projects undertaken by finance and the funding of a wide range of projects including the public sector. public-private partnerships.
On its side, the Bank supported these initiatives by proposing The financing of renewable energy projects is the spearhead of various products in its “Immo Line” and “Energy Line” ranges. the Bank’s commercial strategy and involves projects in the fields of wind, solar and biomass energy. The most spectacular Public & Social Real Estate transaction of 2010 in this sector was the record funding of Only modest progress was made in public-private partnerships EUR 1.289 billion for the second and third phase of the (PPP) and (Design) Build Finance (Maintain) ((D)BF(M)) projects, C-Power Belgian off-shore wind farm – the largest funding thanks in large part to the economic crisis that forced local operation ever carried out in this sector. As in the case of the authorities to revise their budgets. In addition to that, a number first phase of C-Power and the Belwind project, Dexia Bank of specification lists published did not always turn out to be acted as the Mandated Lead Arranger for this exceptional project that “bankable”. Nevertheless the Bank considers it its funda- and took on the additional tasks of Global Facility Agent, mental task to support various public and private initiatives and Security Agent, DSRA Bank, Insurance Bank and L/C issuing so endeavours to standardise this form of market consultation Bank sponsor. so that public sector investments which are essential to the economy can be made under market conditions. In 2010 Dexia Bank was also heavily involved in project finance and in developing a series of public-private partnership projects On the sidelines, but equally important is the participation by in the broader infrastructure. the Bank in the syndicated funding of DBFM to build schools in Flanders. In port and shipping, the emphasis over the past 18 months has been on the intensive management of the portfolio to ensure Project development the continuity of companies. When obtaining new business, In 2010, too, projects by the property developer Deximmo were the Bank adopts a selective approach aimed at partners with deliberately concentrated in the residential housing sector. So whom it can develop a genuine overall banking relationship in the risk profile is limited as the persistently low level of interest a win-win situation for both parties. rates continues to make the building of houses and apartments in the right places an attractive proposition. The rules on In the field of Acquisition Finance, Dexia Bank strengthened its Managementreport energy saving meant that Deximmo had to continue to innovate: market position in 2010 through some twenty operations. Most eco-sites, low-impact housing, sustainable materials have of these were in the medium segment with corporate contract become the criteria by which they are judged. As new techniques values ranging between EUR 25 and 100 million. The most have become standardised, prices have fallen substantially, spectacular transaction was the funding of the takeover of reducing the premium on such “econ-investments”. A large 50 Hertz Transmission (a German network) by a consortium number of building contractors have taken the message on comprising the manager of the Belgian transport electricity grid board and moved with the trend. Elia, as the industrial partner, and the Australian IFM. Here Dexia Bank acted as one of the four Mandated Lead Arrangers. Thanks to its particular knowledge of these two segments of the market (public and private), Deximmo puts itself forward 1.2.3.3. Corporate Finance
as the go-between between the public and the private sector Dexia Corporate Finance maintained its strategy in 2010 of statements mainly in PPP projects involving large urban developments. focussing on its key sectors, (renewable) energy, real estate, health and the infrastructure – a strategy that enabled it to Real Estate Finance conclude a resounding series of major Belgian and inter- Consolidated financial Like the year before, risks were cut to the absolute minimum, national M&A transactions in the field of conventional and given the difficulties on the market in office premises. As a renewable energies during the year. result, the Bank was able to direct its lending towards the best projects with top quality professional counterparties, so there Given the general downturn in the economic climate and the were no unpleasant surprises and it was possible to side-step surge in market volatility, many companies decided to strengthen the problems currently besetting the market (created above their capital base by issuing shares to the general public. Dexia all by the wave of investors in Ireland). The impact of the Corporate Finance assisted several companies in these opera- European energy laws on Loan to Value required the Bank to tions not only in the energy sector, advising on capital increases be extra cautious. in real estate mutual funds and on private investments by companies in other sectors as well. The building of houses and apartments maintained its level of statements previous years, with correctly-priced and well-located projects 1.2.3.4. Dexia Private Equity proving easy to sell. However a level of price stagnation has In 2010 Dexia Private Equity (DPE) continued like the year before
also been factored in here and it has not always been possible to focus its investments on its key sectors – infrastructure, Non-consolidated financial to recover from the final customer the additional cost of work utilities (mainly renewable energy), clean technologies and real to increase energy efficiency. And that has put pressure on estate. In future DPE will continue to aim towards a mix of developers’ margins, a fact which the Bank has had to take into partnership models, investments in funds and direct investments. account. New infrastructure investments were made in Belgium and the Netherlands through the DG Infra+ partnership. In addition a 1.2.3.2. Structured Finance second fund was launched in partnership with GIMV – DG Infra In 2010 Dexia Structured Finance continued to present itself as Yield Fund – with an initial closing of EUR 110 million. The a leader in its various fields of activity ranging from syndicated Revive Brownfield Fund was created with Impact Capital and lending and the raising of capital to the financing of seaport investments were made in clean technologies.
24 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 25 Activity report
During the year Dexia Private Equity sold a number of its 1.3. Dexia Insurance Services (DIS) participations, in particular its holding in SPE to EDF. Overall, Judging by its sales figures, 2010 was a good year for Dexia 2010 was a good year for Dexia Private Equity: it exceeded the Insurance Services. Life premiums amounted to EUR 3 billion, fixed return on equity and maintained the integrity of its assets an increase of 64.1% on 2009. Non-life premiums amounted under management without any loss in accounting value. to EUR 503.8 million, an increase of 3.7% on 2009.
1.2.3.5. Debt Capital Markets Even if the crisis inflicted only minor scratches on company DCM (Debt Capital Markets) activities cover all activities where brands, there is no doubt it left scars that will be felt for a long the borrower (issuer) goes directly to the financial markets and time. However 2010 also brought with it recovery, stabilisation where the bank acts as an intermediary in the setting up of a and renewed demand. programme or a standalone bond issue (Arranger), in the placing of bonds (Book runner/Dealer) and in providing the The financial markets are still difficult, with low returns and the financial servicing (Issuing, Paying & Listing agent). ever-present need for controls to limit risks and protect the customer. Against this difficult and highly competitive back- Following the sharp increase in DCM activity in 2009 as a result ground, Dexia’s insurance arm produced good results. In the of the banking crisis, Dexia Bank noted a strong demand in wake of the crisis, customers are again on the lookout for 2010 for DCM products by public and semi-public sector issuers stability and certainty and so put their faith in big insurance as well as corporates and utilities, as can be seen from the brands like Dexia, AP Insurance and Corona. different transactions in which Dexia Bank was involved during the year. Existing issuers followed the path already taken to the 1.3.1. Dexia Insurance Belgium (DIB) capital markets, while new issuers took their first steps towards 1.3.1.1. Retail alternative finance in order to diversify their funding sources, Life spread their loan redemption dates or refinance existing loans. In 2010 new business in life and equity-linked insurance continued its upward trend. After a cataclysmic 2008, 2009 As regards investors, 2010 saw a (further) strong demand for saw a clear recovery with the financial markets gradually paper issued by our Public and Wholesale Banking customers returning to normal. However sales of life and equity-linked from both institutional and retail investors (personal savers), insurance policies suffered from the greater interest shown by the latter demonstrating a clear preference for corporate bonds Dexia Bank customers in savings accounts and savings bonds. Managementreport as an alternative to and/or to augment the relatively low return Demand for equity-linked insurance picked up again in 2010. on conventional savings products. Whereas in 2009 institu- tional investors were massively seeking refuge in public sector That year Dexia Bank also established a system of collaboration bonds, 2010 witnessed in the wake of the European debt crisis with some twenty selected AP agents with the aim of further a slide towards paper by, among others, utility issuers. improving insurance services to small businesses and the self- employed. Dexia Bank is committed to continuing to play a frontline role for its key customers by offering DCM products that generate Dexia Bank’s premium income doubled to EUR 1.4 billion. added value by maintaining a long-term relationship with its issuer customers. That commitment was confirmed on several “Dexia Life Horizon” won the “Decavi Innovation Award”. This occasions throughout 2010 when Dexia Bank acted as an is a mix of Branch 21 and Branch 23 products that provides a
statements Arranger and Lead Manager for various programmes and bond response to the growing need for pension plans that supplement issues. the three kinds of conventional pension scheme. Consolidated financial Dexia Bank thus reaffirmed its position as market leader in Non-life treasury bills issued by the public sector (regions, provinces, The improvement in the economy brought with it among other municipalities) and semi-public sector (utilities) where it acted things a rise in the number of cars on the road and an increase as dealer in 52 programmes and as arranger and agent in most. in the number of new vehicle registrations. Various sales drives enabled Dexia Insurance Belgium to achieve good growth in its Whereas in 2010 the regions and communities continued to non-life premium income in both car and fire insurance, the fund themselves mainly through commercial paper and private two main retail segments. long-term investments, in which Dexia Bank was again heavily involved, issuers in the semi-public and utility sector increas- Premium income by AP Insurance increased 3.5% to EUR 262.8 million ingly called on institutional and retail investors. Thus Dexia Bank (including small businesses and the self-employed); that by participated as Joint Lead Manager and Joint Book-runner in a Dexia Bank was up 1.9% at EUR 119.5 million. statements number of major institutional and retail bond transactions and in the organisation of targeted private investments that sought In non-life, too, DIB’s efforts also paid off: AP’s Comprehensive to satisfy the needs of both issuer and investor. Insurance won the “Decavi Best Comprehensive Insurance
Non-consolidated financial Award”. In addition Dexia Bank sought to provide public social assistance centres (CPAS) and non-profit organisations (ASBL) with alter- Unfortunately 2010 also witnessed a major deterioration in native funding arrangements through bonds with the right of accident figures. Bad weather, numerous storms and widespread occupation (housing certificates), thereby generating new flooding took their toll on Fire and Car insurance. The rise in contracts. For these Dexia Bank acted as arranger and agent the accident ratio in Car insurance can also be attributed to the and made use of its own branches according to the location of bad state of the roads in Belgium as well as to an increase in the project. the number of accidents.
26 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 27 Activity report
Maintaining the balance between the increase in accidents and Corona also had a good year in respect of its life premium the increase in premiums is a task that faces insurance compa- income at EUR 17.8 million (up 10.1%), mainly thanks to nies all the time – which is why several corrective measures were the success of its funeral insurance policies sold through taken in 2010 and will be followed up in 2011. These involve funeral directors. Non-life grew by 1.8% to EUR 40.2 million, not only the assessment of policyholder quality and monitoring thanks in part to the excellent results produced by the “affinity” of the portfolio, but also premium increases and adjustments channel. to excess payments under Car, Fire and Family insurance policies. 1.3.3. Dexia Life & Pensions (Luxembourg) (DLP) In October and November, AP Insurance carried out a series of Dexia Life & Pensions (Luxembourg) (DLP) had a splendid year advertising campaigns to highlight its brand as the family with premium income amounting to EUR 1.1 billion, up 74.7% insurer always on hand to listen to its customers and give them on 2009, exceeding expectations by some way thanks in the its expert advice. main to a fruitful collaboration with Dexia Bank International in Luxembourg, both in Retail and in Private Banking. DLP 1.3.1.2. Organisations and Businesses continues to pursue its aim to become the expertise centre for For the Organisations and Businesses insurance segment, 2010 High Net Worth Individuals (HNWI). was an excellent year with premium income rising by 24.4% to EUR 183.5 million in conventional Life and by 8.3% to 1.4. Group Center EUR 81.3 million in Non-life. The Group Center encompasses all support services for the various commercial business lines. The growth can be explained by the ongoing successful collaboration with Dexia Bank Public and Wholesale Banking, Treasury and Financial Markets (TFM) not only for the public sector but also for the social profit The principal task of Treasury and Financial Markets (TFM) is to sector and the corporate market. This produced some major provide support for the two business lines in Dexia Bank by achievements such as the IRIS hospitals insurance group made suggesting quality financial products to customers of the up of four large Brussels hospitals in the social profit sector, different sales networks. In addition, TFM is essential for the the Alcopa vehicle fleet for the corporate market and various management of the bank’s long and short-term cash reserves, statutory pension schemes for local mandates (Zemst, Knokke, for developing new sources of funding and liquidity and for Damme, Éghezée, etc.) in the public sector. ensuring that the best use is made of its working capital alloca- tion. It also manages the Bank’s securities portfolio under a Managementreport 2010 was above all the year in which DIB broke through into management contract bestowed upon it by the Management the market in the “2nd pensions pillar for local authority Board. The profits made by TFM are allocated to the Legacy contractors”. As part of a cooperation agreement with Ethias, and Core segments. The Core segment includes the commercial Dexia Insurance Belgium was awarded major contracts from business lines Public and Wholesale Banking (PWB) and Retail the National Social Security Office for the Provincial and Local and Commercial Banking (RCB) as well as the Group Center. Administrations (ONSSAPL) and from the Province of Limburg. In Flanders, this represented a potential of some 102,000 con- The final features of the transformation plan launched in 2008 tractors. Dexia Insurance Belgium aims to pursue its penetration were implemented in 2010. During this last phase TFM activities of this market over the coming years. in London were stopped and transferred to Brussels. In addition Bond Trading and Fixed Income Research activities were
Mention should also be made of the arrival of the De Lijn transferred from Luxembourg to Brussels. The run-off bond statements Hospitalisation insurance scheme involving some 15,000 policy portfolio management centre remains in Dublin. holders, and the successful collaboration with specialised brokers to which can be attributed a large part of the growth In 2010, different teams were brought together under a Consolidated financial in non-life insurance in the voluntary and corporate segments. reporting and organisational structure to enable the two ratios to be managed according to the European introductory scheme. Lastly, it should be noted that the solar panel insurance scheme won the “Decavi Innovation Award”. In order to continue to cut the size of its balance sheet with a view to achieving a more general reduction in its indebtedness 1.3.2. Corona and to limit counterparty risk, Dexia Bank joined LCH-Swapclear Corona Direct, the insurance subsidiary that focuses on alterna- this year. Already a member of Repoclear, it can now use that tive sales outlets, had a very good year in 2010. In its direct central counterparty to clear its swap transactions as well. The approach to customers the importance of the internet as a standardisation and automation of transaction settlements will channel for doing business continues to grow and the task of help reduce not only capital requirements but also operational developing that remains a priority. Mileage-based insurance, risks. In the same way, membership of TriReduce, a TriOptima statements the only car insurance in Belgium under which the premium service that makes it possible to identify swap contracts ready the customer pays is related to the mileage he actually covers, for closure, will have a positive impact for the Bank and help
continues to be successful both with regard to uptake and with reduce its balance-sheet total. Non-consolidated financial regard to customer satisfaction and accident statistics. In the “affinity” business line involving collaboration with car insurance From the legal and operational point of view, special attention sales networks, all existing partnerships were extended and was devoted to the proper management of the different new partnerships formed. It now accounts for over 50% of all relations with counterparties (through outline contracts such new contracts. as the Global Master Repurchase Agreement (GMRA), the International Swaps and Derivatives Association (ISDA) and the Credit Support Annex (CSA)), to improving transactional security and to meeting the MiFID obligations (Markets in Financial Instruments Directive).
26 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 27 Activity report
In 2010 the financial markets were again subject to a high Human Resources Management degree of volatility. After two years of growth in the bond markets, thanks to the fall in interest rates, the first quarter saw 1. Key figures a recovery. Investor nervousness was exacerbated mainly by the uncertainty surrounding the solvency of various countries in the At 30 November 2010, Dexia Bank had 6,087 employees of euro zone such as Greece, Ireland, Portugal, Spain and Italy, 15 different nationalities on its pay-roll (6,618 if one includes and the lack of clarity over support plans drawn up by the non-active workers). European Central Bank in collaboration with the other member states. Equities and exchange rates were equally susceptible to ●● Seniority (excluding non-active workers): over 16% of the these stresses and proved to be highly volatile. staff has worked for the Bank for less than ten years; the average length of service is 20 years. The economic uncertainty was reflected in a low nominal rate ●● Age (excluding non-active workers): the staff of the bank which made it possible to offer “secured funding solutions”. is relatively young: in total, 19% are below the age of 35 and 34% below the age of 40. The average for men is The activities supporting the commercial business lines 45 and for women 42; overall the average age is 44. performed exceptionally well thanks to the sale of structured ●● Men/women (excluding non-active workers): the overall financial products and to the issuing and placing of bonds by distribution between male and female staff is well balanced public sector, institutional, corporate and retail customers. at respectively 53% and 47%. ●● Turnover (excluding non-active workers): 5% of the staff The financing programme was acted on and the various TFM are on fixed-term contracts. teams continued to produce good results with a marked ●● Part time: 15% of the staff work part time. emphasis on facilitating transactions and customer flows. Dexia also succeeded in putting an early end to the state 2. Training and Development guarantee of its funding at 30 June 2010 and in making a substantial reduction over the year to its refinancing operations The new distribution model makes considerable demands on with the Central Bank. the development of the skills of staff in the branches. In 2010 more than ten bank working days were set aside for participa- 2. Legacy Portfolio Management Division tion in workshops and training courses to help them meet the Managementreport challenges of the future. Staff in over 200 open branches opened The Legacy Portfolio Management Division manages the run-off in 2010 were given specific training for the “Open Branch” portfolios as well as certain non-strategic loans and off-balance- environment where processes and security procedures differ sheet commitments of the Public and Wholesale Banking substantially from those in conventional branches. business line. These portfolios are managed from Dublin. The transformation plan also required changes on the part of Since the beginning of 2010 the run-off portfolio has been staff in the head office: learning how to work with new teams, part of the Legacy Portfolio Management (LPM) Division which how to give support to new processes, ... mainly collates the contributions from the run-off bond portfolios. It also bears the state-guaranteed funding costs In collaboration with the business partners, Training & Develop- which the Core Division now no longer has to support. The ment looks for the ways and means to support and encompass
statements Legacy Portfolio Management Division pursues its policy of each change. reducing commitments and balance-sheet risks. 3. Mobile@Dexia Consolidated financial The centralised management of Legacy Portfolio Management operates in very close collaboration with Dexia Risk Management The effective and intelligent use of available office space is an Group. Legacy Portfolio Management executes the instructions ongoing challenge for the Facility Management Division. received from the Investment Committee composed of expe- rienced portfolio managers. The division works closely with the At the end of 2010 half of all central head office staff were other TFM lines to identify debt reduction alternatives and to working according to the new “Mobile@Dexia” scheme which reduce portfolio risks. involves working in a “clean desk” environment. Under this system they choose the space that best suits the job they Despite the difficult circumstances on the market, the reduction are doing: a shared office for routine office work, a small in the run-off portfolios proceeded according to plan: at the meeting room or a more partitioned office for work requiring end of 2010 the portfolio total for Dexia Bank (Brussels and greater concentration are examples of some of the possibilities statements Dublin) and Dexia Investments Ireland amounted to EUR 29 bil available, in addition to working from home if necessary. lion; EUR 5.5 billion in bonds were off-loaded during the year at a capital loss of EUR 44 million. This approach means that central head offices are able to make
Non-consolidated financial cost savings on their premises of EUR 19 million on a recurring basis.
HRM assists the process by providing intensive support for the change. Regular satisfaction surveys conducted among divisions that have adopted the scheme show that staff very quickly get used to working in this way.
28 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 29 Activity report
4. Social Initiatives for Commitment Improvement
As in 2009, Dexia Bank sought to give greater space for actions designed to develop social initiatives in order to contribute, among other things, towards improving motivation and collaboration at the workplace. Various initiatives to achieve this were taken in 2010, such as training of the management (training on support for staff on sick leave or training on how to encourage staff motivation and recognition). Dexia Bank also continued its actions to make managers and fellow staff members alike aware of their psycho-social responsibilities (such as the stress experienced in the wake of major changes) through a new intranet site devoted to well-being at the workplace and by providing tools for supporting employees (such as coaching sessions or a help-network composed of specialists).
A satisfaction survey among the staff was conducted in 2010 throughout Dexia Bank and its participating subsidiaries on stress and harassment at work. The findings will be analysed in detail in 2011 and will the subject of a report and an action plan.
5. Measures contained in the Transformation Plan
The recommended reduction in staff in 2010 (-38 FTE (full-time equivalents)) was carried out as planned, with the emphasis once again on internal mobility. This, together with a strict Managementreport recruitment policy, made it possible to achieve the reduction through retirement and natural wastage. Human Resources Management provided the necessary support, coaching and training for those internal movements.
In September a final wave of job-cuts was announced as part of the transformation plan. Before the end of 2013, the number of full-time equivalents will fall by 270. Discussions with the social partners on what support measures should accompany that additional staff reduction began at the end of 2010. statements Consolidated financial statements Non-consolidated financial
28 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 29 Evolution of the consolidated balance sheet and statement of income
Preliminary to the financial Analysis of the balance sheet statements As at 31 December 2010, the consolidated balance-sheet total amounted to EUR 247.9 billion, up EUR 5.9 billion (2.3%) 1. Changes to the scope of consolidation on the previous year.
The most significant changes have occurred during 2010 1. Debts related to the sale of Dexia Épargne Pension and the IT sub- sidiaries Adinfo, Adehis, Cevi and Logins. Dexia Real Estate At the end of 2010, “Interbank loans and deposits” amounted Capital Markets was sold within the Dexia Group, to Dexia to EUR 62 billion (-15.9%), i.e., 25.2% of the balance-sheet Crédit Local de France. Dexia Bank Belgium – London Branch total. was closed. The name of Eurco Finance UnLdt was changed to DIB Dublin Branch. “Customer borrowings and deposits” and “Debt securi- ties” (savings bonds, certificates and bonds) amounted to A detailed breakdown of the changes that took place is set out EUR 111.8 billion at the end of 2010 (+4.3%) and accounted in the Notes to the consolidated financial statements of Dexia for 45.1% of the balance-sheet total. Bank. At the end of 2010, “Customer borrowings and deposits” Managementreport The biggest changes that occurred during 2009 concerned the amounted to EUR 82.9 billion, up 6.5% on 2009. This is sale of Crédit du Nord and BCC Corporate SA. There was also principally due to an increase in balances on current accounts the founding of Wandelaar Invest SA and a stake was taken and savings accounts and to increased financing via “repo” in Société Mixte de Développement Immobilier SA. Foncière transactions. The rise was partially offset by a fall in deposits Erasme SA changed its name to Erasmus Gardens. Dexia by other financial institutions and in balances on term deposits. Insurance & Pensions Services merged with Dexia Life and Pensions and CEB Fin was absorbed by Dexia Crédits Logement. “Debt securities” amounted to EUR 29 billion, up EUR 479 mil As regards Dexia Secured Funding Belgium, Compartment 3 lion (1.6%) on 2009. The fall recorded by deposit and savings was repaid early and Compartment 4 was created. certificates is slightly higher than the increase of non-convertible bonds. 2. EU GAAP
statements 2. Loans and advances to customers The consolidated financial statements of Dexia Bank are drawn up in accordance with the IFRS standards as adopted by the As at 31 December 2010, “Loans and advances to customers” Consolidated financial European Union. The amendment to IAS 39 and IFRS 7, which had fallen 3.4% to EUR 99.5 billion. This fall is essentially makes it possible to reclassify bonds which meet the required explained by the “run-off” and “deleveraging” policy followed conditions, was applied during the first quarter to certain with regard to bonds reclassified as loans in 2008. bonds issued by insurance companies. This amendment enables “Financial asset held for trading” and “Financial assets available 3. Loans and securities for sale” to be reclassified as “Loans and receivables from customers”. Under the IFRS accounting standards adopted by the European Union, securities are presented in terms of the portfolio strategy: held for trading purposes, available for sale, mark- to-market or held to maturity. As at 31 December 2010 the total volume amounted to EUR 42.8 billion, down -10.7% statements essentially as a result of a decline of the bond portfolio in implementation of the “run-off” and “deleveraging” policy. The equity portfolio – essentially the share held by the insurance
Non-consolidated financial companies – had fallen by EUR 0.2 billion.
30 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 31 Evolution of the consolidated balance sheet and statement of income
Consolidated balance sheet Evolution (in millions of EUR) 31/12/09 31/12/10 in % Total liabilities and equity 253,771 247,902 -2.3%
Total liabilities 248,096 242,450 -2.3% Due to banks 74,119 62,368 -15.9% Customers borrowings and deposits 77,799 82,877 +6.5% Negative value of derivates 32,311 34,903 +8.0% Debt securities 29,437 28,958 -1.6% Subordonated and convertible debt 2,944 2,716 -7.8%
Total Equity 5,675 5,452 -3.9% Core shareholders’ equity 7,270 7,950 +9.3% Total shareholders’ equity 5,643 5,432 -3.7% Non-controlling interests 32 20 -35.6%
Total assets 253,771 247,902 -2.3%
Due from banks 63,912 67,937 +6.3% Loans and advances to customers 103,007 99,472 -3.4% Loans and securities 47,920 42,795 -10.7% Positive value of derivatives 28,745 30,313 +5.5%
4. Debts to and claims on banks Analysis of the consolidated statement of income As regards interbank assets (EUR 67.9 billion), the increase in term deposits and cash guarantees is partially offset by the fall recorded by “repo” activity and debt instruments. 1. Net profit share of the Group Managementreport
The fall in interbank liabilities (EUR 62.4 billion) is attributable In 2010, the net profit share of the Group amounted to above all to a decline in financing with central banks. Financing EUR 678 million, up EUR 257 million on 2009. The changes in via “repo” transactions was up on 2009. the scope of consolidation that occurred from one year to the next had a minimal impact on the net profit. 5. Total capital and reserves 2. Income As at 31 December 2010, the capital and reserves of Dexia Bank Group amounted to EUR 5.5 billion, against EUR 5.7 bil Total income amounted to EUR 2,447 million in 2010, lion as at 31 December 2009, up EUR 0.2 billion, i.e., 3.9%. EUR 195 million up on 2009 (8.7%).
Total capital and reserves are made up of core capital (capital, That rise is the result of the following movements: the items statements issue premiums, reserves, net profit for the year) plus latent “Net interest margin” and “Dividends” fell by EUR 299 million or deferred gains or losses. These gains or losses relate to and EUR 25 million respectively; the item “Net income from the available-for-sale portfolio, to the derivatives for cash flow associates” fell by EUR 10 million; the “Net profit on financial Consolidated financial hedging and to the conversion differences. As at 31 December instruments measured on fair value through profit or loss” 2010, this item amounted to EUR -2.5 billion, whilst, for 2009, increased by EUR 266 million and the “Net profit on invest- it was EUR -1.6 billion. This deterioration is due to the evolution ments” by EUR 187 million; the item “Net commissions” of market prices for bonds. One half of this amount was in increased by EUR 38 million and the “Technical margin on “frozen” latent losses on the reclassified bonds portfolio, which insurance activities” fell by EUR 10 million. are subject to linear depreciation over the life of the securities. 3. Expenses Core capital amounted to EUR 7.9 billion, up 9.3% on the previous year. This is due essentially to the addition of the Expenses amounted to EUR 1,657 million in 2010, i.e., 1.7% profit for 2010, when no dividend was paid out on the profit (EUR 28 million) less than in 2009. They break down as follows: for 2009. Minority interests, amounting to EUR 20 million, fell statements by EUR 12 million. ●● Staff expenses, which account for around 40% of the total, fell by EUR 30 million (or -4.2%) over the year;
6. Total economic capital ●● Network costs rose by 0.8% (EUR 3 million); Non-consolidated financial ●● Other expenses rose by 1.1% (EUR 5.4 million); Apart from the accounting capital, Dexia Bank also calculates ●● Depreciation fell by 5.6% (EUR 6.9 million). the economic capital requirement under Basel II – Pillar 2. This is done through ICAAP (the Internal Capital Adequacy Assess- The operating ratio over the whole of 2010 amounted to ment Process), using Economic Capital (ECAP) and Available 67.7%. In 2009, it amounted to 74.8%. Financial Resources (AFR) as the parameters. As at 31 December 2010, ECAP amounted to EUR 5.1 billion and AFR to almost EUR 9 billion, giving an AFR/ECAP ratio of 176%.
30 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 31 Evolution of the consolidated balance sheet and statement of income
Consolidated statement of income Evolution (in millions of EUR) 31/12/09 31/12/10 in %(1) Income 2,252 2,447 +8.7% Of which net commissions 331 368 +11.5% Expenses (1,685) (1,657) -1.7%
Gross operating income 567 790 +39.3%
Cost of risk (184) (26) -85.7% Impairments on (in)tangible assets (2) 0 -99.2% Provisions for legal litigations 3 (2) +157.6% Tax expense 19 (82) -524.8% Net income 404 680 +68.3% Non-controlling interests 17 (2) -112.6%
Net income – Group share 421 678 60.9%
4. Gross operating profit
In 2010, the gross operating profit amounted to EUR 790 mil lion, a rise of EUR 223 million on 2009.
5. Cost of risk
The cost of risk (impairment on loans and provisions for credit commitments) amounted to EUR 26 million in 2010, as opposed to EUR 184 million in 2009. It covers specific as well as collective impairments. “Other impairments and provisions for litigation” Managementreport amounted to EUR 2 million.
6. Taxes
Taxes (including deferred taxes) amounted to EUR 82 million for 2010, up EUR 101 million on 2009.
7. Financial ratios
The return on equity (ROE) amounted to 9.3% (as opposed to 6% in 2009). statements The Tier 1 solvency ratio (Basel II) amounted to 14.6% at the end of 2010 and the capital adequacy ratio (Risk Assets Consolidated financial Ratio or RAR – Basel II) to 15.7%.
These ratios have been calculated on the basis of the consoli- dated IFRS figures pursuant to the decree as amended published in the Belgian Official Gazette on 5 August 2005 and the CBFA decision of 17 October 2006.
The Tier 1 ratio amounted to 13.8% (and the RAR to 15.5%) as at 31 December 2009. Over that period the volume of risk- weighted assets fell by 0.8%. statements Non-consolidated financial
32 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 33 Evolution of the non-consolidated balance sheet and statement of income
Balance sheet Statement of income
At 31 December 2010 the balance-sheet total stood at In 2010 the profit for the year amounted to EUR 698 million. EUR 212.4 billion, down EUR 4.6 billion, or down 2.1% on that The total operating profit amounted to EUR 555 million, up of the previous year. EUR 276 million on 2009.
1. Assets 1. Net interest margin
Government securities eligible for central bank refinancing fell The net interest margin during 2010 amounted to EUR 1,079 mil by EUR 1.9 billion as a result of a decline in the holdings of lion as against EUR 1,096 million in 2009. The fall is due to treasury certificates. a decline in the activities of the Dublin branch, partly offset by the fall in fees paid for the guarantee received from Interbank loans and advances were up by EUR 9.8 billion mainly governments. as a result of an increase in short-term loans within the Group. 2. Revenue from variable income securities Outstanding loans to customers fell by EUR 7.7 billion following the decline in loans within the Group. Revenue from variable income securities increased by EUR 204 mil lion on 2009, mainly as a result of the rise in dividends received Bonds and other fixed income securities fell by EUR 7.9 billion, from subsidiaries. Managementreport of which EUR 4.3 billion was due to the dismantling of the Dublin branch portfolio. 3. Net commission
The increase of EUR 2.6 billion in deferred costs and accrued Net commission rose by EUR 37 million EUR, in particular as a income is due to the fall in interest rates and its impact on the result of the increase in commission received from unit trust value of forward transactions. funds and insurance companies.
2. Liabilities 4. Profit from financial transactions
Interbank loans and advances fell by EUR 11.4 billion following The outcome from financial transactions was a loss of EUR 51 mil
the fall of EUR 15.7 billion in term deposits (mainly through the lion. But this was an improvement of EUR 149 million on 2009, statements decline in funding by the National Bank of Belgium), partly thanks essentially to the improvement in the valuation of credit offset by a rise of EUR 4.2 billion in debts on the discounting derivatives. of securities. Consolidated financial 5. General management costs The rise of EUR 7.3 billion in customer borrowings and deposits is due to the EUR 2.7 billion rise in balances on regulated savings General management costs amounted to EUR 1,083 million, accounts, the EUR 2.4 billion increase in unregulated deposit an increase of EUR 60 million of which EUR 58 million was accounts and the EUR 5.2 billion rise in dealing room term accounted for by the deposit guarantee premium. deposits, the latter being partly offset by the decline of EUR 2.9 bil lion in dealing room current accounts. 6. Write-downs
The fall in debt securities is due to the fall of EUR 1.7 billion in Amounts under this item came to EUR 48 million in 2010 as balances invested in deposit certificates issued by the London opposed to EUR 0.5 million in 2009. This unfavourable develop- branch and the fall of EUR 1.9 billion in own issues in circulation. ment is due essentially to the need to cover the write-down of statements EUR 35 million on the Dublin branch portfolio. The increase of EUR 3.0 billion in accrued costs and deferred
income is due to the fall in interest rates and its impact on the 7. Provisions for other risks and costs Non-consolidated financial value of forward transactions, as on the assets side. These provisions amounted to EUR 14 million in 2009 as Capital and reserves including the General Banking Risks Reserve opposed to EUR 18 million in 2009. amounted at the end of 2010 to EUR 7.7 billion, EUR 0.7 billion more than at the end of 2009 as a result of the appropriation of profit.
32 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 33 Evolution of the non-consolidated balance sheet and statement of income
8. Extraordinary income and costs
Extraordinary income and costs amounted to EUR 152 million in 2010 as opposed to EUR 140 million in 2009.
9. Tax
Tax, including deferred tax, amounted to EUR 8 million in 2010. Managementreport statements Consolidated financial statements Non-consolidated financial
34 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 35 Risk management
Introduction Finally, Dexia Bank took an active part in the development and implementation of various transversal and other projects: 2010 was a particularly busy year for the teams in the Risk support line at Dexia Bank. In fact the year saw economic events ●● it participated in the development of new models which will occur, which were sometimes balanced, sometimes intensified. progressively be used for calculation of regulatory capital (for instance the public satellites model, a new model for Confidence grew in the recovery of the global economic self-employed clients and small companies); situation. More particularly in Belgium, the cost of risk was kept ●● governance of the Risk support line in Dexia Bank subsidiar- at acceptable levels in the Retail and Commercial Banking (RCB) ies was strengthened; business line as well as in Public and Wholesale Banking (PWB). ●● in collaboration with Dexia Group risks teams, credit risk directives were updated. The LMTR (Maximum Theoretical At the same time, the year 2010 was marked by increased Risk Limit) system was updated and widened in its applica- investor distrust of certain sovereign issuers in the euro zone. tion in to order to manage concentration risks even better; That distrust was coupled with significant volatility in interest ●● Dexia Bank played an important role in implementation of and exchange rates. the transformation plan which gives great importance at an operational level to competence centres; Despite all that, Dexia Bank continued with its policy of reducing ●● in the framework of Dexia Bank’s membership of Febelfin, its risk profile, with a voluntary and ongoing reduction of the several members of staff in the Risk support line partici- size of the portfolio in run-off. In line with the agreement pated in working groups formed after the 2008 crisis to Managementreport between Dexia and the European Commission, Dexia Bank ensure dialogue between the banking sector dispensing implemented a programme to dispose of holdings in 2010 loans and clients. (cf. section on the restructuring plan). Portfolio reduction and the disposal of holdings are reflected by a EUR 5.5 billion More detailed quantitative information is provided in the reduction of Dexia Bank’s exposure to credit risk compared with annex 12 of the consolidated financial statements of this the end of 2009. Weighted risks obviously followed the same Annual Report. trend, posting a fall of EUR 378 million over the year despite the unfavorable impact of the price of the euro against the US dollar. Governance
The Tier 1 solvency ratio improved, from 13.8% at the end of statements 2009 to 14.6% at the end of 2010. Within Dexia Bank, risk management is in line with Dexia Group policy. Strategy in this regard is established at Group level, Over the year, the Group, like Dexia Bank, considerably reduced taking into account the contributions made by the relevant Consolidated financial its short-term liquidity gap and continued to improve the specialist entities in the different business lines of the Dexia mix of its short-term funding sources. This improvement of its Group. liquidity situation enabled Dexia to exit the State guarantee on its financing four months before the formal end date of 2010 was marked by the effective reorganisation of the Risk 30 October 2010. In fact, on 30 June 2010, the Group stopped support line with the approach aligned to the general organisa- issuing guaranteed debt, in line with its undertakings to the tion of the Dexia Group and based on a directive model in which European Commission. the local chief risk officer (CRO) reports directly to the Group CRO. In this context, the mission of the Risk support line was Dexia was subject to the 2010 European Union-wide stress redefined: the main challenges are to define the Dexia risk testing exercise, coordinated by the Committee of European appetite, to put in place independent and integrated risk Banking Supervisors (CEBS). The conclusion of that stress test, measures for all types of risks, to manage all risks and proactively statements based on various scenarii of credit quality deterioration(1), is that to identify and address any emerging risk. Dexia does not require additional capital to withstand the CEBS
two-year adverse scenario, including the additional sovereign The support line is now organised transversally by business Non-consolidated financial shock. More detailed information on the stress tests is line: “Public and Wholesale Banking” credit risks, “Retail and provided in the section dedicated to stress tests in this chapter Commercial Banking” credit risk and risks linked to financial (page 46). market activities. This organisation is based on competence centres on which local risk management can rely, in accordance Market activity monitoring was improved with the launch in with the Service Level Agreements (SLA) concluded in 2010. 2010 of the “Market Risk Engine” project aimed at having an integrated system for the calculation of historical VaR over all (1) The test was conducted using to the scenarii, methodology and key risk factors. Considerable progress was also made in valuing assumptions provided by the CEBS, detailed in the aggregate report published structured instruments and back-to-back derivatives. on the CEBS web site: http://www.c-ebs.org/EU-wide-stress-testing.aspx
34 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 35 Risk management
These Service Level Agreements are the keystones of the the request by the European Commission to ensure a minimum Dexia Group governance model. They give a detailed description RAROC (Risk Adjusted Return on Capital) of 10% for transac- of the rights and obligations of the contracting parties applica- tions of the PWB business line. ble to different aspects of proper risk management. More particularly, they guarantee Dexia Bank has access to the At the same time as monitoring the credit process, different know-how of competence centres as well as autonomy in the committees are responsible for the supervision of specific risks. acceptance of risks. Indeed the Credit Risk Monitoring & Risk Detection department 1. Credit risk organises a bi-monthly Watchlist Committee which oversees assets considered “sensitive” and placed on watch. 1.1. Definition Credit risk represents the potential loss (decrease of asset value The quarterly organised Default committees, qualify and or payment default) which Dexia Bank may incur as a result of monitor counterparties in default in accordance with Basel II deterioration in the solvency of any counterparty. regulations, applying rules prevailing at Dexia.
1.2. Organisation The quarterly organised Provision committees settle the The Dexia Bank Chief Risk Officer (CRO) is the hierarchical and amount of provisions allocated and monitor the cost of risk. operational head of the Credit Risk Management (CRM) division within Dexia Bank. This division has departments which cover Rating committees (quarterly organised by the department all credit risks within Dexia Bank. Credit Risk Governance) ensure the correct application of inter- nal rating systems and the appropriateness of rating processes The Retail and Commercial Banking department is in charge in relation to established principles and the consistency of those of credit models for this segment and for monitoring risk processes within the different entities. parameters. It is the competence centre for the entire Dexia Group with regard to credit risk in the Retail and Commercial To ensure the consistency of decisions, these committees are Banking business line. also organised on a quarterly basis at Dexia Group level in order to either validate the decisions of entity committees or take The Public and Wholesale Banking department is responsible decisions on more important files on the basis of proposals Managementreport for analysing, originating and servicing of loans to clients of the made by the entities. business line. As one of the Dexia Bank guidelines is that members of staff The task of the Credit Risk Monitoring & Risk Detection depart- of commercial departments are the primary risk managers, it is ment is to monitor the evolution of credit risk in Public and important to mention that the commercial departments are Wholesale Banking subsidiaries, essentially active in asset represented on all of these committees. For regulatory reasons finance. Its second task is to detect and to monitor deteriorating the ratings committee is the only exception to this rule. credit risks in the bank’s commercial segments. 2. Market Risk The division also has Reporting and Credit Risk Governance departments. The latter sees to the proper application of the 2.1. Definition
statements Basel mechanism and operational procedures in daily functioning. Market risk comprises the exposure to adverse movements in market prices as a result of interest-rate risk, equity-price risk Credit risk associated with Treasury and Financial Markets (TFM) and foreign-exchange risk. Consolidated financial activities is monitored by the Group centre of expertise (Risk Management Financial Markets), in collaboration with Dexia The interest-rate risk consists of a general interest-rate risk Bank Credit Risk Monitoring & Risk Detection (which provides resulting from market evolution and a specific interest-rate weekly reports to the Weekly Operational Committee of Dexia risk (credit spread) linked to the issuer. The latter arises from Bank) and Dexia Bank Financial Markets Risk Management variations in the spread for a specific issuer within a specific (FMRM) (which ensures the quality of valuations and positions). rating class. The risk associated with the equity price represents the risk arising from the reduction in value of equity. As for 1.3. Specialised committees foreign-exchange risk, this represents the potential decrease of In order to ensure adequate governance of credit risk within the value due to currency exchange rate movements. Dexia Bank, risk committees have been established. These committees operate equally with policies and fields of compe- 2.2. Organisation statements tence at Dexia Group level. The Dexia Bank CRO is hierarchical and functional head of the department Financial Markets Risk Management (FMRM). FMRM The Management Credit Committee delegates its decision- supervises market risk, as an integrated support line within the
Non-consolidated financial making power to Credit Committees organised per entity and/ Risk support line of the group Dexia. On the basis of its global or expertise centre. This delegation is based on specific rules, in risk management approach, FMRM is responsible for identifying, relation to the type of counterparty, the level of counterparty analysing, monitoring and reporting on risks and results (includ- rating and credit risk exposure. The Credit Risk Management ing the valuation aspect) associated with financial market (CRM) department of Dexia Bank uses the same categories to activities. establish a hierarchic structure of credit committees at central and local level. For each file presented to the credit committee, The policies, guidelines and procedures documenting and an independent analysis is performed, presenting the main risk governing each of the activities are defined within Dexia and indicators, as well as a qualitative analysis of the transaction. applied to all the entities of the Dexia Group. Central risk Dexia updated credit granting procedures in accordance with management teams within expertise centres or transversal teams
36 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 37 Risk management
also have the responsibility to define methods of income 3. Balance-Sheet Management statement calculation and risk measurement, as well as to guarantee consolidated measurement, reporting and monitoring 3.1. Definition of the risks and results of each of the activities for which they Balance-Sheet Management (BSM) covers all the structural risks are responsible. of the banking book, namely, interest-rate risk, foreign-exchange risk, equity risk and liquidity risk. We refer to the part on Established in the operational entities, local FMRM teams are Market Risks for detailed definitions of structural and specific responsible for day-to-day activity, namely and inter alia the interest-rate risk, foreign-exchange risk and equity risk. implementation of policies and directives defined at Dexia level, but also local risk assessment and monitoring of risks at Liquidity risk measures the ability of the Group to meet its a local level (computation of risk indicators, control of the current and future liquidity requirements, both expected and limits and triggers and so on), as well as local reporting, unexpected. reconciliation with local strategic planning, accounting and IT systems. Each operational entity is also responsible for 3.2. Organisation monitoring and reporting to local supervisory and regulatory Balance-Sheet Management (BSM) falls under the responsibility bodies. of the Finance support line and involves the management of the structural risks of the entire Group. Within Risk Manage- We also note the existence of Expertise Centers (EC) per activity ment, the role of BSM Risk is to define the risk framework in line, responsible for monitoring risks and results for the main which management may be undertaken by BSM Finance (risk entities of the Dexia Group (BIL, DCL and Dexia Bank). factors, limits, investment universe, guidelines), to validate models used in the effective management of that risk, to ●● EC Cash and Liquidity Management (CLM) monitor the exposure and to check compliance in relation to The CLM team produces consolidated reports on the results Group standards, to define the stress tests to be applied to and risks of the different entities. It determines risk measures. different risk factors, to challenge the management of the risk It provides input for guidelines. performed by the Finance support line and to ensure compliance ●● EC Trading, Structuring and Distribution (TSD) of the framework with external regulations in force throughout The TSD team produces consolidated reports on the results the Dexia Group. and risks of the different entities. It determines risk measures. It provides input for guidelines. It gives its advice on new 3.3. Committees Managementreport financial products. All BSM risks are managed via the Group Assets & Liabilities ●● EC Client Pricing and Data Management (CP&DM) Committee (ALCo) which meets monthly. The ALCo of Dexia The CP&DM team provides less liquid market data used to decides on the global risk framework, fixes limits, ensures a value TSD structured products. It controls the quality of consistency of the strategy and delegates its implementation valuations of the TSD structured products of the entities. to local ALCo’s. The ALCo of Dexia decides globally on the level of exposure in line with the risk appetite defined by the 2.3. Committees Management Board, and validates the internal transfer price The Market Risk and Guidelines Committee (MRGC) meets on mechanisms within the Dexia Group. a monthly basis and is responsible for a wide range of topics such as: risk and P&L-trigger reporting analysis(1) and related The Funding and Liquidity Committee (FLC), by delegation from
decisions, definition and revision of limits, proposals for the Group ALCo, centralises and coordinates the decision- statements the approval of new products, discussion of guidelines, risk making process in relation to liquidity associated issues. The governance and standards, risk concepts and measurement FLC is responsible for monitoring the Group’s liquidity position, methodology and the quality of valuation processes. its evolution and its coverage by short, medium and long-term Consolidated financial funding resources. It monitors the achievement of the liquidity Ad-hoc MRGC are organised to decide on specific issues when targets fixed by the Management Board and elaborates funding, required from a business and/or a risk management perspective. disinvestment and structuring strategies which will enable the Group to overcome regulatory and internal stresses. Meeting In addition to the monthly MRGC, a specific MRGC meets each every two weeks, the FLC takes all possible steps to improve quarter to discuss risk and business reports associated with the Group’s liquidity profile. The Management Board of Dexia market activities. Bank has mandated two of its members as representatives in the FLC. Dexia Market Risk Committee (DMRC) meets every two weeks and acts as supervisory committee of the MRGC. The local ALCo at Dexia Bank manages specific local risks within the framework defined by and under the delegation statements Dexia Bank is represented on the different MRGC by the head of the Group ALCo. The local ALCo at Dexia Bank meets of FMRM. regularly (once / twice a month) in the presence of two members
of the Management Board of Dexia Bank (CFO and CRO). Non-consolidated financial The Risk Policy Committee and Risk Management Executive Practical implementation of the decisions of the Group ALCo, Committee validate all major changes in risk profile or risk risks and results arising from BSM positions are subject to the governance. analyses and decisions of this committee. The local ALCo also analyses and monitors the risk indicators from BSM at Dexia Dexia Bank is represented on the Risk Management Executive Bank’s balance sheet. Committee by the CRO of Dexia Bank.
(1) Statement of income triggers warn of a deterioration of results and are expressed as a percentage of VaR limits: typically at 50%, 75% and 100% for triggers 1, 2 and 3 and stop the activity at 300% of VaR.
36 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 37 Risk management
4. Operational risk Risk monitoring
4.1. Definition 1. Credit risk Dexia defines operational risk as follows: operational risk is the risk of financial or non-financial impact resulting from 1.1. Dexia Bank policy inadequate or failed internal processes, people and systems, Dexia Credit Risk Management (CRM) sets forth a global frame- or from external events. This definition includes IT, legal and work of policies and guidelines in coherence with the Risk compliance risks, but excludes strategic risk. Appetite of the bank. This framework guides CRM in its different functions of risk analysis, risk decision, and risk surveillance. Dexia’s definition of operational risk is based on, but not restricted to, the one used by the Basel Committee, which CRM manages the credit granting process by giving delegations focuses on losses (negative financial impacts). Dexia policy also within the framework set by the top management of the requires the gathering of data on events generating financial bank, and by chairing credit committees. As a part of its credit gains. surveillance function, CRM monitors the credit evolution of its portfolios by performing, on a regular basis, credit reviews and 4.2. Organisation by updating ratings. CRM also defines and implements the The management of operational risks at Dexia Bank is assigned impairment policy. As such it decides on specific impairments to the Operational Risk Management department (ORM). The and qualifies defaults. director in charge reports directly to the CRO (Chief Risk Officer) of Dexia Bank (hierarchically) and to the director 1.2. Risk measurement Operational risk at Group level (directive line). Credit risk measurements rely principally on internal rating systems put in place by Dexia under Basel II. Each counterparty The Operational Risk Management framework relies on strong is rated by analysts in charge of credit risk or by dedicated governance with clearly defined roles and responsibilities. scoring systems. This rating corresponds to a valuation of the counterparty’s level of default risk, expressed on an internal It is defined at Dexia level in the form of the committees rating scale, and is a key element in the loan granting process mentioned below, consisting in particular of representatives by the credit committee or by automated granting systems. of local entities, including Dexia Bank. Ratings are reviewed at least annually, and this allows a proactive Managementreport identification of counterparties requiring regular monitoring by The Management Board, organised on a weekly basis, regu- the “watchlist” committee. larly reviews the evolution of the risk profile of the different Group activities and takes the required decisions. In order to control the general credit risk profile and to limit risk concentrations on bank and Group level, credit risk limits are The Risk Policy Committee, a strategic committee with defined for each counterparty, fixing the maximum exposure representatives of the Management Board, approves Group- to credit risk deemed acceptable for a given counterparty. wide policies. This committee is organised on a quarterly basis. Limits may also be imposed per economic sector and per product. The risk department proactively monitors these limits, The Operational Risk Guidelines Committee, chaired on a in relation to the evolution of the perception of risks run by the quarterly basis by the Group Chief Risk Officer, reflects in detail bank. In order to take more recent events into consideration,
statements the policy approved on recommendations suited to commercial specific limits may be frozen at any time by the Risk Manage- activities. It transversally reviews operational risk events as well ment department. as analyses performed. Consolidated financial As to risk management of derivatives, the bank closely monitors The Operational Risk Management Committee, chaired on the conclusion of appropriate legal documentation relating to a monthly basis by the Group head of operational risks, develops netting agreements and the exchange of collateral. a consistent mechanism for the entire Group, including business continuity, crisis management, information security and insurance 1.3. Fundamentals of Dexia credit risk in 2010 policy. At a macroeconomic level, the year 2010 saw a gradual improve- ment of the economic environment in the majority of countries Dexia Bank Middle Management is principally responsible for in Europe. However, the year was also marked by a crisis of operational risk management. In its field of activity, it appoints confidence as to the ability of some European States to fulfil a correspondent for operational risks whose role is to coordinate their financial obligations, resulting in tensions on the financial the gathering of data and the self-assessment of risks, with the markets and difficulties for those countries to obtain finance. statements support of the local operational risk management function. The crisis led all European countries to adopt financial austerity measures aimed at reducing their public debt.
Non-consolidated financial Against this complex and volatile macroeconomic background, Dexia Bank’s premier domestic market, Belgium, evolved in a rather stable manner in the end. The measures taken by govern- ment in 2008 and 2009 in part cushioned the effects of the crisis which hit the economy so violently in 2009. Consequently, as an open economy Belgium benefited from the remarkable
38 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 39 Risk management
recovery of the economic situation globally and particularly in Following the announcement of measures to reduce public Germany. Despite the positive developments, it is clear how- expenditure in various European countries, Dexia Bank took ever that Belgium can no longer delay in the implementation part in internal stress tests to assess the potential impact of of structural measures in the domain of public finances in order plausible austerity measures on the financial situation of the to retain the confidence of the global financial community. local public sector in Belgium. These tests demonstrated good resilience and stability in this strategic sector. Attention will be All the business lines in which Dexia Bank is active are of course paid to the results of negotiations in relation to the institutional dependent on this macroeconomic environment. framework of Belgium and the effects that any modification of the financing structure might have on the budget situation of The credit portfolios of the Retail and Commercial Banking regions and communities in the kingdom. Under the impact business line remained positively oriented at the end of 2010 of the economic and financial crisis, budgets for 2009 were to the principal risk indicators, despite the still unfavourable affected by a weakening of the financial situation of many macroeconomic environment in the first half of 2010 and Belgian municipalities. Relying on a new financial survey, results uncertainty of evolution in 2011. A reduction is observed in the show a relative stabilisation in 2010 compared to the situation number of new defaults on loans to individuals as well as a in 2009. The rate of growth of revenues (2.2%) is well above stagnation on loans to self-employed persons. Nevertheless, the percentage of expected expenditure (1.6%). In general, the very low default levels that existed before the crisis in 2008, local authorities have a funding structure relatively less directly were not observed in 2010. The ratios of non-performing loans sensitive to the evolution of the economy. and the cost of risk remain very acceptable and better than initially forecast for 2010. The mortgage loan portfolio has In the Treasury and Financial Markets segment, the Group proved particularly robust for two years. Similar trends are actively participates in the strategy, on the one hand of risk observed on loans to medium-sized companies. The number reduction by the identification and sale of weaker positions and of new defaults has stabilised since June 2010. The cost of on the other hand of accelerated volume reduction by the sale risk remains below forecast for 2010 and is down on 2009. of positions with market prices close to nominal value. In fact, Nevertheless, this portfolio does not escape certain granularity Dexia pursued its bond cession programme in 2010, in line with effects on a segment where activity has grown considerably the undertakings made to the European Commission, resulting over the last five years. mechanically in a reduction of the Group’s credit risk. On that portfolio, the impact of the crisis continued to weigh on the The Public and Wholesale Banking business line saw a similar average rating level, although no clear deterioration was Managementreport evolution during 2010. After the crisis year 2009, marked by observed in terms of performance or expected loss. The operating accounts in deficit, a significant decline of activity, deterioration is more pronounced in Residential Mortgage- as well as company restructuring, companies gradually regained Backed Securities (RMBS) segments in the United States and in confidence in 2010. A clear slowdown of the deterioration of Europe, principally in Ireland and Spain. average ratings was observed in this portfolio. Analysis teams anticipated the mediocre quality of the annual accounts of In general, the good resistance shown by the Dexia Bank asset companies over 2009 and were already taking account of the base to the economic crisis confirms the low risk profile of the satisfactory results for the first quarter 2010 and forecasts for Group’s business lines. the full year 2010. This contributed to the development of a “through the cycle” perspective on this important segment of 1.4. Credit-risk exposure(3)
activity. During 2010, some sectors weakened by the financial The credit-risk exposure includes: statements crisis and on which collective provisions were passed in 2008 and 2009 were paid very particular attention. The shipping ●● the net carrying amount for balance-sheet assets other than sector saw a spectacular return to positive operating accounts. derivative contracts (i.e. the accounting value after deduction Consolidated financial In spite of this evolution, prudence and vigilance should be of specific provisions); adopted vis-à-vis this sector which is particularly sensitive to ●● the market value for derivative contracts; shocks in supply and demand for freight capacity. The adopted ●● the fully committed amount for off-balance-sheet commit- strategy – to concentrate on large operators and limit activity ments: the full commitment is either the undrawn portion to the financing of modern vessels – avoided losses. The port of liquidity facilities or the maximum amount Dexia Bank is sector profited likewise from the recovery of international trade. committed to pay for the guarantees granted to third parties. These evolutions enabled the bank to reverse collective provi- When credit-risk exposure is guaranteed by a third party sions. Globally, a fall of the non-performing loans ratio was with a lower risk weight, the principle of substitution is observed in the major enterprise segment and the cost of risk applied. was kept to a level well down on 2009. The credit-risk exposure includes fully consolidated subsidiaries statements In order to cope with the crisis affecting the sovereign debt of of Dexia Bank. some European States, principally Greece, Ireland, Portugal
and Spain, Dexia Bank – in line with the strategy of the group Total Dexia Bank credit risk exposure is EUR 227 792 million as Non-consolidated financial Dexia – not only froze the granting of credit to the sovereigns at 31 December 2010. concerned but also placed those exposures in its asset cession programme. Dexia Bank continues to monitor this issue, particularly the impact of interventions by the European Sup- (1) Refer to part 12.2 « Credit risk exposure » of the consolidated financial port Fund and the IMF to sustain those States experiencing statements. difficulties.
38 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 39 Risk management
Exposure by category of counterparty Commercial Banking mainly due to a rapidly improving credit Although the mix of counterparties in the portfolio of Dexia environment, reversals of collective impairments in Public and Bank is in general very stable, the exposures on sovereigns were Wholesale Banking also reflecting an improvement of the reduced to a considerable extent from 14% to 10% over the environment (more particularly in sectors like shipping and ports) course of 2010. 35 % of the exposure is on the financial institu- and reversals of collective impairments for ABS and subordi- tions, 23% on local public sector. nated debt related to the bond portfolio in run-off.
Note: the counterparties are the final counterparties, i.e. after 2. Market Risk taking into account the Basel II eligible guarantee (substitution principle). Monolines exposure is essentially an indirect exposure. 2.1. Dexia Bank policy In order to have an integrated and sound market risk manage- Exposure by geographical region ment, Dexia developed a framework based on the following As at 31 December 2010, the exposure of Dexia Bank was components: mainly concentrated in the European Union (89%, EUR 203.3 bil lion at year-end 2010), particularly in Belgium (48%) and France ●● a comprehensive risk measurement approach, which (17%). constitutes an important part of the process of monitoring and controlling the Group’s risk profile; Exposure by rating class ●● a sound structure of limits and procedures that govern As at 31 December 2010, 39 % of the exposure of Dexia Bank risk taking. The limit system must be consistent with the was rated AAA or AA. Only 8% was rated Non-Investment effectiveness of the organisation’s overall risk measurement Grade (NIG). and management process and with the adequacy of the capital position. These limits are integrated to the fullest In 2010, impaired loans and advances to customers decreased extent possible; by 16% to EUR 1,030 million. The specific impairments on loans ●● a strong risk management organisation responsible for iden- and advances to customers remained stable at a level of tifying, measuring, monitoring, controlling and reporting EUR 586 million. As a result, the coverage ratio increased at risk. The development of an enterprise-wide risk manage- 56.9% compared to 48.2% in 2009. ment framework must be responsive to the nature of the challenges the bank has to face. This approach provides Managementreport Overall, Dexia Bank’s cost of risk (impairments on loans and the management with the assurance that risks are being provisions for credit commitments) fell down in 2010. The bank managed in accordance with Dexia’s strategy and objectives benefited from a decrease of the cost of risk in Retail and and with the overall risk appetite framework.
Exposure by category of counterparty Exposure by rating class(1) as at 31 December 2010 as at 31 December 2010 Project finance: Monolines: 1.4% Not rated: 0.5% D: 0.3% 3.1% ABS/MBS: Other: 0.0% 4.0% NIG: 8.4% Local Public AAA: statements Individuals, Sector: BBB: 10.9% SME and 23.2% self-employed: 12.6%
Consolidated financial 15.0% AA: Corporate: 27.8% 11.1% A: 36.9% Central Financial Governments: 9.5% Institutions: 35.2%
(1) In ratings partially linked to internal rating systems.
Exposure by geographical region as at 31 December 2010 statements Rest of Europe: 1.1% Spain: 5.0% Portugal: 0.4% Turkey: 0.8% Other EU Countries: 6.3% South and Central America: 0.3% Luxembourg: 3.1% United States and Canada: 6.3% Non-consolidated financial Italy: 4.0% Southeast Asia: 0.3% Ireland: 0.6% Japan : 0.2% Greece: 0.9% Germany: 4.0% Others: 1.8%
France: 16.9% Belgium: 48.1%
40 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 41 Risk management
Breakdown of government bond portfolio on a selection of European countries (31 December 2010) (In millions of EUR) 31/12/09 31/12/10 Total o/w o/w o/w Total o/w o/w o/w Countries banking insurance trading banking insurance trading Greece 2,465 1,102 1,340 23 1,810 981 828 1 Ireland 70 50 20 1 326 0 326 0 Italy 6,825 4,940 1,873 11 5,659 4,510 1,143 6 Portugal 1,189 768 384 37 336 101 235 0 Spain 1,385 973 397 15 1,225 863 346 16
Total 11,935 7,833 4,014 87 9,356 6,456 2,877 23
Asset quality
In millions of EUR, except where indicated(1) 31/12/09 31/12/10 Impaired loans and advances to customers 1,222 1,030 Specific impairments on loans and advances to customers 590 586 Coverage ratio(2) 48.2% 56.9%
(1) Insurances included. (2) The ratio between the specific impairments on loans and advances to customers and the impaired loans and advances to customers.
2.2. Risk measurement In 2010 back-testing generated three exceptions for interest-rate Dexia Bank, as member of the Dexia Group, adopted the VaR risk and foreign-exchange risk (internal model), three within (Value at Risk) measurement methodology as one of the the equity risk scope and two within the spread scope, which leading risk indicators. The VaR is a measure of the potential proves the quality of the tools used. loss that can be experienced with a 99% confidence level and for a holding period of 10 days. Dexia applies multiple VaR As a complement to VaR measures and P&L triggers, Dexia Managementreport approaches based on their ability to measure market risk applies a wide range of other risk measures in order to assess accurately in different market activities and portfolios. risks related to the different business lines and portfolios, among others nominal limits, maturity limits, market limits and limits ●● General interest-rate and forex risks are measured through on authorised products, limits on sensitivity (Greeks). a parametric VaR approach. ●● Specific interest-rate risk (spread risk), equity risk and other Stress-testing is important for sound risk management as it
risks (inflation and CO2) in trading books are measured by explores a range of low-probability events outside the predictive means of a historical VaR approach. capacity of VaR measurement techniques. As such, VaR ●● Non-linear (risk related to options) and particular risks (e.g. measures assess market risk in a daily market environment, risk of negative basis trade) are measured through specific whereas stress-testing measures market risk in an abnormal
and historical VaR methodologies with a view to a more market environment. In this context, the range of stress statements appropriate measurement of the sensitivity to market scenarios is regularly revised and updated. In 2010, a “2008 volatilities. crisis scenario” is added. The consolidated results of stress tests and the corresponding analyses are presented quarterly to the Consolidated financial Dexia Bank’s exposure to market risk as measured in Value at MRGC and the DMRC. Risk (VaR) terms stems mainly from general interest-rate risk and specific interest-rate (spread) risk reflecting today’s volatility The bond portfolio on the banking books is not subject to VaR in credit markets, while its market exposure arising from trading limits, given its different investment horizon. Following the positions in equity, exchange and other risk factors remains Dexia transformation plan, this portfolio is largely in run-off. much lower. 2.3. Exposure to market risk(1) Dexia Bank applies the internal VaR model for the regulatory 2.3.1. Value at Risk (VaR) capital requirement calculus on foreign exchange risk and The VaR use of market activities of Dexia Bank (bond portfolio in general interest-rate risk within the trading scope. banking book not included) is disclosed in the table on page 42. Average global Value at Risk amounted to EUR 35.2 million in statements The “Market Risk Engine” project was launched in 2010. It aims 2010 (as compared to EUR 33.5 million in 2009). for an historical VaR over all risk factors (with a complete
revaluation on non-linear risk factors); a complete historical VaR 2.3.2. Bond portfolios Non-consolidated financial which is confirmed as the standard in many banks will provide Dexia Bank manages bond portfolios, largely in run-off, amounting a consistent and more precise measure. In addition to VaR, the to EUR 26 billion as at 31 December 2010, against EUR 33 billion new tool will facilitate stress testing, the analysis of extreme as at 31 December 2009 (BSM portfolio excluded). The sensitivity values and so on. The first phase of the project has already been in economic value of these bonds portfolios is very limited, as successfully implemented and enabled existing historical VaR interest-rate risk is hedged. An important part of the bond to be consolidated, historical VaR to be added on the basis of sensitivities and progress to be made on implementing the (1) Refer to part 12.5 ”Market risk & BSM“ of the consolidated financial Stressed VaR as requested by the regulator. statements.
40 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 41 Risk management
Value at risk of market activities 31/12/09 31/12/10 VaR IR(1) & FX(2) EQT(4) Spread Others IR(1) & FX(2) EQT(4) Spread Others (10 days, (Trading et Trading Trading risks(5) (Trading et Trading Trading risks(5) 99 %) Banking)(3) Banking)(3) Per activity Average 14.1 2.0 12.8 4.6 14.3 2.0 15.4 3.5 Maximum 22.7 8.3 19.1 7.8 25.7 4.5 23.7 4.2
Global Core(6) Legacy(6) Core(6) Legacy(6) Average 26.8 13.0 26.6 14.9 Maximum 46.5 25.6 39.5 25.1 End period 30.8 12.4 25.0 8.3
Total 2009 Total 2010 Average 33.5 35.2 Maximum 45.9 47.3 End period 33.8 32.0 Limit 86.5 85.0
(1) IR : interest rate risk (2) FX : forex risk (3) IR & FX : without BSM (4) EQT : equities
(5) Other risks: inflation and CO2. (6) “Core” refers to assets considered by Dexia Bank as being part of its core businesses while the Legacy portfolio contains the run-off assets, in line with the Agreement with the European Commission. More detailed information on the Legacy Division is provided in the chapter entitled “Transformation plan” of this annual report (page 10).
Managementreport portfolios is classified in Loans & Receivables. The Available principally linked with long-term interest rates in euro and results For Sale (AFS) reserve of these securities is insensitive to the from the structural imbalances between the bank’s liabilities market spread evolutions. Regarding the other bonds port and assets on respectively notional amounts and maturities. folios classified in AFS, the sensitivity in fair value (and of AFS reserves) to a basis point credit-spread increase amounted to The interest rate risk is constantly monitored from two comple- EUR -7.12 million (against EUR -7.58 million as at 31 December mentary points of view: the impact of a interest rate movement 2009). on economic value and on accounting results.
Given the illiquidity of markets and the reduced possibility of ●● Limits of interest rate sensitivity on the economic value having “observable” prices/spreads in the valuation process, a Interest rate variations can affect the economic value of mark-to-model valuation development was performed on the the bank’s assets, liabilities and off-balance sheet items. A
statements illiquid part of the available-for-sale bond perimeter (AFS) . consolidated sensitivity limit covers this risk for the BSM perimeter. Sensitivity to interest rate risk measures the 3. Balance-Sheet Management change of the net economic value on the balance sheet on Consolidated financial a parallel shift of the interest rate curve of 1%. 3.1. Risk measurement ●● Limit of interest rate sensitivity on the results: Earn- 3.1.1. Dexia Bank policy ings at Risk approach Dexia follows a conservative approach in terms of Asset and The bank actively monitors its earnings at risk in accordance Liability Management. The main objective is to minimize P&L with Belgian and international accounting standards. This volatility and to preserve value. There is no objective of creating risk measure consists of estimating the potential gain or loss additional revenue through voluntary interest-rate risk taking. of earnings for the current and upcoming years, in function The focus is on stabilizing the global bank earnings. of different types of simulated shocks of the interest rate curve. Interest-rate sensitivity is considered as the main risk measure- ment tool (full revaluation expressed in sensitivity terms). In addition, various Basis Point Value (BPV) limits have been statements Although a parametric VaR (indicative) is calculated at Group fixed at a local level and are monitored daily in order to avoid: level based on interest-rate sensitivities, global and partial interest rate risk sensitivities per time bucket remain the ●● large interest rate positions on a single point of the curve,
Non-consolidated financial principal risk indicators based on which the ALCo’s manage the via limits by maturity tenor. risk exposures. ●● large positions towards higher or lower interest rates, via limits in the total of positive partial sensitivities (up) or the 3.1.2. Interest rate total of negative partial sensitivities (down). The role of BSM in the management of interest-rate risk consists on the one hand of reducing the volatility of the P&L, thus The interest rate curve can vary in a non-parallel manner and immunising the commercial margin generated by the business can cause a change of value despite a globally reported zero lines, and on the other hand of preserving the overall value sensitivity (BPV). This is called curvature risk. creation of the Group. Dexia Bank’s structural rate risk is
42 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 43 Risk management
Dexia Bank calculates the partial sensitivities to the yield curve result in volatility in the IFRS result. The same applies to the (partial BPV), hence showing variations of value to be expected floating legs of swaps which are defined in a “portfolio hedge” following the evolution of a single point on the curve, and under IFRS. imposes limits to provide a framework for these sensitivities and this type of risk. This sensitivity of the IFRS results to a rise of 1% over the entire rate curve amounts to EUR -5 million/% as at 31 December The Basis Point Value risk sensitivity measure reflects the balance 2010, against EUR -16 million/% as at 31 December 2009. This sheet exposure to sensitivity of the first and second order (named evolution is fully in line with the renewed BSM strategy focusing “convexity”) and to behavioural risk. VaR calculations are on minimising P&L volatility while preserving overall value additional indicative measures. creation.
3.1.3. Credit spread 3.2.2. Balance-sheet exposure to credit-spread The credit spread is defined as being the specific interest-rate risk risk capturing individual issuer-related causes. This is due to BSM of Dexia Bank manages bond portfolios amounting to variations in the spread of one specific signature within a rating EUR 8.8 billion as at 31 December 2010 against an exposure of class and is measured with sensibility measures (/basis point). EUR 11.0 billion as at 31 December 2009. This bond portfolio is classified in IFRS as an AFS portfolio. The credit spread 3.1.4. Equity sensitivity (to an increase of the credit spread with one basis The Value at Risk measurement approach is applied to assess point) amounted to EUR -7.7 million on 31 December 2010, the portfolio’s vulnerability to adverse changes in equity prices, against EUR -8.9 million as at 31 December 2009. volatility or correlation. Inter alia, the market risk management framework includes Earnings-at-Risk and Stress-Test measures The bond portfolios of the insurances companies stabilized representing the maximum accounting loss under different at EUR 15.5 billion as at 31 December 2010, the same level as scenario assumptions. The equity portfolios of the banking at 31 December 2009. Part of the bond portfolios is classified entities are in run-off mode. Within the insurance perimeter, a as “Loans & Receivables”. The “credit spread sensitivity” to one warning system has been introduced from the perspective of basis point of the fair value (and AFS reserve), amounted to reallocating assets for the potential occurrence of a stress and EUR -10.2 million as at 31 December 2010, compaired to in order to maintain solvency ratios. EUR -11/1 million as at 31 December 2009. Managementreport 3.1.5. (Structural) foreign exchange 3.2.3. Balance sheet sensitivity to equities (quoted Although Dexia Bank’s reporting currency is the euro, assets, shares) liabilities, income and expenses are also denominated in other Equity Value at Risk (VaR with a 99% confidence level and a currencies. The ALCo of Dexia Bank executes the decisions 10-day holding period) expresses the potential change in of the Group ALCo on hedging the risk associated with the market value. evolution of these results in foreign currencies. In 2010, a systematic and ongoing hedge was done of these Fx-exposures. VaR (10 days, 99%)
The structural risks associated with financing of participations Insurance / Pension funds (equity) in foreign currencies as well as the volatility of the (in millions of EUR) 2009 2010
Group’s solvency ratio are also monitored regularly. statements Average 98.5 102 Maximum 142 116 3.1.6. Insurance companies and pension funds End period 119 116 Consolidated financial Specific reports on insurance companies and pension funds Limit 160 150 are presented to the Group ALCo. They cover risk factors associated with interest rates, inflation and equities. Risk indica- tors are calculated on the basis of a Group harmonised risk 3.3. Liquidity methodology complemented with specific risk management 3.3.1. Dexia Bank Policy factors. In 2010, Dexia completely revised its internal process for managing liquidity risk, including its contingency funding plan. 3.2. Balance sheet exposure 3.2.1. Balance sheet exposure to interest-rate risk The new framework aims at providing more effective and (sensitivity) coordinated liquidity management. The cornerstone of this new Interest-rate sensitivity measures the change in the balance- framework is the Funding and Liquidity Committee (FLC). As sheet net economic value if interest rates move by 1% across formerly described, FLC is a central committee where Dexia statements the entire curve. ALM long-term sensitivity amounted to Bank is represented. The FLC co-ordinates with all involved EUR -148 million as of 31 December 2010 (against EUR -29 mil stakeholders, the liquidity management and the funding strategy
lion as of 31 December 2009), excluding insurance companies of the Group. Non-consolidated financial and pension funds. Interest rate sensitivity limits amounted, just like the year before, to EUR -160million/%. Dexia ensures that it maintains liquidity reserves proportional to its future funding requirement under several scenarios, in a Derivatives concluded in the BSM scope all aim an economic normal situation and in a stress situation. These liquidity reserves hedge of the interest-rate risk of the balance sheet. However, consist of assets highly liquid that can be used for secured as IFRS exclude certain balance sheet items (e.g. deposit books) funding transactions with central banks to which Dexia has as underlying hedged element, some of these derivatives access (BCE, FED and Central Bank of Turkey). Dexia Bank has only cannot be defined in an IFRS hedge relationship. Thus, they direct access to the BCE. The expected funding requirements
42 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 43 Risk management
of Dexia and the group Dexia Bank are assessed prudently, strategy of deleveraging of the balance sheet. Looking forward dynamically and fully, taking existing and planned on and off to the available reserves within one month, Dexia Bank can balance sheet transactions into consideration. The monitoring dispose of EUR 38 billion available reserves to cover its 1 month of short-term liquidity risk is organised on a daily basis whilst funding gap. the supervision of long-term liquidity risk is on a quarterly basis. This significant reduction of the short-term funding requirement Globally, Dexia’s internal framework for managing liquidity risk happened under unfavourable interest-rate conditions resulting allows a monitoring of short term liquidity on a daily basis and in an increase of the amount of cash collateral of EUR 0.3 billion a prospective view of long term liquidity needs. in 2010, and despite a very disrupted macroeconomic environ- ment, marked by the sovereign crisis which weighted heavily The contingency funding plan has been updated in function of on the funding capacity and conditions of many European banks. the governance structure to make it more reactive in the case of liquidity stress requiring rapid measures to be taken. In 2010, Dexia also ended transactions guaranteed by the Belgian, French and Luxembourg governments. In fact, on 3.3.2. Liquidity risk measurement 30 June 2010, considering the improvement of its liquidity Dexia’s new internal framework for managing liquidity risk also situation and in line with its undertakings to the European defines a certain number of liquidity indicators which, alongside Commission, the Group ceased to issue guaranteed debt four regulatory liquidity indicators, guarantee Dexia Bank’s resistance months before its formal end date of 30 October 2010. Total to liquidity risk. These indicators include but are not limited to outstanding guaranteed debt amounted to EUR 2.0 billion as normal “liquidity ratios” describing available liquidity reserves at 31 December 2010, a decrease of EUR 5.2 billion compared in comparison with the funding liquidity gap. They also include with 31 December 2009. This guaranteed outstanding will be limits on the absolute size of liquidity deficits, as well as limits totally written down in 2014. on the proportional need of short-term funding. All of these indicators are assessed according to different scenarios, for the 4. Operational risk major currencies and at all relevant consolidation levels. They are communicated to the Management Board and to the Audit 4.1. Dexia Bank policy Committee of Dexia Bank on a regular basis. Dexia Bank’s operational risk policy consists in identifying and assessing on a regular basis the existing risks and current Managementreport Dexia Bank’s liquidity risk is also monitored by regulatory controls in order to check that the acceptance level defined per liquidity ratios. These ratios are communicated to the CBFA on activity line is respected. If not, adequate governance shall be a monthly basis and to the CSRSFI (Committee for Systemic put in place and lead to efficient and/or corrective actions to Risks and System-relevant Financial Institutions) on an annual return to an acceptable situation. basis. A connection has been recently decided between the opera- 3.3.3. Exposure to liquidity risk tional risk management and the permanent control which should Dexia Bank made a considerable progress in reducing its short- lead to a reinforced monitoring of risk indicators. term liquidity gap. It decreased with EUR 13 billions in 2010. Short-term funding requirements fell by EUR 13 billion in 2010, 4.2. Risk Measures and management to EUR 25 billion as of the end of December 2010. The operational risk framework relies on the following elements: statements This good performance was achieved by virtue of: 4.2.1. Decentralised responsibility The bank’s middle management is primarily responsible for Consolidated financial ●● the sustained pace of the deleveraging programme. At monitoring operational risk in its field of activity. It defines Dexia Bank, EUR 5.78 billion of bonds and EUR 5.73 billion the organisation of its activities and in particular the checks to EUR of Public and Wholesale Banking long term loans were be provided to limit operational risk. It also determines the sold to and/or refinanced via the AAA covered bond vehicles corrective actions required by major incidents or notable risks of the Dexia Group in 2010. identified. A regular follow-up and a quarterly reporting for all ●● the swift execution of the long-term funding programme; activities have been set up by Operational Risk Management. ●● the important increase of client deposits for EUR 4.4 billion By virtue of this process, the internal control system is continu- in 2010. ously improved and the main risks appropriately mitigated over time. Dexia also considerably improved its short-term funding mix. Indeed, Dexia accelerated the decrease of central bank borrow- 4.2.2. Operational risk event data collection statements ings (EUR -32 billion compared with the end of December 2009, The systematic capture and monitoring of risk events is one among which EUR -19 billion on the balance of Dexia Bank). of the most important requirements stated by the Basel Since June 2010, the Group is no longer dependent of short- Committee, whatever the approach chosen for the capital
Non-consolidated financial term government guaranted debt, in view of the repayment of calculation (Standardised or Advanced Measurement Approach): short-term guaranteed loans. Increased funding on the capital “Data on a bank’s historical loss experience could provide markets via bilateral repos or triparty repos on longer maturities meaningful information for assessing the bank’s exposure to made this possible. operational risk and developing a policy to mitigate/control the risk”. As at 31 December 2010, the total amount of liquid securities, eligible for repo transactions or eligible for pledge at a central As a consequence, the continuous collection of risk event data bank, amounted to EUR 48 billion (of which EUR 22 billion was enables Dexia both to be compliant with regulatory require- unencumbered and available). As such, considerable liquidity ments, and to obtain very valuable information in order to buffer remains present at Dexia Bank, despite the active improve the quality of the internal control system. Strict guide-
44 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 45 Risk management
Split of the total amount of losses among standard event types
Internal Fraud: 1% Information, Technology & Infrastructure Failures: 0% External Fraud: 29%
Client, Products & Business Practices: 2% Execution, Delivery Damage to Assets & Public Safety: 0% & Process Management: 67% Employment Practices (HR) & Workplace Safety: 1%
lines have been defined and deployed at Group level in terms Security programmes and well-defined responsibilities ensure of reporting, in order to ensure that the most important that all business activities are organised in a secure environment. information is escalated in due time to Senior Management (in particular, the compulsory declaration threshold has been set As required by the Group business continuity policy, business at EUR 1,000). The Management Board receives a report on lines are required to make impact analyses for critical business, the main events, including an action plan enabling risks to be to define and document recovery plans and ensure that business reduced, defined by the bank’s Middle Management. continuity plans are tested and updated at least once a year. On the basis of regular reporting, the Management Board Over the last 3 years, the split of the total amount of losses validates recovery strategies, residual risks, and action plans for among standard event types is as indicated in the graph above. continuous improvement. Managementreport
The largest proportion of the losses is due to Execution, From the same point of view, an assessment of the business Delivery and Process Management events, which also represent continuity mechanisms took place in 2010 for all Dexia the majority of all events, present in all businesses and support subsidiaries. functions. These events and the related action plans are reviewed on a quarterly basis with the key stakeholders (in particular 4.2.5. Management of insurance policies Operations & IT activity lines). Dexia Bank applies the general insurance policy of Dexia, as described hereafter. The proportion of frauds increased in 2009 in the retail banking activities. Global mitigating plans have been approved by the The mitigation of the operational risks to which Dexia is exposed Management Board, so that existing processes can be adapted is also guaranteed by subscription to Group insurance policies,
to all threats. covering professional liability, fraud, theft and business inter- statements ruption. Through an insurance policy elaborated for the whole Other categories remain limited in number and amount. The Group, the aim is moreover to establish insurance guidelines main events are of course subject to corrective actions approved regarding the different risks within the Group and to be imple- Consolidated financial by the management bodies. mented at Group and entity levels. It is also a matter of providing a centralised framework for negotiations with brokers and 4.2.3. Self-assessment of risks and associated insurance companies. Against that background, a mapping of controls existing policies in each entity and subsidiary was realized in In addition to building a history of losses, it is also necessary to 2010, in order to improve effective cover. determine the exposure of Dexia to main risks through risk mapping of all significant activities. To do this, all the entities 4.2.6. Increased coordination with other functions of Dexia Bank perform bottom-up self-assessment exercises involved in the internal audit system regarding risks and associated controls. They can lead to the A new software tool was developed in 2009 aimed at covering definition of mitigation actions. They provide a good view of most of the building blocks of the Operational Risk Management the most important risk areas in the different entities and framework, and also offering some key functions for other statements activities, with the objective of reporting the results to Man- central functions such as Internal Audit, Compliance, Permanent agement across the organisation. These exercises are repeated Control or Quality Control. The installation of this software in
each year. 2010 allows the use of one language and reference systems Non-consolidated financial common to those functions, as well as the generation of 4.2.4. Information security and business consolidated information for the bank’s Middle Management, continuity management in particular regarding any type of action plan or recommenda- Information security policy and the related information security tion to be followed up over time. guidelines, standards and practices aim to secure Dexia’s (1) information assets . (1) Information or data representing value to the company which must therefore be properly protected.
44 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 45 Risk management
4.2.7. Calculation of regulatory capital financial health, and to obtain a global view of the possible requirements deformation of elements of the statement of income or its Dexia has decided to apply the Basel II Standardised Approach capital ratios under stress. Such simulations were made in 2010 for the calculation of the capital requirement for operational for ABS, Assured-FSA and local authorities in particular. risk management. Finally, in 2010 Dexia was among 91 European establishments This approach mainly consists of applying a percentage (called subjected by the Committee of European Banking Supervisors “Beta” factor, in a range between 12% and 18%) to a relevant (CEBS) to a common stress test, built on different scenarios of indicator calculated for each of the eight business lines defined credit quality deterioration(1). The conclusion of the stress tests by the Basel Committee (Corporate Finance, Commercial is that Dexia does not require additional capital to withstand Banking, Retail Banking, Trading and Sales, Asset Management, the CEBS two-year adverse scenario, including the additional Agency Services, Retail Brokerage, Payment and Settlement). sovereign shock. Dexia’s strong capital base would enable it to resist to the conservative set of assumptions of the stress tests The relevant indicator essentially consists of the operating over the next two years, while still maintaining strong capital income from the underlying activities which includes net interest ratios. and net commission income. Income from insurance activities is not taken into consideration, as they are not subject to Basel II regulation. Evolution of the regulatory
The total of regulatory capital for each business line is used to framework calculate total capital requirements for operational risk. This is an average over the last three years. The calculation is updated Since 1 January 2008 the Dexia Group has used the Advanced at each year-end. Internal Rating Based Approach (AIRBA) for calculating its capital requirements and its solvency ratios. New models have The capital requirement for the last calculation periods is the been developed and will progressively be used for calculating following: regulatory capital as from 31 December 2011.
Pillar 2 was consolidated in 2010 following inspections by Managementreport (in millions of EUR) 2009 2010 the college of regulators. This mechanism, applicable since 276 255 31 December 2008, requires banks to demonstrate to their regulators the adequacy of their risk profile and their capital. To do so, they must have internal systems for the calculation A decrease of the capital requirements of 7.7% can be observed and management of their risks, capable of making a valid between 2009 and 2010. This is linked to the fact that the 2007 assessment of their economic capital needs (Internal Capital gross income is replaced in the calculation by the 2010 gross Adequacy Assessment Process − ICAAP). This process is thus income, which are lower due to the activity evolutions from the based on three main processes: the analysis of risks by the risk 2008 financial crisis. department and the financial plan (including a capital allocation, an analysis of the evolution of the results of business lines and the internal capital supply) and an analysis of the economic
statements Stress tests adequacy of capital by the Finance department.
In 2010, the Board of Directors and the Management Board Consolidated financial Dexia put an action plan in place in 2010 regarding stress- approved the principles of the bank’s risk appetite policy. Values testing: the development of new governance enhancing and and key indicators of risk appetite are now integrated in the optimising the organisation in place was made a priority in 2010. recurrent information provided to those bodies by Risk Manage- The stress tests principally related to risks consolidated at a ment. Dexia Group level. Pillar 3, which defines a range of qualitative and quantitative In terms of Pillar 1 stress tests (individual stress tests on Basel II information in relation to risks distributed to market operators, internal rating models), Dexia maintains its target to cover more is applicable at the highest consolidated level of the Dexia Group than 80% of weighted credit risks. and has been part of the external communication of Dexia SA since 2008 (see the document Risk Report – Pillar 3 of Basel II In terms of Pillar 2 stress tests (global stress tests), the stress published on Dexia’s website www.dexia.com). statements test performed by Dexia on the basis of an expert scenario of economic recession led to the maintenance of a Tier 1 ratio at Finally, Dexia is heavily involved and very closely monitors a level above 8%. national and international consultations by participating in
Non-consolidated financial particular in the study of the impact of the Bank of Interna- In addition to the “classic” stress tests for market and liquidity tional Settlements on Basel III reform regarding the definition risks, Dexia now has a full range of stress tests (sensitivity of capital, leverage ratio, liquidity ratios and so on. analyses, the implementation of stress scenarios and potential vulnerability assessments), enabling it to assess the potential In this context, Dexia worked actively on application of the effects of a hypothetical event or combination of events on its so-called “CRD 2” and “CRD3” European directives.
(1) The test was conducted using the scenarios, methodology and key assumptions provided by the CEBS, detailed in the aggregate report published on the CEBS web site: http://www.c-ebs.org/EU-wide-stress-testing.aspx
46 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 47 Risk management
Risk appetite Along with the management which is responsible for risk management, the Risk Department maps out the risks that are Risk appetite expresses the level of risk an institution is ready effectively run. To that end, suitable stochastic models are used to take, given the expectations of the principal stakeholders to assess: (shareholders, creditors, regulators, rating agencies, clients and so on), in order to achieve its strategic and financial objectives. ●● future claims that will occur within a predetermined time, including the settlement of those claims; In 2010, the Group worked on integration of its risk appetite ●● the future settlement of existing claims (declared or not) approach in various strategic analyses, and began to implement that have not yet been fully processed; it in the main subsidiaries. ●● the impact of reinsurance programmes on those claims.
Based on a global approach, risk appetite is a reference point: These models also make it possible to take catastrophes into account. ●● to guide strategy and planning; ●● to frame performance in terms of growth and value creation; From the results of these models it is possible to judge whether ●● to facilitate daily investment decisions. the actions taken are commensurate with the predetermined risks. A formalised framework was developed in 2009, and then validated in 2010, integrating a series of ratios constituting a In addition to that, the actuaries regularly analyse the technical key element in defining limits for major financial balances. The insurance reserves, the profitability of insurance portfolios and framework is based on a mix of accounting ratios (gearing), the reinsurance programme. The opinion of the actuaries is also regulatory ratios (Tier 1, weighted risks), economic ratios sought whenever a new product is launched or an existing (economic capital, earnings at risk), and naturally integrates product changed. liquidity and funding structure ratios as well as credit concentra- tion limits. 2. Risk modelling
Limits are defined on each of these ratios, and validated by the The measurement of risk at Dexia Insurance Services (DIS) Board of Directors each year. The Group financial plan is analysed involves quantifying risks in a consistent manner throughout respecting the framework set for risk appetite. The Risk and the company to determine whether the types and the extent Managementreport Finance support lines are responsible for monitoring these ratios, of risk being assumed are in line with the defined risk appetite. and if necessary propose measures to the Management Board The DIS Risk management department ensures that the to ensure the limits are observed. complexity of the risk measurement system is proportional to the size, scope and specificity of the different areas of activity.
Insurance risk The types of risk cover are chosen on the basis of their ability to cover the risks inherent in each branch of activity.
1. Management of non-life insurance risk A comprehensive system for limiting risk is used to ensure that the authorised risk position adopted by the various local units
When taking out insurance, the policyholder transfers the risks is in line with the risk profile of the Group. Risk limits are the statements insured to the insurance company. In this way, the insurance means by which the risk strategy and risk appetite are expressed company can group different insurance risks together for and communicated to the different units and branches of solidarity or mutualisation purposes. activity. Consolidated financial
The insurance risk arises out of the uncertainty at the time an Ongoing supervision is the backbone of an effective risk insurance policy is taken out as to whether or not the risk that management system. Effective supervision ensures that any has been covered will materialise. If it does, there is always the violation of the risk limits is immediately brought to the atten- uncertainty over when it will occur and over the damage that tion of the management and that appropriate remedial action will have to be made good by the insurance company. Often is taken to re-establish the limits. the full extent of a claim is not known for some time. The imposition of risk limits is one of the main ways in which The main risks that a nonlife insurer faces are as follows: the to ensure that DIS’s capital is managed in the best possible underwriting risk, the risk of inadequate technical reserves and manner. All actions taken are therefore subject to clear and the risk of a catastrophe occurring. unambiguous procedures that are applied in a disciplined statements manner and rigorously monitored. In order to protect itself against these major risks, the mana
gement of the insurance company has taken the measures Dexia Insurance Belgium (DIB) is in the process of developing Non-consolidated financial necessary to ensure: models for its entire asset and liability portfolio. Specifically in the case of life-insurance products, all cash-flow models are ●● a satisfactory up-to-date underwriting policy; developed in a single environment covering the entire life port- ●● the fixing of appropriate premiums; folio. In addition, an ALM module has been developed in ●● ongoing monitoring of the claims reserve constituted for conjunction with an economic scenario generator to enable each claim that takes into account all known and correctly stochastic simulations to be made. valued aspects of the claim; ●● a reinsurance policy that is adapted to the insurance risks underwritten by DIB, taking into account DIB’s capital and reserves and the risk appetite of the Dexia Group.
46 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 47 Risk management
With respect to the non-life insurance portfolio, a model has 3.2. Risk management and reinsurance guidelines been developed to assess the Reserve Risk and the Premium The guidelines and procedures to be followed regarding the Risk of the main branches of the portfolio. A Catastrophe Risk transfer and assumption of the reinsurance risk are communi- model has also been developed using the technical QIS V cated by the Reinsurance Risk Manager to all insurance and specifications. reinsurance units within the Dexia Group.
The models and the modelling environment are subject to Thus in the case of a number of aspects, the management regular updates, notably in response to existing recommenda- carefully monitors procedures to ensure that the level of cover, tions and to recommendations that may be made during future reinsurance charges, the management of claims, reinsurance validation exercises. treaties and services by other providers (such as brokers and consultants) are in line with the market. Increasing use will be made of the risk models to develop applications that supervise the insurance units within the Group Compared to other insurers, some insurance companies in the in order to create greater shareholder value. Dexia Group take every possible opportunity to reinsure within the Group. The main effect of in-house reinsurance is to provide Such applications include: the insurance companies within Group with greater risk under- writing capacity. ●● calculating the ex post profitability of specific portfolios taking into account the return on the capital required; The terms and conditions of reinsurance treaties are in line with ●● performing valuation exercises such as calculating the local regulations in force and with the recommendations of Market Consistent Embedded Value; Dexia Group. ●● decision-making tools for reinsurance programmes; ●● pricing insurance policies to take into account the return on In order to prepare the information for the Management Board, operating capital in order to be able to estimate in advance the Reinsurance Risk Manager is in regular contact with those what value is created. involved in reinsurance-related transactions and is kept regularly ●● achieving the most efficient allocation of capital in budgeting informed of all aspects relating to the activity and practice of exercises. reinsurance.
Managementreport These models will also be used for internal and external reporting 3.3. Quality of reinsurers purposes (to support the opinion of the appointed actuary and The various insurance companies in the Dexia Group strive to provide information for the internal and external auditors, to maximise their purchasing power on the international the prudential supervisory authorities and the rating agencies). reinsurance market.
Under the European “Solvency II” directive, it has been In a reinsurance transaction the cost is measured in terms decided to use the technical specifications of the standard of the quality of service and the solvency of the reinsurance model in order to quantify the statutory capital requirements. company.
3. Reinsurance policy The insurance companies in the Dexia Group attach great importance to the possible impact of bankruptcies or liquidity
statements The DIS insurance units belonging to the Dexia Group use problems and endeavour to reduce the credit risk. They all reinsurance as a key risk-management tool for diversifying risk, therefore deal with reinsurers having an S&P A- (A minus) improving the management of capital and taking advantage of credit rating or better and include in their reinsurance treaties Consolidated financial the benefits that come with that. any terms and conditions that are necessary or desirable for providing legal protection. Reinsurance cover (mostly through major reinsurance brokers) is placed with a selection of high-quality reinsurers (with an They also require most reinsurers to make a deposit into the S&P A- (A minus) or higher rating for long-tail business). reserves as a supplementary guarantee for all the obligations incumbent on them. Reinsurance transactions must help achieve return on capital objectives. By transferring risks to reinsurers, the DIS insurance In addition, insurance companies in the Dexia Group actively units of the Dexia Group widen their available capital base. This apply a reinsurance recoverables policy, the aim of which is to is important not only for accounting purposes, but also for the encourage reinsurers to settle their commitments early in cash financial solidity and capital management of the insurance units (where there is uncertainty over whether a reinsurer will be able statements within the Dexia Group. to retain its rating level or in the case of a reinsurer’s impending bankruptcy). 3.1. Reinsurance in terms of the risk profile
Non-consolidated financial The need for reinsurance is determined on the basis of risk The DIS insurance companies within the Dexia Group limit assessments for all the insurance companies within the Dexia single and aggregate risks in their reinsured portfolios, by avoiding Group both individually and at Group level. large concentrations of business with any one reinsurer.
The Management sets great store by stress tests (some of which 3.4. Reinsurance programmes require more than the 99.5% confidence interval) and the The DIS insurance companies within the Dexia Group apply (in calculation of capital requirements (taking into account the structure and pricing) conservative reinsurance underwriting possibility of exceptional claims, bankruptcies in the reinsurance standards that result in more predictable reinsurance costs as sector and depreciation on our investment portfolios). they reduce the impact of market cycles.
48 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 49 Risk management
They use conventional forms of treaty reinsurance such as “quota share” reinsurance, ”surplus” reinsurance, “excess of loss” reinsurance and “stop-loss” reinsurance. For large individual risks facultative reinsurance is used.
4. Stress tests
Stress tests measure the impact of certain economic or technical shocks and are based on the economic value of the net assets (i.e. the difference between the total assets on the balance sheet and the debts on the liabilities side of the balance sheet; these are measured in terms of their economic or market value).
The sensitivity tests carried out systematically by DIS involve a number of stress scenarios related to market, credit and insurance risks.
The following stress tests are made:
4.1. Market and credit risks ●● rises and falls in the interest rate; ●● asymmetrical shifts in the yield curve (steepening, flattening); ●● 20%, 25%, 30% and 40% falls in share and real estate prices; ●● 25 and 50 basis point increases in credit spreads; ●● 25% increases in implicit volatility; ●● 10% fall in rates of exchange affecting non-euro assets.
4.2. Insurance technical risk Managementreport Non-life insurance ●● Worst Loss ratio (claims/premiums) over last 10 years multiplied by 1.5, remaining constant over the next 3 years; ●● increase of 20% in general costs, remaining constant over the next 3 years.
Life insurance ●● increase and decrease of 20% in the surrender rate of insurance policies, remaining constant over the next 3 years; ●● increase of 20% in general costs, remaining constant over
the next 3 years. statements
The impact of technical risks is measured before and after reinsurance. Consolidated financial
The tests are made on a best-effort basis.
The results are discussed in the Asset and Liability Committee (ALCo) meetings and with the Dexia Group and communicated to the competent authorities.
When the embedded value is calculated, stress tests are carried out in order to measure sensitivity to interest rates, mortality, cancellations and costs. statements Non-consolidated financial
48 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 49 Capital management
Solvency According to regulatory requirements:
Dexia Bank monitors its solvency using rules and ratios estab- ●● AFS reserves on bonds and cash flow hedge reserves are lished by the Basel Committee on Banking Supervision and the not part of equity; European Capital Requirements Directive. ●● AFS reserves on shares are added to Tier 2 equity if positive (limited to 90%) or deducted from Tier 1 equity if negative; These ratios, the CAD-ratio (capital adequacy ratio) and the ●● certain IFRS adjustments on subordinated debts, non- Tier 1 ratio, compare the amount of regulatory capital (in total controlling interests and debts must be reversed to reflect and Tier 1) with total weighted risks. From a regulatory point the characteristics of absorption of loss of those instruments; of view, they should amount to a minimum 4% for the Tier 1 ●● other elements (SPV, deferred taxes, etc.) are also adjusted ratio and 8% for the CAD- ratio. based on CBFA requirements.
Another indicator used by Dexia to monitor its solvency is the Moreover, since 1 January 2007, according to the CRD regula- Core Tier 1 ratio, which compares the amount of regulatory tion (Capital Requirement Directive), the CBFA adapted its capital excluding hybrid capital, with the total weighted risks. definition of the regulatory capital. The most important point impacting Dexia Bank, is that the elements which were The Banking, Finance and Insurance Commission (CBFA) requires deducted from the total regulatory capital (banks accounted Dexia to submit the calculation of capital necessary for the for by the equity method, participations in financial companies Managementreport realisation of its activity in accordance with the prudential or subordinated loans issued by such financial companies) are banking regulations. Dexia Bank has complied with all regula- deducted for 50% from Tier 1 capital and for 50% from total tory capital rules for all report periods required by the CBFA. regulatory capital. For these elements relating to insurance companies, the new deduction rule will be implemented as 1. Regulatory capital from 1 January 2013.
Regulatory capital consists of: For regulatory purposes, insurance companies are accounted for by the equity method. Therefore, non-controlling interests ●● The original own funds consisting of share capital, share differ from that published in the Financial Statements. Discre- premiums, retained earnings including current year profit, tionary Participation Features only relate to insurance companies. hybrid capital, foreign currency translation and non-controlling
statements interests, less intangible assets, accrued dividends, net long At year-end 2010, Tier 1 capital amounted to EUR 7,258 million, positions in own shares and goodwill; up 5.39%. Excluding hybrid Tier 1 instruments in an amount of ●● The additional own funds (Tier 2 capital) which includes the EUR 499 million, core Tier 1 capital amounted to EUR 6,759 mil Consolidated financial eligible part of subordinated long-term debt, less subordi- lion at year-end 2010. The hybrid Tier 1 instrument consist of nated debt from and equities in financial institutions. an perpetual subordinated non-cumulative Note for EUR 500 mil lion, issued by Dexia Funding Luxembourg and booked for EUR 499 million.
Comparison total equity (financial statements) and total equity as calculated for regulatory requirements 31/12/09 31/12/10 Financial Regulatory Financial Regulatory
statements (in millions of EUR) Statements purposes Statements purposes Total shareholders’ equity of the Group Dexia Bank 5,643 5,643 5,408 5,408
Non-consolidated financial Non-controlling interests 32 15 20 0 of which Core equity 32 15 21 0 of which Gains and Losses not recognized in the statement of income 0 0 (1) 0 Discretionary participation features of insurance contracts 1 0 0 0
Total equity 5,675 5,658 5,429 5,409
50 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 51 Capital management
Total regulatory capital (in millions of EUR) 31/12/09 31/12/10 Regulatory capital (after profit appropriation) 7,748 7,780
Tier 1 capital 6,887 7,258 Core shareholders’ equity 7,270 7,950 Cumulative translation adjustments (group share)– Group Dexia Bank (7) 1 Prudential filters (326) (584) Non-controlling interests eligible in Tier 1 15 0 IRB (Internal Rating Based) provision shortfall 50% (-) 0 (42) Items to be deducted (564) (565) Intangible and Goodwill (214) (216) Holdings > 10% in other credit and financial institutions (50%) (89) (87) Subordinated claims and other items in other credit and financial institutions in which holdings > 10% (50%) (258) (262) Subordinated claims and other instruments held by insurance in which holdings >10% (50%) (3) 0 Innovative hybrid tier-1 instruments 498 499
Tier 2 capital 861 522 Perpetuals 755 839 Subordinated debts 1,214 1,160 Available for sale reserve on equities (+) 122 54 IRB provision excess (+); IRB provision shortfall 50% (-) 100 (42) Items to be deducted (349) (350) Holdings > 10% in other credit and financial institutions (50%) (89) (87) Excess on limit for holdings, subordinated claims and other items in credit and financial institutions in which holdings < 10% (50%) (258) (262) Subordinated claims and other instruments held by insurance in which holdings >10% (50%) (3) 0 Managementreport
Participations in insurance undertakings (981) (1,139)
Booked Amount Rate Call date Rate applicable Issuer (millions of EUR) after the call Dexia Funding Luxembourg SA 499 4.892% 2 November 2016 Euribor 3 months + 178 basis points
The agreement with the European Commission provides certain statements restrictions in relation to the payment of coupons and calls on Dexia hybrid capital instruments. These restrictions are detailed in the chapter “Transformation plan” in this annual report Consolidated financial (page 10). statements Non-consolidated financial
50 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 51 Capital management
2. Weighted risks Internal capital adequacy
Weighted risks consist of three elements: credit risk, market In 2010, Dexia Bank had the Management Board and the Board risk and operational risk. Each of these risks is described in of Directors validate its internal capital adequacy mechanism the chapter on “Risk Management” in this Annual Report thus responding to the requirements of Pillar 2 of Basel II. Beyond (pages 35-49). those external requirements, this process is at the heart of management of the bank and responds to its capital adequacy At year-end 2010, Dexia Bank’s total weighted risks amounted target in line with its risk profile. It relies on a comparison to EUR 49.6 billion against EUR 49.9 billion at year-end 2009, between available financial resources and economic capital. a decrease of EUR 378 million. 1. Economic capital
(in millions of EUR) 31/12/09 31/12/10 Economic capital is defined as the potential deviation of the Weighted credit risks 44,526 44,104 economic value of the bank in relation to the value expected Weighted market risks 1,948 2,260 at a given interval of confidence and time horizon. The Weighted operational economic capital quantification process is organised in three risks 3,454 3,187 phases: risk identification (definition and cartography updated annually up to a local level), their assessment (essentially on the TOTAL 49,929 49,551 basis of statistical methodologies) and their aggregation on the basis of an inter-risks diversification matrix. The majority of risks are capitalised in relation to a measure of expected loss; certain 3. Solvency ratios risks are not however capitalised if other management modes (limits, scenarios, governance and so on) are considered more In 2010, Tier 1 ratio further improved by 85 bps to 14.6 % appropriate to cover them. supported by organic generation of Tier 1 capital of EUR 371 mil lion (equivalent to 74 bps) and by a slight decrease of total Capitalised risks are assessed at a high level of severity (99.97% weighted risks by EUR 378 million (equivalent to 11 bps). at one year).
Managementreport The core Tier 1 ratio reached 13.6%, up by 84 bps compared During 2010, Economic Capital reporting was totally centralised, to the end of 2009, illustrating the solid solvency situation of in line with the new Group organisation. A series of methodo- Dexia Bank. logical evolutions was made to calculation methods in order to learn from the crisis, and to respond to internal recommen- The capital adequacy ratio was 15.7% at the end of 2010, up dations as well as those from the regulators who audited the by 18 bps compared to the end of 2009. mechanism at the end of 2009.
Dexia was subject to the 2010 European Union-wide stress Dexia Bank’s economic capital is EUR 5,111 million at year-end testing exercise, coordinated by the Committee of European 2010. Banking Supervisors (CEBS). The conclusion of that stress test, based on various scenarios of credit quality deterioration(1), was (1) The test was performed according to the scenarios, methodology and statements that Dexia does not require any additional capital to withstand hypotheses provided by the CEBS, detailed in the global report published on the CEBS adverse “what –if” scenario on a two year horizon, the CEBS web site: http://www.c-ebs.org/EU-wide-stress-testing.aspx. including the additional shock in sovereign debt. Consolidated financial
More detailed information on the stress tests is provided in the Economic capital per type of risk section dedicated to stress tests in the chapter Risk Management as at 31 December 2010 of this Annual Report (page 46).
Operational Credit risk: risk: 13% 42% 31/12/09 31/12/10 Tier 1 ratio 13.8% 14.6% Core Tier 1 ratio 12.8% 13.6% Capital adequacy ratio 15.5% 15.7% statements Market risk: 45% Non-consolidated financial
52 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 53 Capital management
Economic capital per business line as at 31 December 2010
Legacy : 15 % Public and Wholesale Banking : 19 % Group Center : 22 %
Retail and Commercial Banking : Asset 26 % Management and Services : 18%
In the commercial business lines, Retail and Commercial Banking uses 26% of the economic capital, followed by the business lines Public and Whosesale Banking (19%) en Asset Management and Services (18%). The Legacy division, which mainly consists in the bond portfolio in run-off (comprising the former credit spread portfolio, the public bond portfolio and some trading portfolios formerly in Treasury and Financial Markets), consumes 15% of economic capital. The remainder is allocated to the Group Center (ALM, holdings,…).
2. Economic capital adequacy Managementreport
Created in 2009, the Economic Performance Analysis Committee (EPAC) manages the capital adequacy process and in this context has to propose solutions suited to Dexia Bank’s strategy. On a quarterly basis, the EPAC examines (regulatory and economic) ratios, limits and triggers defined in the risk appetite policy and the budget framework, and possible divergences in relation to forecasts. It assesses the Group’s capacity to absorb them and studies action proposals. The Management Board is being informed on the information in the EPAC report,
established jointly by the Risk and Finance support lines. statements Consolidated financial statements Non-consolidated financial
52 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 53 General information
Equity capital and appropriation of Principal changes to the scope of profit Dexia Bank
1. Equity capital and changes in 2010 The main transactions for Dexia Bank in 2010 will have been the sale of its holdings of 6.13% in SPE which operates in the The Extraordinary Shareholders’ Meeting on 27 February 2009 Belgian energy sector and 51% in Adinfo, a company that offers authorised the Board of Directors in pursuance of statutory IT services to Belgian local authorities. requirements to increase the capital of the Bank in one or more stages to a maximum of three billion, four hundred and fifty- These transactions form part of the Agreement reached with eight million, sixty-six thousand, two hundred and twenty- the European Commission in February 2010 under which the seven euros and forty-one cents (EUR 3 458 066 227,41). That holdings in question were to be sold before 31 December 2010. authorisation is valid for five years. In implementation of the transformation plan drawn up in the No change was made to the capital in 2010. wake of the financial crisis, Dexia Bank carried out a number of operations that have helped simplify the scope of the Bank. It The equity capital of Dexia Bank amounts to three billion, thus closed its London branch, sold its holding in Dexia Real four hundred and fifty-eight million, sixty-six thousand, Estate Capital Market (which deals in securitisation in the Managementreport two hundred and twenty-seven euros and forty-one cents United States) to Dexia Crédit Local and sold its participation (EUR 3,458,066,227.41) and is represented by 359,412,616 in Quest for Growth to Dexia Insurance Belgium. It wound up registered shares. the equity portfolio held by its subsidiary Parfipar (a Luxem- bourg-based portfolio management company) and reduced The company has also issued 300,000 registered profit-sharing that company’s equity capital. In the meantime it has concluded shares without face value. an agreement with Dexia Banque Internationale à Luxembourg to sell Parfipar to it during the first quarter of 2011. 2. Appropriation of profit In 2010 Dexia Bank carried out a number of business-related The dividend that Dexia Bank pays its shareholders is determined financial operations. These included taking a shareholding in in the light of the growth in profit and the strategy of the the company DG Infra Yield, an infrastructure fund created
statements Dexia Group. jointly with GIMV to invest in selected infrastructure and real- estate projects situated in the Benelux. This fund supplements After deduction of the tax-free reserves amounting to the DG Infra+ Fund. Dexia Bank also took part in operations Consolidated financial EUR 5,917,406.76, the profit for distribution for the financial relating to certain longstanding participations such as an year amounts to EUR 692,100,404.83. increase in the capital of Ecotech Finance (now SRIW Environ- ment) and a purchase of additional shares in Socofe in order to With the addition of the profit of EUR 3,654,736.43 brought maintain the level of its holding in that company. forward from the previous year, the total profit for distribution amounts to EUR 695,755,141.26. Various operations involving stakes held in real-estate companies took place, including: The total profit of EUR 695,755,141.26 will be appropriated as follows: ●● the establishment of BEM Flemish Construction and Invest- ment Company II (a real-estate developer in Eastern Europe); ●● a sum of EUR 34,605,020.24 will be allocated to the ●● the acquisition of the company Shop Equipment (a real- statements statutory reserve; estate project in Ghent). ●● a sum of EUR 645,000,000.00 will be allocated to the available reserves;
Non-consolidated financial ●● a sum of EUR 14,990,894.77 will be distributed to holders Litigation: Lernout & Hauspie of profit-sharing shares; ●● a sum of EUR 1,159,226.25 will be carried over to next year. Dexia Bank Belgium (Dexia Bank) was involved in various ways 3. Annual dividend in the bankruptcy of Lernout & Hauspie Speech Products SA (LHSP) and the consequences thereof. This was described in At the Shareholders’ Meeting on 27 April 2011, the Board of detail in the 2007, 2008 and 2009 annual reports. Directors will propose not to pay the shareholders any dividend. On the other hand, the Board of Directors will propose that a The following important developments have taken place since preferential dividend of EUR 14,990,894.77 be paid to holders the 2009 annual report. of profit-sharing shares.
54 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 55 General information
1. Claim on Lernout & Hauspie Speech 3. Civil proceedings against Dexia Bank Products 3.1. LHSP receivers’ claim At 31 December 2010, Dexia Bank has a claim in USD charge- In July 2005, the Belgian receivers of LHSP filed a civil action able to the bankruptcy of LHSP for a principal sum of EUR 29.3 mil- before the Commercial Court of Ypres against twenty-one lion (exchange rate USD/EUR 1.3399), for which an impairment parties including Dexia Bank. They claim compensation for the of EUR 25.1 million has been booked. This claim originates in net liabilities of LHSP in bankruptcy. According to the receivers’ the share taken by the former Artesia Banking Corporation provisional assessment of the claim, it would amount to (ABC) in the syndicated loan of USD 430 million to LHSP on approximately EUR 439 million. This claim, to a large extent 5 May 2000. ABC’s share amounted to USD 50 million. duplicative of the claims introduced by the receivers in the criminal proceedings, has not developed since then. There is Dexia Bank believes it will be able to recover the net accounting not likely to be any development until after the end of the value of this claim. criminal proceedings (still on hold before the Supreme Court of Appeal with regard to parties other than Dexia Bank) The liquidation of LHSP’s assets is subject to separate proceed- and settlement of the civil aspect before the Court of Appeal. ings in Belgium and in the United States. Considering the acquittal of Dexia Bank and the reasoning for the order, the risk of that action being declared substantiated According to the LHSP Belgian bankruptcy receivers, Dexia Bank is considered extremely low. and the other unsecured creditors are unlikely to receive any reimbursement from the Belgian liquidation of LHSP. 3.2. Individual actions During the criminal proceedings, certain civil claims were filed In 2008, Dexia Bank waived its claim on the insolvency of LHSP before the Commercial Court of Ypres against various parties, in the United States, in exchange for a waiver by the American including Dexia Bank. The main claim was filed by Deminor on Litigation Trustee of LHSP of all its claims entered against behalf of 4,941 investors. Similarly, 151 investors affiliated Dexia Bank. to Spaarverlies (now named Dolor) and the liquidators of the company Velstra also commenced civil actions. These claims, 2. Prosecution of Dexia Bank in Belgium to a large extent duplicative of the claims introduced in the criminal proceedings, have not developed since then. There is On 4 May 2007, Dexia Bank was summoned, together with 20 not likely to be any development until after the end of the Managementreport other parties, to appear before the Court of Criminal Appeal in criminal proceedings (still on hold before the Supreme Court Ghent. According to the writ of summons, Dexia Bank is pros- of Appeal with regard to parties other than Dexia Bank) and ecuted by virtue of the former ABC being accused as an alleged settlement of the civil aspect before the Court of Appeal. accessory to the falsification of the financial statements of LHSP and other related offences among which forgery, securities Considering the acquittal of Dexia Bank and the reasoning for fraud and market manipulation. the order, the risk of that action being declared substantiated is considered extremely low. On 20 September 2010, the Court of Appeal of Ghent passed its judgment on the criminal case. It acquitted Dexia Bank and 4. L&H Holding Mr G. Dauwe, former member of the Management Board of
Artesia Bank, of all criminal charges on the basis of a very de- On 27 April 2004, the bankruptcy receiver of L&H Holding statements tailed analysis of the facts by the Court of Appeal. summoned Messrs Lernout, Hauspie and Willaert, along with Banque Artesia Nederland (BAN) and Dexia Bank, to return the No party has filed an appeal to the Supreme Court of Appeal Parvest shares (the value of which was estimated at USD 31.5 mil Consolidated financial against this acquittal of Dexia Bank and Mr G. Dauwe, so that lion as at 31 December 2010) or, in default, to pay the principal their acquittal is definitive. amount of USD 25 million. The case, still pending before the Commercial Court of Ypres, has not developed since then. As a result of those acquittals, the Court of Appeal of Ghent is no longer competent to pronounce on the claims made in This action is connected with a USD 25 million loan granted to civil actions by the shareholders, creditors and receivers of LHSP Mr Bastiaens by BAN in July 2000 for the purposes of the against Dexia Bank and Mr G. Dauwe. Deminor and Dolor, acquisition by Mr Bastiaens of LHSP shares owned by L&H together representing the majority of the individuals bringing Holding. The selling price of USD 25 million was credited not civil actions, consider that they can only appeal when the Court to the account of L&H Holding but to three separate accounts of Appeal in Ghent has pronounced on the civil case. Dexia opened by Messrs Lernout, Hauspie and Willaert. Taking the Bank and its counsel are of the opinion that this position is view that this money was due to L&H Holding, the L&H Holding statements extremely contestable. bankruptcy receiver is claiming its repayment.
Whatever the case, an appeal by a civil party is not likely to The order by the Court of Appeal in Ghent on 20 September Non-consolidated financial throw back into question the acquittal of Dexia Bank and 2010 attributed the said Parvest shares to the bankruptcy Mr G. Dauwe. receiver of L&H Holding.
Considering the comprehensively substantiated judgment, there If the Parvest shares, on deposit in the Netherlands and seized is a particularly low risk of Dexia Bank being ordered to pay by various parties, are restored to the bankruptcy receiver of damages and interest to the receivers, creditors or shareholders L&H Holding, his action will have no object and in principle it of LHSP. will lapse.
54 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 55 General information
5. Provisions
In view of its criminal acquittal, on the basis of the facts of the case, there is a particularly low risk that Dexia Bank will be or- dered to pay damages and interest in the current civil proceed- ings and no provision has been constituted in that regard. Managementreport statements Consolidated financial statements Non-consolidated financial
56 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 57 Transparency declaration
Transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market.
Pursuant to Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (hereinafter the “Transparency Directive”) and Directive 2007/14/EC of 8 March 2007 laying down detailed rules for the implementation of certain provisions of the Transparency Directive, Dexia Bank Belgium SA has chosen Luxembourg as its origin Member State.
The Transparency Directive has been transposed into Luxem- bourg law by:
●● the law of 11 January 2008 on the transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market; Managementreport ●● the regulation of the Grand-Duchy of 3 July 2008 officially designating the mechanisms for the central storage of regulated information within the meaning of the law of 11 January 2008; and ●● CSSF Circular No 08/337 by the Commission de Surveillance du Secteur Financier (Financial Sector Supervisory Commis- sion).
The aforesaid regulation lays down a certain number of require- ments in relation to information and the publication of data. statements The Management Board of Dexia Bank Belgium (see page 13 for its composition) therefore declares that: Consolidated financial
●● Dexia Bank Belgium SA has chosen Luxembourg as its origin Member State; ●● to the best of their knowledge, the financial statements prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer and the undertakings included in the consolidation taken as a whole; ●● to the best of their knowledge, the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a statements whole, together with a description of the principal risks and uncertainties that they face. Non-consolidated financial
56 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 57 58 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 59 Consolidated financial statements
as at 31 december 2010
60 Consolidated balance sheet 62 Consolidated statement of income 63 Consolidated statement of change in equity 67 Consolidated statement of comprehensive income 68 Consolidated cash flow statement 69 Notes to the consolidated financial statements 69 I. Accounting principles on a consolidated basis 85 II. Significant changes in scope of consolidation and list of subsidiaries and affiliated enterprises of Dexia Bank 96 III. Business reporting 99 IV. Significant items included in the net income 99 V. Post-balance-sheet events 99 VI. Litigation 100 VII. Notes on the assets of the consolidated balance sheet 115 VIII. Notes on the liabilities of the consolidated balance sheet 126 IX. Other notes on the consolidated balance sheet 149 X. Notes on the consolidated off-balance-sheet items 150 XI. Notes on the consolidated statement of income 158 XII. Notes on risk exposure 182 Report of the Auditor
58 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 59 Consolidated balance sheet
Assets (In thousands of eur) Note 31/12/09 31/12/10
I. Cash and balances with central banks 7.2 501,637 1,460,908 II. Loans and advances due from banks 7.3 63,911,755 67,936,784 III. Loans and advances to customers 7.4 103,007,194 99,472,471 IV. Financial assets measured at fair value through profit or loss 7.5 6,463,000 6,320,036 V. Financial investments 7.6 41,456,991 36,475,085 VI. Derivatives 9.1 28,744,619 30,313,229 VII. Fair value revaluation of portfolio hedge 1,739,298 1,812,004 VIII. Investments in associates 7.8 284,014 277,969 IX. Tangible fixed assets 7.9 1,334,211 1,241,293 X. Intangible assets and goodwill 7.10 228,507 229,235 XI. Tax assets 7.11 & 9.2 683,063 953,365 XII. Other assets 7.12 & 9.3 1,058,982 1,393,092 XIII. Non-current assets held for sale 7.13 & 9.6 4,357,477 16,664
Total assets 253,770,748 247,902,135 Managementreport Liabilities (In thousands of eur) Note 31/12/09 31/12/10
I. Due to banks 8.1 74,119,120 62,368,244 II. Customer borrowings and deposits 8.2 77,798,775 82,876,531 III. Financial liabilities measured at fair value through profit or loss 8.3 10,837,556 12,194,667 IV. Derivatives 9.1 32,311,209 34,902,906 V. Fair value revaluation of portfolio hedge 0 (42,023) VI. Debt securities 8.4 29,437,038 28,957,883 VII. Subordinated debts 8.5 2,943,831 2,715,641 VIII. Technical provisions of insurance companies 9.3 13,384,676 15,619,891 IX. Provisions and other obligations 8.6 911,551 900,859
statements X. Tax liabilities 8.7 & 9.2 39,035 34,936 XI. Other liabilities 8.8 1,977,510 1,920,469 XII. Liabilities included in disposal groups held for sale 8.9 4,335,466 2 Consolidated financial Total liabilities 248,095,767 242,450,006
The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Non-consolidated financial
60 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 61 Consolidated balance sheet
Equity (In thousands of eur) Note 31/12/09 31/12/10
XIV. Subscribed capital 9.7 3,458,066 3,458,066 XV. Additional paid-in capital 209,232 209,232 XVI. Treasury shares 0 0 XVII. Reserves and retained earnings 3,181,191 3,604,061 XVIII. Net income for the period 421,469 678,322
Core shareholders’ equity 7,269,958 7,949,681 XIX. Gains and losses not recognised in the statement of income (1,627,383) (2,517,932) a) Available-for-sale reserve on securities (203,483) (1,247,197) b) “Frozen” fair value adjustment of financial assets reclassified to Loans and Receivables (1,406,971) (1,254,618) c) Other reserves (16,929) (16,117)
Total shareholders’ equity 5,642,575 5,431,749 XX. Non-controlling interests 31,633 20,380 XXI. Discretionary participation features of insurance contracts 9.3 773 0
Total equity 5,674,981 5,452,129
Total liabilities and equity 253,770,748 247,902,135
The notes on pages xx to xx are an integral part of these consolidated financial statements. Managementreport statements Consolidated financial statements Non-consolidated financial
60 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 61 Consolidated statement of income
(In thousands of eur) Note 31/12/09 31/12/10
I. Interest income 11.1 35,384,889 25,238,192 II. Interest expense 11.1 (32,975,919) (23,128,386) III. Dividend income 11.2 91,004 66,133 IV. Net income from associates 11.3 38,360 28,672 V. Net income from financial instruments at fair value through profit or loss 11.4 (294,104) (28,264) VI. Net income on investments 11.5 20,312 207,150 VII. Fee and commission income 11.6 440,703 489,436 VIII. Fee and commission expense 11.6 (110,175) (121,060) IX. Premiums and technical income from insurance activities 11.7 & 9.3 2,661,284 3,449,474 X. Technical expense from insurance activities 11.7 & 9.3 (3,032,309) (3,830,654) XI. Other net income(1) 11.8 28,379 76,715 Income 2,252,424 2,447,408 XII. Staff expense 11.9 (698,757) (669,167) XIII. General and administrative expense 11.10 (497,607) (502,982) XIV. Network costs (366,098) (369,127) XV. Depreciation & amortization 11.11 (122,551) (115,768) Expenses (1,685,013) (1,657,044)
Managementreport Gross operating income 567,411 790,364 XVI. Impairment on loans and provisions for credit commitments 11.12 (184,036) (26,371) XVII. Impairment on tangible and intangible assets 11.13 (1,506) (12) XVIII. Impairment on goodwill 11.14 0 0 XIX. Provisions for legal litigations(1) 11.15 3,296 (1,899) Net income before tax 385,165 762,082 XX. Tax expense 11.16 19,211 (81,601) Net income of continuing operations 404,376 680,481 XXI. Discontinued operations (net of tax) 0 0
Net income 404,376 680,481 Attributable to non-controlling interests (17,093) 2,159 Attributable to equity holders of the parent 421,469 678,322 statements (1) Figures as at 31 December 2009 have been restated.
Consolidated financial The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Non-consolidated financial
62 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 63 Consolidated statement of change in equity
Core shareholders’ Subscribed Additional Treasury Reserves Net income Core capital paid-in shares and retained for shareholders’ equity capital earnings the period equity (In thousands of eur) As at 31 Dec. 2008 3,458,066 209,232 0 3,762,009 (573,884) 6,855,423 Movements of the period - Transfers to reserves 0 0 0 (573,884) 573,884 0 - Share-based payments: value of employee services 0 0 0 3,461 0 3,461 - Variation of scope of consolidation 0 0 0 (10,395) 0 (10,395) - Net income for the period 0 0 0 0 421,469 421,469
As at 31 Dec. 2009 3,458,066 209,232 0 3,181,191 421,469 7,269,958
Gains and losses not Gains and losses Cumulative Group share not recognised in the statement of income translation recognised in the adjustments Subsidiaries Securities(1) Derivatives Associates statement of income (CTA) held for sale (CFH) (AFS, CFH and Managementreport (In thousands of eur) CTA) As at 31 Dec. 2008 0 (3,346,558) (21,774) (6,523) (6,923) (3,381,778) Movements of the period - Net change in fair value through equity – Available-for-sale investments 0 1,267,392 0 15,766 0 1,283,158 - Transfers to income of available- for-sale reserve amounts due to impairments 0 65,738 0 0 0 65,738 - Transfers to income of available- for-sale reserve amounts due to disposals 0 183,739 0 (554) 0 183,185 statements - Amortization of net fair value on reclassified portfolio in application
of IAS 39 amended 0 202,078 0 0 0 202,078 Consolidated financial - Net change in fair value through equity – Cash flow hedges 0 0 11,049 0 0 11,049 - Net change in cash flow hedge reserve due to transfers to income 0 0 (1,899) 0 0 (1,899) - Translation adjustments 0 33,512 931 4 (230) 34,217 - Variation of scope of consolidation 0 (16,612) 0 (6,504) (15) (23,131) - Transfers (257) 257 0 0 0 0
As at 31 Dec. 2009 (257) (1,610,454) (11,693) 2,189 (7,168) (1,627,383)
(1) Includes both the available-for-sale reserve and the” frozen” fair value adjustment of financial assets reclassified to Loans and Receivables.
The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Non-consolidated financial
62 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 63 Consolidated statement of change in equity
Non-controlling interests Core Gains Non- Discretionary equity and losses not controlling participation recognised in interests features the statement of insurance (In thousands of eur) of income contracts As at 31 Dec. 2008 69,423 (30,699) 38,724 0 Movements of the period - Increase of capital 77 0 77 0 - Dividends (4,194) 0 (4,194) 0 - Net income for the period (17,094) 0 (17,094) 0 - Net change in fair value through equity 0 9,475 9,475 773 - Transfers to income of available-for-sale reserve amounts due to disposals 0 1,157 1,157 0 - Transfers to income of available-for-sale reserve amounts due to impairments 0 79 79 0 - Translation adjustments 0 10 10 0 - Variation of scope of consolidation (14,043) 16,846 2,803 0 - Amortization of net fair value on reclassified portfolio in application of IAS 39 amended 0 615 615 0 - Other (2,160) 2,141 (19) 0
As at 31 Dec. 2009 32,009 (376) 31,633 773
Core shareholders’ equity 7,269,958 Gains and losses not recognised in the statement of income attributable to equity holders of the parent (1,627,383) Non-controlling interests 31,633 Discretionary participation features of insurance contracts 773
Managementreport TOTAL EQUITY as at 31 Dec. 2009 5,674,981
The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Consolidated financial statements Non-consolidated financial
64 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 65 Consolidated statement of change in equity
Core shareholders’ Subscribed Additional Treasury Reserves Net income Core capital paid-in shares and retained for shareholders’ equity capital earnings the period equity (In thousands of eur) As at 31 Dec. 2009 3,458,066 209,232 0 3,181,191 421,469 7,269,958 Movements of the period - Transfers to reserves 0 0 0 421,469 (421,469) 0 - Share-based payments: value of employee services 0 0 0 972 0 972 - Variation of scope of consolidation 0 0 0 422 0 422 - Other movements 0 0 0 7 0 7 - Net income for the period 0 0 0 0 678,322 678,322
As at 31 Dec. 2010 3,458,066 209,232 0 3,604,061 678,322 7,949,681
Gains and losses not Gains and losses Cumulative Group share not recognised in the statement of income translation recognised in the adjustments Subsidiaries Securities(1) Derivatives Associates statement of income (CTA) held for sale (CFH) (AFS, CFH and (In thousands of eur) CTA) As at 31 Dec. 2009 (257) (1,610,454) (11,693) 2,189 (7,168) (1,627,383) Movements of the period - Net change in fair value through equity – Available-for-sale investments 0 (916,824) 0 1,587 0 (915,237) - Transfers to income of available- for-sale reserve amounts due to impairments 0 31,387 0 0 0 31,387
- Transfers to income of available- Managementreport for-sale reserve amounts due to disposals 0 (70,610) 0 (2,518) 0 (73,128) - Amortization of net fair value on reclassified portfolio in application of IAS 39 amended 0 130,825 0 0 0 130,825 - Net change in fair value through equity – Cash flow hedges 0 18 (2,313) 0 0 (2,295) - Net change in cash flow hedge reserve due to transfers to income 0 0 (2,584) 0 0 (2,584) - Translation adjustments 0 (67,243) (1,412) (2) 3,987 (64,670) - Variation of scope of consolidation 257 (83) 0 0 3,810 3,984 - Transfers 0 1,169 0 0 0 1,169 statements As at 31 Dec. 2010 0 (2,501,815) (18,002) 1,256 629 (2,517,932)
(1) Includes both the available-for-sale reserve and the” frozen” fair value adjustment of financial assets reclassified to Loans and Receivables. Consolidated financial
The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Non-consolidated financial
64 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 65 Consolidated statement of change in equity
Non-controlling interests Core Gains Non- Discretionary equity and losses not controlling participation recognised in interests features the statement of insurance (In thousands of eur) of income contracts As at 31 Dec. 2009 32,009 (376) 31,633 773 Movements of the period - Dividends (4,327) 0 (4,327) 0 - Net income for the period 2,159 0 2,159 0 - Net change in fair value through equity 0 (610) (610) (773) - Transfers to income of available-for-sale reserve amounts due to disposals 0 (240) (240) 0 - Transfers to income of available-for-sale reserve amounts due to impairments 0 57 57 0 - Translation adjustments 0 12 12 0 - Variation of scope of consolidation (8,424) 37 (8,387) 0 - Amortization of net fair value on reclassified portfolio in application of IAS 39 amended 0 66 66 0 - Other 14 3 17 0
As at 31 Dec. 2010 21,431 (1,051) 20,380 0
Core shareholders’ equity 7,949,681 Gains and losses not recognised in the statement of income attributable to equity holders of the parent (2,517,932) Non-controlling interests 20,380 Discretionary participation features of insurance contracts 0
TOTAL EQUITY as at 31 Dec. 2010 5,452,129 Managementreport The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Consolidated financial statements Non-consolidated financial
66 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 67 Consolidated statement of comprehensive income
31/12/09 Before-tax Tax (expense) Net-of-tax (In thousands of eur) amount benefit amount Result recognised in the statement of income 385,165 19,211 404,376
Unrealised gains (losses) on available-for-sale financial investments and “frozen” fair value adjustment of financial assets reclassified to Loans and Receivables 2,180,358 (413,908) 1,766,450 Gains (losses) on cash flow hedges 18,828 (8,747) 10,081 Cumulative translation adjustements (230) 0 (230) Gains (losses) from hedges on net investments 0 0 0 Other comprehensive income from associates 8,712 0 8,712 Other comprehensive income from assets held for sale (294) 0 (294)
Other comprehensive income 2,207,374 (422,655) 1,784,719
Total comprehensive income 2,592,539 (403,444) 2,189,095 Attributable to equity holders of the parent 2,175,865 Attributable to non-controlling interests 13,230 Managementreport
31/12/10 Before-tax Tax (expense) Net-of-tax (In thousands of eur) amount benefit amount Result recognised in the statement of income 762,082 (81,601) 680,481
Unrealised gains (losses) on available-for-sale financial investments and “frozen” fair value adjustment of financial assets reclassified to Loans and Receivables (1,274,845) 382,771 (892,074) Gains (losses) on cash flow hedges (9,681) 3,373 (6,308) Cumulative translation adjustements 7,797 0 7,797 statements Gains (losses) from hedges on net investments 0 0 0 Other comprehensive income from associates (934) 0 (934) Consolidated financial Other comprehensive income from assets held for sale 294 0 294
Other comprehensive income (1,277,369) 386,144 (891,225)
Total comprehensive income (515,287) 304,543 (210,744) Attributable to equity holders of the parent (212,226) Attributable to non-controlling interests 1,483
The notes on pages xx to xx are an integral part of these consolidated financial statements. statements Non-consolidated financial
66 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 67 Consolidated cash flow statement
(In thousands of eur) Note 31/12/09 31/12/10 Cash flow from operating activities Net income after income taxes 404,376 680,481 Adjustment for - Depreciation, amortization and other impairment 142,139 130,930 - Impairment on bonds, equities, loans and other assets (1,198,870) (130,870) - Net gains or losses on investments 635,647 (71,119) - Charges for provisions (mainly insurance provision) 1,117,233 2,201,528 - Unrealised gains or losses 29,610 (44,996) - Income from associates (38,360) (28,672) - Dividends from associates 19,640 31,384 - Deferred taxes (1,420) 43,244 - Other adjustments 2,762 912 Changes in operating assets and liabilities (22,437,311) 7,621,874 Net cash provided (used) by operating activities (21,324,554) 10,434,696
Cash flow from investing activities Purchase of fixed assets (306,768) (293,540) Sales of fixed assets 118,990 260,312
Managementreport Acquisitions of unconsolidated equity shares (1,461,009) (1,049,261) Sales of unconsolidated equity shares 2,578,466 1,509,824 Acquisitions of subsidiaries and of business units (25,383) 0 Sales of subsidiaries and of business units (17) (12,857) Net cash provided (used) by investing activities 904,279 414,478
Cash flow from financing activities Issuance of new shares (192) 0 Issuance of subordinated debts 20,256 1,354 Reimbursement of subordinated debts (185,239) (315,482) Purchase of treasury shares 0 0 Sale of treasury shares 0 0 Dividends paid (4,194) (4,327) statements Net cash provided (used) by financing activities (169,369) (318,455)
Net cash provided (20,589,644) 10,530,719 Consolidated financial
Cash and cash equivalents at the beginning of the period 7.1 48,094,300 27,504,177 Cash flow from operating activities (21,324,554) 10,434,696 Cash flow from investing activities 904,279 414,478 Cash flow from financing activities (169,369) (318,455) Effect of exchange-rate changes and change in scope of consolidation on cash and cash equivalents (479) 1,096 Cash and cash equivalents at end of period 7.1 27,504,177 38,035,992
Additional information Income tax paid (33,141) 5,620 Dividends received 110,643 97,517 statements Interest received 33,545,546 25,708,999 Interest paid (30,553,287) (24,533,728)
Non-consolidated financial Definition of cash and cash equivalents has been restated (see note 7.1.). As a consequence, some amounts have been restated in 2009.
The notes on pages xx to xx are an integral part of these consolidated financial statements.
68 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 69 Notes to the consolidated financial statements
I. Accounting principles on a Notes to the financial statements
consolidated basis The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
Notes to the financial statements 69 The common used abbreviations below are:
Accounting policies 69 ●● IASB: International Accounting Standards Board; 1. Basis of accounting 69 ●● IFRIC: International Financial Reporting Interpretations 2. Changes in accounting policies since the previous Committee; annual publication that may impact Dexia Bank ●● IFRS: International Financial Reporting Standards. Group 70 3. Consolidation 71 The financial statements have been approved of by the Board 4. Offsetting financial assets and of Directors on 3 March 2011. financial liabilities 72 5. Foreign currency translation and transactions 72 6. Financial assets and liabilities 73 Accounting policies 7. Fair value of financial instruments 75 8. Interest income and expense 76 Managementreport 9. Fee and commission income and expense 76 1. Basis of accounting 10. Insurance and reinsurance activities 76 11. Network costs 79 1.1. General 12. Hedging derivatives 79 The consolidated financial statements of Dexia Bank are 13. Hedge of the interest rate risk exposure prepared in accordance with all IFRSs as adopted by the EU. of a portfolio 80 14. Day one profit or loss 80 The European Commission published Regulation EC 1606/2002 15. Tangible fixed assets 80 on 19 July 2002, requiring listed groups to apply IFRS as from 16. Intangible assets 81 1 January 2005. This regulation has been updated several times 17. Non-current assets held for sale and since 2002.
discontinued operations 81 statements 18. Goodwill 81 Dexia Bank’s financial statements have therefore been prepared 19. Other assets 82 “in accordance with all IFRSs as adopted by the EU” and 20. Leases 82 endorsed by the European Commission up to 31 December Consolidated financial 21. Sale and repurchase agreements and lending 2010 including the conditions of application of interest-rate of securities 82 portfolio hedging and the possibility to hedge core deposits. 22. Deferred income tax 82 23. Employee benefits 82 Dexia Bank adopted the new accounting rules on 1 January 24. Provisions 83 2005. Dexia Bank is a Dexia SA subsidiary, which is publishing 25. Share capital and treasury shares 84 its consolidated annual financial statements in accordance with 26. Fiduciary activities 84 the IFRS standards with effect from the year 2005. For 2004 27. Cash and cash equivalents 84 and 2005, Dexia Bank applied the IFRS standards in the same way as Dexia SA.
The Royal Decree of 5 December 2004 compels Dexia Bank to statements publish its consolidated accounts according to the IFRS approved by the European Union as from 31 December 2006. Non-consolidated financial The consolidated financial statements are prepared on a going- concern basis. They are stated in thousands of euro (EUR) unless otherwise stated.
1.2. Accounting estimates and judgements In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported. To make these assumptions and estimates, management uses information available at the date of prepara- tion of the financial statements and exercises its judgement.
68 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 69 Notes to the consolidated financial statements
While management believes that it has considered all available impact on Dexia Bank because there were no new business information in developing these estimates, actual results may combinations as from 1 January 2010. differ from the estimates and the differences could be material ●● Amendment to IAS 39 “Financial Instruments: Recognition to the financial statements. and Measurement: Eligible Hedged Items”. There is no impact on Dexia Bank. Judgements are made principally in the following areas: ●● Amendments to IAS 27 “Consolidated and Separate Financial Statements”. There is no impact on Dexia Bank for the ●● classification of financial instruments; period ending 31 December 2010 other than relabelling ●● determination of whether there is an active market or not; “minority interest” into “non-controlling interest”. ●● consolidation (control, including SPE); ●● Amendments to IFRS 5 “Non-current Assets Held for Sale ●● identification of non-current assets and disposal groups held and Discontinued Operations” issued in May 2008 as part for sale and discontinued operations (IFRS 5); of the improvements to IFRSs. There is no impact on Dexia ●● hedge accounting; Bank. ●● existence of a present obligation with probable outflows in ●● IFRIC 12 “Service Concession Arrangements”. This interpre- the context of litigations; tation has no impact on Dexia Bank. ●● identification of impairment triggers. ●● IFRIC 15 “Agreement for the Construction of Real Estate”. This interpretation has no impact on Dexia Bank. These judgements are entered in the corresponding sections ●● IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”. of the accounting policies. This interpretation has no impact on Dexia Bank. ●● IFRIC 17 “Distributions of Non-cash Assets to Owners”. This Estimates are principally made in the following areas: interpretation has no impact on Dexia Bank. ●● IFRIC 18 “Transfers of Assets from Customers”. This interpre ●● determination of the recoverable amount of impaired financial tation has no impact on Dexia Bank. assets; ●● determination of the useful life and the residual value of 2.2. IASB and IFRIC texts endorsed by the property, plant and equipment, investment property and European Commission during the current year but intangible assets; not yet applicable as from 1 January 2010 ●● measurement of liabilities for insurance contracts; ●● Amendment to IFRS 1 “Limited Exemption from Compara- Managementreport ●● actuarial assumptions related to the measurement of tive IFRS 7 Disclosures for First-time Adopters” applicable employee benefits obligations and plan assets; as from 1 January 2011. This amendment will have no impact ●● estimate of future taxable profit for the recognition and on Dexia Bank which is not a first-time adopter anymore. measurement of deferred tax assets; ●● Amendment to IFRIC 14 “Prepayments of a Minimum ●● estimate of the recoverable amount of cash-generating units Funding Requirement” applicable as from 1 January 2011. for goodwill impairment. This amendment will not impact Dexia Bank. ●● IAS 24 “Related Party Disclosures” applicable as from 2. Changes in accounting policies since 1 January 2011. This standard supersedes IAS 24 “Related the previous annual publication that may Party Disclosures” (as revised in 2003). This amendment will impact Dexia Bank Group not significantly impact Dexia Bank. ●● IFRIC 19 “Extinguishing Financial Liabilities with Equity
statements The overview of the texts below is made until the reporting Instruments” applicable as from 1 January 2011. This date of 31 December 2010. interpretation has no impact on Dexia Bank.
Consolidated financial 2.1. IASB and IFRIC texts endorsed by the 2.3. New IFRS standards, IFRIC interpretations and European Commission and applied as from amendments issued during the current year but 1 January 2010 not yet endorsed by the European Commission The following standards, interpretations or amendments have ●● Amendment to IAS 12 “Deferred Tax: Recovery of Under- been endorsed by the European Commission and are applied lying Assets”. There is no impact for Dexia Bank as Dexia as from 1 January 2010. Bank measures these assets at amortised cost. ●● Amendment to IFRS 1 “Severe Hyperinflation and Removal ●● “Improvements to IFRSs” (issued by IASB in April 2009), of Fixed Dates for First-time Adopters”. This amendment will which are a collection of amendments to existing standards have no impact on Dexia Bank, which is not a first-time and interpretations. Unless otherwise specified, the amend- adopter anymore. ments are effective as from 1 January 2010. There is no ●● IFRS 9 “Financial Instruments – Phase I Classification and statements impact for Dexia Bank. Measurement”. Dexia Bank performed several impact ●● Amendments to IFRS 2 “Group Cash Settled Share-based assessments and the main preliminary conclusions were the Payment Transactions”. These amendments aim to clarify following:
Non-consolidated financial the scope of IFRS 2. There is no impact for Dexia Bank. ■■ Some structured loans, for which the embedded derivative ●● Revised IFRS 1 “First-time Adoption of International Financial are currently bifurcated and measured at fair value while Reporting Standards”, which replaces the standard as issued the host contract is reported at amortised cost, will be in June 2003. The revision of this standard has no impact measured at fair value through profit or loss. on Dexia Bank which is not a first-time adopter anymore. ■■ Bonds currently classified as available for sale and thus ●● Amendments to IFRS 1 “Additional Exemptions for First-time reported at fair value through other comprehensive in- Adopters”. The revision of this standard has no impact on come, will be reported either at amortised cost or at fair Dexia Bank, which is not a first-time adopter anymore. value through profit or loss. Consequently the negative ●● Revised IFRS 3 “Business Combinations”, which is applied AFS reserve will either be reversed or reclassified to re- prospectively to business combinations for which the tained earnings. acquisition date is on or after 1 January 2010. There is no
70 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 71 Notes to the consolidated financial statements
■■ For structured products (ABS, RMBS…), a “look through” In the fourth quarter 2010, Dexia Bank Belgium concluded that approach should be applied under the new standard in it meets the criteria required in IAS 32 to offset the positive and order to determine the measurement model. As Dexia negative market values of OTC interest-rate swaps transacted Bank invested mostly in the highest tranche, these prod- with the London Clearing House (“LCH”). The positions are ucts could be measured at amortised cost under IFRS 9. netted across maturities by currency. The application of offset- ■■ Some financial assets will probably be measured at fair ting had no net impact on the consolidated statement of income value through profit or loss as the business model criteria or shareholder’s equity. (collecting the cash flows attached to the underlying in- strument) for amortised cost are not respected. 3. Consolidation
However, the outcome of these assessments is tentative and 3.1. Business combinations subject to potentially important changes once the final policies Acquisitions of businesses are accounted for using the acqui on impairment and hedge accounting are known. sition method. The consideration transferred in a business combination is measured at fair value, which is calculated as ●● Amendment to IFRS 7 “IFRS Disclosures – Transfers of the sum of the acquisition-date fair values of the assets trans- Financial Assets”. This amendment will impact Dexia Bank ferred by Dexia Bank, the liabilities incurred by Dexia Bank to by requiring more detailed disclosures on transferred assets former owners of the acquiree and the equity interests issued which were not derecognised by Dexia Bank. by Dexia Bank in exchange for control of the acquiree. Acqui- ●● “The Conceptual Framework for Financial Reporting 2010” sition-related costs are generally recognised in profit or loss as completes the first phase of the review and comprises incurred. At the acquisition date, the identifiable assets acquired Chapter 1 “The objective of general purpose financial and the liabilities assumed are recognised at their fair value at reporting” and Chapter 3 “Qualitative characteristics of the acquisition date. useful financial information”. There is no impact for Dexia Bank because Dexia Bank already complies with the principles Non-controlling interests may be initially measured either at fair of the Conceptual Framework. value or at the non-controlling interest’s proportionate share of ●● “Improvements to IFRSs” (issued by IASB in May 2010), the recognised amounts of the acquiree’s identifiable net assets. which are a collection of amendments to existing Interna- The choice of measurement basis is made on a transaction-by- tional Financial Reporting Standards. These amendments transaction basis. The equity and net income attributable to are effective as from 1 January 2011 and the impact mainly the non-controlling interests are shown separately in the balance Managementreport relates to disclosures. sheet and statement of income respectively.
The IASB also published “IFRS Practice Statement: Management When the consideration transferred by Dexia Bank in a business Commentary: A Framework for presentation”. This Practice combination includes assets or liabilities resulting from a Statement is not an IFRS but provides a non-binding framework contingent consideration arrangement, the contingent con for the presentation of management commentary. sideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business 2.4. Changes in presentation combination. Subsequent changes in the fair value of the The publication line XVI. “Deferred Acquisition Costs” has been contingent consideration are typically recognised in profit or removed. loss. statements Dexia Bank Belgium has decided to report as a separate line When a business combination is achieved in stages, Dexia Bank’s item in the statement of income all legal litigations in the line previously held equity interest in the acquiree is remeasured to “Provisions for legal litigations” under “Gross operating income” fair value at the acquisition date (i.e. the date on which Dexia Consolidated financial together with “Impairment on loans and provisions for credit Bank obtains control) and the resulting gain or loss, if any, is commitments”, “Impairment on tangible and intangible assets” recognised in profit or loss. Amounts arising from interests in and “Impairment on goodwill”. In Dexia Bank Belgium’s previous the acquiree prior to the acquisition date that have previously reporting, such legal litigations were reported in “Other net been recognised in other comprehensive income are reclassified income”. to profit or loss where such treatment would be appropriate if that interest were disposed of. The IASB amended IAS 39 in October 2008. By this amendment, an entity is allowed to reclassify, if certain conditions are met, 3.2. Subsidiaries financial assets from “Held for trading” or “Available for sale” Subsidiaries are those entities over whose financial and operating to “Loans and receivables” and from “Held for trading” to policies Dexia Bank, directly or indirectly, may exercise control. “Available for sale”. Dexia Bank Belgium mainly applied this statements amendment to reclassify a part of its “Available for sale” port- Subsidiaries are fully consolidated as at the date on which folio to “Loans and receivables”. These assets were transferred effective control is transferred to Dexia Bank and are no longer
at fair value on 1 October 2008, the date of reclassification. consolidated as at the date on which Dexia Bank’s control Non-consolidated financial The amortization of the discount on the bond is compensated ceases. Intercompany transactions, balances and unrealised by the amortization of the “frozen” fair value adjustment. The gains and losses on transactions among Dexia Bank’s companies consequences were that (i) these assets are subject to the have been eliminated. Where necessary, the accounting policies impairment procedure applicable for the category “Loans and of the subsidiaries have been amended to ensure consistency receivables” and (ii) any subsequent change in fair value does with the policies adopted by Dexia Bank. no longer impact Dexia Bank Belgium’s financial statements. In order to distinct the “frozen” fair value adjustments of re- Changes in the Dexia Bank’s ownership interests in subsidiaries classified assets from the fair value adjustments relating to the that do not result in Dexia Bank losing control over the sub- remaining “Available for sale” portfolio, Dexia Bank Belgium sidiaries are accounted for as equity transactions. The carrying decided to split these elements within its equity. amounts of Dexia Bank’s interests and the non-controlling
70 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 71 Notes to the consolidated financial statements
interests are adjusted to reflect the changes in their relative Control may arise through the predetermination of the activities interests in the subsidiaries. Any difference between the amount of the SPE (operating on “autopilot”) or otherwise. The fol by which the non-controlling interests are adjusted and the fair lowing circumstances may indicate a relationship in which value of the consideration paid or received is recognised Dexia Bank controls an SPE (which it should consequently directly in equity. consolidate):
When Dexia Bank loses control of a subsidiary, the profit or loss ●● The activities of the SPE are being conducted on behalf of on disposal is calculated as the difference between: Dexia Bank according to its specific business needs; ●● Dexia Bank has the decision-making powers or delegated ●● the aggregate of the fair value of the consideration received these powers to obtain the majority of the benefits of the and the fair value of any retained interest; and activities of the SPE; ●● the previous carrying amount of the assets (including good- ●● Dexia Bank has the right to obtain the majority of the will), and liabilities of the subsidiary and any non-controlling benefits of the SPE and may be exposed to its risks; or interests. ●● Dexia Bank retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain The fair value of any investment retained in the former sub- benefits from its activities. sidiary at the date on which control is lost is regarded as the fair value on initial recognition for subsequent accounting 4. Offsetting financial assets and financial under IAS 39 “Financial Instruments: Recognition and Measure- liabilities ment” or, where applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. Financial assets and financial liabilities are offset (and conse- quently, the net amount only is reported) when Dexia Bank has 3.3. Jointly-controlled entities a legally enforceable right to offset and intends either to settle A joint venture (JV) is a contractual arrangement whereby on a net basis, or to realise the asset and settle the liability two or more parties undertake an economic activity that is simultaneously. subject to joint control. Joint ventures are accounted for via the proportionate consolidation method. In the financial statements, 5. Foreign currency translation and joint ventures are integrated by combining their share of the transactions Managementreport assets, liabilities, income and expenses on a line-by-line basis. 5.1. Foreign currency translation The same consolidation treatment as applied to subsidiaries, is On consolidation, the statements of income and cash flow applied to intercompany transactions. Where necessary, the statements of foreign entities that have a functional currency accounting policies of the jointly-controlled entities have been different from Dexia Bank’s presentation currency are trans- amended to ensure consistency with the policies adopted by lated into Dexia Bank’s presentation currency (EUR) at the Dexia Bank. average exchange rates for the year (annual reporting) or the period (interim reporting) and their assets and liabilities are 3.4. Associates translated at the respective year-end or quarter-end exchange Investments in associates are initially measured at cost and rates. accounted for using the equity method. Associates are invest-
statements ments in which Dexia Bank has significant influence, but does Exchange differences arising from the translation of the net not exercise control. This is usually the case, when Dexia Bank investment in foreign subsidiaries, associates, joint ventures and owns between 20% and 50% of the voting rights. The owner- of borrowings and other currency instruments designated as Consolidated financial ship share of net income for the year is recognised as income hedges of such investments, are recorded as a cumulative of associates, whereas the share in other comprehensive income translation adjustment within shareholders’ equity. On disposal of associates is carried on a separate line of the statement of of a foreign entity, such exchange differences are recognised comprehensive income and the investment is recorded in the in the statement of income as part of the gain or loss on balance sheet at an amount that reflects its share of the net disposal. assets increased with related goodwill. Goodwill and fair value adjustments arising from the acquisition Gains on transactions between Dexia Bank and its “equity of a foreign entity are treated as assets and liabilities of the method investments” are eliminated to the extent of Dexia foreign entity and are translated at the closing rate. Bank’s interest. The recognition of losses from associates is discontinued when the carrying amount of the investment 5.2. Foreign currency transactions statements reaches zero, unless Dexia Bank has incurred or guaranteed For individual Dexia Bank entities, foreign currency transactions legal or constructive obligations in respect of the associates’ are accounted for using the approximate exchange rate at the undertakings. Where necessary, the accounting policies of the date of the transaction. Outstanding balances denominated in
Non-consolidated financial associates have been amended to ensure consistency with the foreign currencies at period- or year-end are translated at policies adopted by Dexia Bank. period- or year-end exchange rates for monetary items and non-monetary items carried at fair value. Historical rates are 3.5. Special purpose entities (SPEs) used for non-monetary items carried at cost. The resulting An SPE shall be consolidated when the substance of the exchange differences from monetary items are recorded in the relationship between Dexia Bank and the SPE indicates that the consolidated statement of income, except for the foreign SPE is controlled by Dexia Bank. exchange impact related to fair value adjustments on available- for-sale bonds, which is recorded under “Other comprehensive income”. For non-monetary items carried at fair value, the exchange differences are governed by the same accounting treatment as for fair value adjustments.
72 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 73 Notes to the consolidated financial statements
6. Financial assets and liabilities Trading securities are securities acquired for generating a profit from short-term fluctuations in price or dealer’s margins, or are Management determines the appropriate classification of its securities included in a portfolio in which a pattern of short-term investments at initial recognition. However, under certain profit taking exists. Dexia Bank initially recognises trading conditions, financial assets could subsequently be reclassified. securities at fair value and subsequently re-measures them at fair value. All realised and unrealised gains and losses are recorded 6.1. Recognition and derecognition of financial under “Net income from financial instruments at fair value instruments through profit or loss”. Interest earned is recorded under “Interest Dexia Bank recognises and derecognises financial assets held income”, and dividends received under “Dividend income”. for trading on trade date. For these financial assets, Dexia Bank recognises in the statement of income and as at the trade date, 6.3.2. Liabilities held for trading any unrealised gains or losses arising from revaluing the contract Liabilities held for trading are subject to the same accounting to fair value at the reporting date. Dexia Bank recognises these rules as those for “Loans and securities held for trading”. unrealised gains and losses under “Net income from financial instruments at fair value through profit or loss”. 6.3.3. Loans and securities designated at fair value through profit or loss (“FVO”) All other “regular way” purchases and sales of financial assets In some cases and if appropriately documented, Dexia Bank are recognised and derecognised on the settlement date, which can designate a financial asset, a financial liability or a group is the date of delivery to or by Dexia Bank. of financial instruments as “at fair value through profit or loss” where: Dexia Bank recognises the financial liabilities on its balance sheet when it becomes party to the contractual provisions of the ●● such designation eliminates or significantly reduces a instrument. Dexia Bank derecognises financial liabilities only measurement or recognition inconsistency that would when it is extinguished, i.e. when the obligation specified in otherwise arise; the contract is discharged or cancelled or expires. ●● a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value 6.2. Loans and advances due from banks and basis, in accordance with a documented risk management customers or investment strategy; Managementreport Dexia Bank classifies non-derivative financial assets with fixed ●● an instrument contains a non-closely related embedded or determinable payments that are not quoted on an active derivative: market into this category (labelled by IAS 39 as Loans and ■■ that significantly modifies the cash flows that otherwise Receivables – L&R) except for: would be required by the contract; or ■■ for which it is not clear,with little or no analysis, that the ●● those that Dexia Bank intends to sell immediately or in the separation of the embedded derivative is prohibited. near term, which are classified as held for trading, and those that Dexia Bank, upon initial recognition, designates as In order to avoid volatility in its equity and results, Dexia Bank being at fair value through profit or loss; has designated the assets and liabilities of unit-linked contracts ●● those that Dexia Bank, upon initial recognition, designates (Branch 23) at fair value through profit or loss. as available for sale; or
●● those for which Dexia Bank might not substantially recover 6.3.4. Liabilities designated at fair value through statements all of its initial investment, other than because of credit profit or loss (FVO) deterioration, such L&R then being classified as available for For subsequent measurement, these financial liabilities are sale. subject to the same accounting principles as described earlier Consolidated financial under the heading “Financial instruments measured at fair Dexia Bank recognises interest-bearing loans and advances value through profit or loss”. initially at fair value plus transaction costs and subsequently at amortised cost, less any allowance for impairment. Interest is 6.3.5. Derivatives – Trading portfolio calculated using the effective interest-rate method and recorded When a derivative is not designated in a hedge relationship, it under “Net interest income”. is deemed to be held for trading. The main types of derivatives are the currency and the interest-rate derivatives. Dexia Bank, The effective interest rate is the rate that exactly discounts which also makes use of credit derivatives and equity derivatives, estimated future cash payments or receipts through the ex- initially and subsequently measures all derivatives at the fair pected life of the financial instrument or, when appropriate, a value obtained from quoted market prices, discounted cash shorter period to the net carrying amount of the financial asset. flow models or pricing models, as appropriate. All changes in statements fair value are recognised in the statement of income. 6.3. Financial instruments measured at fair value
through profit or loss Dexia Bank reports derivatives as assets when fair value is Non-consolidated financial positive and as liabilities when fair value is negative. 6.3.1. Loans and securities held for trading Dexia Bank reports loans held for trading purposes in the line Dexia Bank treats certain derivatives embedded in other financial “Financial assets held for trading” at their fair value, with instruments as separate derivatives: unrealised gains and losses recorded in the statement of income under “Net income from financial instruments at fair value ●● when their risks and characteristics are not closely related through profit or loss”. Interest income is accrued using the to those of the host contract; and effective interest-rate method and is recorded under “Net ●● when the hybrid contract is not carried at fair value with interest income”. unrealised gains and losses reported in the statement of income.
72 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 73 Notes to the consolidated financial statements
6.4. Financial investments other lending-related commitments at the balance-sheet date. Dexia Bank estimates them based upon the historical 6.4.1. Held to maturity patterns of losses in each segment, the credit ratings allo- Dexia Bank classifies the interest-bearing financial assets with cated to the borrowers and reflecting the current economic fixed maturity quoted in an active market as held to maturity environment in which the borrowers operate. Dexia Bank (HTM) when management has both the intent and the ability develops for that purpose credit-risk models using an approach to hold the assets to maturity. that combines appropriate default probabilities and loss- given defaults that are subject to regular back-testing and Dexia Bank recognises such interest-bearing financial assets are based on Basel II data and risk models, consistently with initially at fair value plus transaction costs and subsequently at the “incurred-loss” model. amortised cost, less any allowance for impairment. Interest is recognised based on the effective interest-rate method and Accounting treatment of the impairment recorded under “Net interest income”. Dexia Bank recognises changes in the amount of impairment losses in the statement of income and reports them as “Impair- 6.4.2. Available for sale ment on loans and provisions for credit commitments”. The Dexia Bank classifies financial assets intended to be held for an impairment losses are reversed through the statement of income indefinite period of time, but which may be sold in response to if the increase in fair value relates objectively to an event needs for liquidity or changes in interest rates, exchange rates occurring after the impairment was recognised. or equity prices, as available for sale (AFS). When an asset is determined by management to be uncollect- Dexia Bank recognises financial assets initially at fair value plus able, the outstanding specific impairment is reversed via the transaction costs. Interest is recognised based on the effective statement of income under the heading “Impairment on loans interest-rate method and recorded under “Net interest income”. and provisions for credit commitments” and the net loss is Dexia Bank recognises dividend income from equities under recorded under the same heading. Subsequent recoveries are “Dividend income”. also accounted for under this heading.
Dexia Bank subsequently re-measures available-for-sale financial 6.5.2. Reclassified financial assets assets at fair value (cf. I.7. Fair value of financial instruments). In rare circumstances, Dexia Bank can reclassify financial assets Managementreport Unrealised gains and losses arising from changes in the fair initially classified as held for trading or available for sale into value of financial assets classified as available for sale are held-to-maturity or loans and receivables categories. In such recognised within equity under the heading ”Gains and losses circumstances, the fair value at the date of transfer becomes not recognised in the statement of income”. When securities the new amortised cost of those financial assets. Any fair value are disposed of, or impaired, Dexia Bank recycles the related adjustment previously recognised under “Other comprehensive accumulated fair value adjustments in the statement of income income” is “frozen” and amortised on the residual maturity as “Net income on investments”. of the instrument. Regarding the calculation of impairment, reclassified financial assets are governed by the same account- 6.5. Impairments on financial assets ing principles as financial assets initially valued at amortised Dexia Bank records allowances for impairment losses when cost. If there is objective evidence that reclassified financial there is objective evidence that a financial asset or group of assets are impaired, Dexia Bank calculates the amount of the
statements financial assets is impaired as a result of one or more events impairment on reclassified assets as the difference between the occurring after initial recognition and evidencing (a) a decline net carrying amount of the asset and the net present value of in the expected cash flows and (b) the impact on the estimated the expected cash flows discounted at the recalculated effective Consolidated financial future cash flows that can be reliably estimated. yield at the time of reclassification. Any unamortised part of the “frozen” AFS reserve is recycled in the statement of income 6.5.1. Financial assets valued at amortised cost and reported under the heading “Impairment on loans and Dexia Bank first assesses whether objective evidence of impair- provisions for credit commitments” as a part of the impairment. ment exists individually for financial assets. If no such evidence exists, the financial assets are included in a group of financial 6.5.3. Available-for-sale assets assets with similar credit-risk characteristics and collectively Dexia Bank recognises the impairment of available-for-sale assessed for impairment. assets on an individual basis if there is objective evidence of impairment as a result of one or more events occurring after Determination of the impairment initial recognition. ●● Specific impairments – If there is objective evidence that statements loans or other receivables or financial assets classified as Determination of the impairment held-to-maturity are impaired, the amount of the impairment ●● Equities – For equities quoted in an active market, any on specifically identified assets is calculated as the difference significant decline in their price (more than 50% at reporting
Non-consolidated financial between the carrying amount and the recoverable amount, date) or a prolonged decline (5 years) compared to the being the present value of expected cash flows, including acquisition price is considered as an objective evidence amounts recoverable from guarantees and collateral, of impairment. In addition, management can decide to discounted at the financial instrument’s original effective recognise impairment losses should other objective evidence interest rate (except for reclassified assets, see below). Assets be available. with small balances that share similar risk characteristics ●● Interest-bearing financial instruments – In the case of interest- follow the principles as described below. bearing financial instruments, impairment is triggered based ●● Collective impairments – Collective impairments cover on the same criteria as applied to individually impaired losses incurred where there is no specific impairment but financial assets valued at amortised cost (see 1.6.5.1.). objective evidence of losses in segments of the portfolio or
74 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 75 Notes to the consolidated financial statements
Accounting treatment of the impairment observable inputs are available, they should be incorporated When AFS financial assets are impaired, the total AFS reserve into the model. is recycled and these impairment losses are reported by Dexia Bank in the statement of income as “Net income on invest- Dexia Bank’s approach to the valuation of its financial instruments ments”. Additional decline in fair value is recorded under the (direct profit or loss, AFS and disclosures) can be summarised same heading for equity securities. as follows:
When an impairment loss has been recognised on interest- 7.1. Financial instruments measured at fair value bearing financial instruments, any subsequent decline in fair (trading, FVO, AFS, derivatives) value is recognised in “Net income on investments” if there is objective evidence of impairment. In all other cases, changes 7.1.1. Financial instruments measured at fair value in fair value are recognised in “Other comprehensive income”. for which reliable quoted market prices are Impairments on equity securities cannot be reversed in the available statement of income due to later recovery of quoted prices. If the market is active – meaning that bid-offer prices are avail- able representing effective transactions concluded on an arm’s Please refer the chapter Risk Monitoring – Credit Risk, page 38 length basis between willing counterparties – these market for further information on how credit risk is monitored by prices provide for the most reliable evidence of fair value and Dexia Bank. therefore shall be used for valuation purposes.
6.5.4. Off-balance-sheet exposures The use of market prices quoted in an active market for identical Dexia Bank usually converts off-balance-sheet exposures such instruments with no adjustments qualifies for inclusion in level 1 as credit substitutes (e.g. guarantees and standby letters of within IFRS 7 fair value hierarchy, contrary to the use of quoted credit) and loan commitments into on-balance-sheet items prices in inactive markets or the use of quoted spreads. when called. However, there may be circumstances such as uncertainty about the counterparty, where the off-balance-sheet 7.1.2. Financial instruments measured at fair value exposure should be regarded as impaired. Dexia Bank classifies for which no reliable quoted market prices are loan commitments as impaired if the credit worthiness of the available and for which valuations are obtained client has deteriorated to such an extent as to make the repay- by means of valuation techniques ment of any loan and associated interest payments doubtful. Financial instruments for which no quoted market prices in Managementreport active markets are available are valued by means of valuation 6.6. Borrowings techniques. The models that Dexia Bank uses range from standard Dexia Bank recognises borrowings initially at fair value, being market models (discount models) to in-house developed generally their issue proceeds, net of any transaction costs valuation models. incurred. Subsequently, borrowings are stated at amortised cost. Dexia Bank recognises any difference between their initial In order for a fair value to qualify for level 2 inclusion, only carrying amount and the redemption value in the statement of observable market data should be used. The market data that income over the period of the borrowings using the effective Dexia Bank incorporates in its valuation models are either interest-rate method. directly observable data (prices), indirectly observable data (spreads) or own assumptions about unobservable market
The distinction between interest-bearing instruments and data. Fair value measurements that rely significantly on own statements equity instruments issued is based on the substance of their assumptions qualify for level 3 disclosure. underlying contracts rather than their legal form. For bonds for which no liquid market exists, these are valued Consolidated financial 7. Fair value of financial instruments using Dexia Bank’s mark-to-model approach. The valuation price is composed of a market-price component and a model- Fair value is the amount for which an asset could be exchanged, price component. The weight granted to the model-price or a liability settled, between knowledgeable, willing parties in component reflects an assessment of the liquidity of the market an arm’s-length transaction. Quoted market prices in an active considering the bond characteristics. market (such as a recognised stock exchange) are to be used as fair value, as they are the best evidence of the fair value of For its mark-to-model price, Dexia Bank uses a discount cash- a financial instrument. Quoted market prices are not, however, flow model, based on a discounted spread that incorporates available for a significant number of financial assets and liabilities both credit and liquidity risk. The credit spread is estimated from held or issued by Dexia Bank. the security specific characteristics (sector, rating, Loss Given Defaut…) and from the level of some liquid CDS indices. A statements If a financial instrument is not traded on an active market, liquidity component is added to the credit component to obtain recourse is provided by valuation models. A valuation model the instrument’s spread. The weight of the liquidity component
reflects what the transaction price would have been on the depends on the instrument’s central bank eligibility character. Non-consolidated financial measurement date in an arm’s length exchange motivated by normal business considerations, i.e. the price that would Due to the financial crisis of 2008, many assets and liabilities be received by the holder of the financial asset in an orderly for which quoted prices were available became illiquid. Risk transaction that is not a forced liquidation or forced sale. Management developed models in 2008 to value those illiquid financial instruments. Risk Management adjusted its classification The valuation model should take into account all factors that between fair value levels in 2009 based on the recommendations market participants would consider when pricing the asset. included in the amendment to IFRS 7 published in March 2009 Measuring the fair value of a financial instrument requires and included in the Exposure Draft on Fair Value, published in consideration of current market conditions. To the extent that May 2009.
74 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 75 Notes to the consolidated financial statements
Regarding structured derivatives, Risk Management together Accrued interest is reported in the same line as the related with the Modelling Team continues to implement the action financial asset or liability in the balance sheet. plan validated by the Management Board, focussing on the development of internal valuation models, the conduct of a Once an interest-bearing financial asset has been written down robust external price reconciliation process and the use of to its estimated recoverable amount, interest income is there- qualitative market data for its valuations. after recognised based on the interest that was used to discount the future cash flows for measuring the recoverable amount. 7.2. Financial instruments measured at amortised cost (valuations in IFRS disclosures on fair value) 9. Fee and commission income and expense
7.2.1. Financial instruments reclassified from Commissions and fees arising from most of Dexia Bank’s Trading or AFS to L&R activities are recognised on an accrual basis over the life of the As a response to the financial crisis, the IASB issued on underlying transaction. 13 October 2008 an amendment to IAS 39 permitting the reclassification of certain illiquid financial assets. Dexia Bank Commissions and fees arising from negotiating, or participating decided to benefit from this opportunity to reclassify assets for in the negotiation of a transaction for a third party, such as the which an active market, as well as reliable quoted prices, were arrangement of the acquisition of loans, equity securities or no longer available. other securities or the purchase or sale of businesses, are recognised when the significant act has been completed. The Modelling Team developed and implemented new models on instruments that became and remained illiquid. For asset-management operations, revenue consists principally of unit-trust and mutual-fund management and administration 7.3. Financial instruments classified inHT M and fees. Revenue from asset management is recognised as earned L&R since inception when the service is provided. Performance fees are recognised when all underlying conditions are met and thus acquired. 7.3.1. Loans and receivables, including mortgages loans, are valued based on the following valuation Loan commitment fees are recognised as part of the effective principles interest rate if the loan is granted, and recorded as revenue on Managementreport General principles: expiry if no loan is granted. ●● the carrying amount of loans maturing within 12 months is assumed to reflect their fair value; 10. Insurance and reinsurance activities ●● for bonds in HTM and L&R since inception, the valuation is done as for bonds classified in AFS. 10.1. Insurance Dexia Bank is mainly active in banking products. Some insurance Interest-rate part: products sold by insurance companies have been requalified as ●● the fair value of fixed-rate loans and mortgages reflect financial instruments as they do not meet the requirements of interest-rate movements since inception; insurance products under IFRS 4. ●● embedded derivatives, like caps, floors and prepayment options are included in determining the fair value of loans IFRS 4 allows a company to account for insurance contracts
statements and receivables; under local GAAP if they qualify as such under IFRS 4. ●● the fair value of variable-rate loans is assumed to be approx- imated by their carrying amounts. Hence, Dexia Bank has elected to use the local accounting Consolidated financial policies to evaluate the technical provisions for contracts that Credit-risk part: fall under IFRS 4 and investment contracts with discretionary For corporate loan and social profit portfolios, credit-spread participation features (DPF). evolutions since inception are reflected in the fair value. For other sectors, mainly retail and public sector, the spread is kept A contract that complies with the conditions of an insurance unchanged as no reliable information is available for SME and contract remains an insurance contract until all rights and no credit losses have been recognised on the public sector where obligations cease to exist or expire. An insurance contract is a Dexia Bank is present. contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing 8. Interest income and expense to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. statements Interest income and expense are recognised in the statement of income for all interest-bearing instruments on an accrual A contract can start out as an investment contract and become basis using the effective interest-rate method based on the an insurance contract when containing significant insurance
Non-consolidated financial initial carrying value (including transaction costs) for financial components as time passes. instruments not valued at fair value through profit or loss. The amounts received and paid relating to insurance products Transaction costs are the incremental costs that are directly (including non-life claims) are reported respectively under attributable to the acquisition of a financial asset or liability and “Premiums and technical income from insurance activities” or are included in the calculation of the effective interest rate. An under “Technical expense from insurance activities”, whereas incremental cost is one that would not have been incurred if losses and changes in provisions for credit enhancement the entity had not acquired the financial instrument. activities, which are similar to banking activities, are reported under “Impairment on loans and provision for credit commit- ments”.
76 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 77 Notes to the consolidated financial statements
All other items arising from insurance activities are classified 10.1.3. Shadow accounting according to their nature in the balance sheet, except for Insurers are permitted, but not required, to change their technical provisions, which are identified under a separate accounting policies so that a recognised but unrealised gain or heading. loss on an asset affects those measurements in the same way as a realised gain or loss does. The related adjustment to the Dexia Bank’s insurance activities are mainly performed by insurance liability (or deferred acquisition costs or intangible Dexia Insurance Services (DIS) for life and non-life products. assets) shall be recognised in equity if, and only if, the unrealised gains or losses are recognised directly in equity. 10.1.1. DIS activities: life and non-life DIS insurance products are recorded under Local GAAP. DIS Dexia Bank will limit the application of shadow accounting, if comprises principally the Belgian and Luxembourg entities, which under legal and/or contract conditions, the realisation of gains are governed by Local GAAP, if they are qualified as such under on an insurer’s assets has a direct effect on the measurement IFRS 4. However, provisions for catastrophes and equalisations of some or all of its DPF insurance contracts and investment are reversed. contracts with discretionary participation features.
The life insurance portfolio features: 10.1.4. Shadow-loss adjustment ●● Insurance contracts, including reinsurance contracts, and To determine the need for a shadow-loss adjustment, Dexia the accepted reinsurance treaties, with the exception of the Bank first has to determine whether additional liabilities would in-house defined employee benefit plans; be required, assuming current market investment yields rather ●● Financial instruments issued with a discretionary profit- than the estimated return of the assets. If the level of liabilities sharing (a discretionary participation feature (DPF)); required is higher than the total liabilities, then the deficiency ●● Unit-linked (UL) contracts stipulating that the policyholder should decrease the unrealised gains recorded in equity and can switch at all times, at no expenses, to an investment increase the liabilities through a shadow premium deficiency product with a guaranteed interest rate and a probable adjustment. profit sharing. This requires the liability adequacy test (see I.10.1.9 Liability 10.1.2. Classification Adequacy Tests – below) to be performed after all (if any) Classification is done policy by policy, whereas, for group shadow adjustments. Should there be insufficient unrealised insurances, classification is done at employer level. capital gains left in equity to accommodate the shadow-loss Managementreport adjustment, the additional liability increase should be charged ●● Type 1: branch 21: guaranteed insurance products with or to the statement of income. without DPF; ●● Type 2: branch 21: investment products with profit sharing; 10.1.5. Discretionary participation feature (DPF) ●● Type 3: branch 21: investment products without profit Discretionary participation feature is a contractual right to sharing; receive, as a supplement to the guaranteed benefits, additional ●● Type 4: branch 23: investment products with risk – UL benefits: products; ●● Type 5: branch 23: investment products without risk; ●● that are likely to be a significant portion of the total con- ●● Type 6: branch 23: investment products convertible to a tractual benefits;
branch 21 investment product with risk (class 23); ●● whose amount or timing is contractually at the discretion of statements ●● Type 7: branch 23: investment products convertible to a the issuer; and branch 21 investment product with profit sharing. ●● that are contractually based on: Consolidated financial ■■ the performance of a specified pool of contracts or a The non-life insurance portfolio features include only insurance specified type of contract; or contracts that contain significant insurance risk. ■■ realised and/or unrealised investment returns on a speci- fied pool of assets held by the issuer; or Insurance contracts measured in accordance with IFRS 4 ■■ the profit or loss of the company, fund or other entity that – phase 1 issues the contract. Deposit accounting rules apply to financial instruments that do not include a discretionary participation feature (type 3). In All unrealised gains and losses coming from investments back- deposit accounting this part of the premium is not accounted ing insurance contracts and investment contracts with DPF are to the statement of income, nor is the resulting increase of the categorised proportionally for the part related to the insurance liability. The liability is not mentioned in the item “Technical contracts and investment contracts with DPF in a separate line provisions” but is entered as a financial liability deposit. of the equity. statements Management fees and commissions are recognised immediately in the statement of income. Settlements are not accounted to Proportional calculation is performed on the basis of the carried
the statement of income but will result in a decrease in the reserves and by separated management of the assets. Non-consolidated financial carrying amount of the liability. 10.1.6. Insurance contracts with deposit component Financial instruments with a discretionary participation feature (unbundling) (type 2) are measured according to local rules for normal All unit-linked products that contain both an insurance contract insurance contracts (as type 1). This means, these contracts are and a deposit component will be unbundled (type 4 & 6). not unbundled into a deposit and an insurance component. Accounting policies for insurance contracts (IFRS 4) are applied to the insurance component (as for type 1).
76 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 77 Notes to the consolidated financial statements
Accounting policies for financial instruments (IAS 39) are applied If an adequacy test of the life obligations imposed by the local to the deposit component. The liabilities and the investments authorities is available, it will show whether or not the insurance are measured at fair value on the balance sheet. liabilities are sufficient.
This fair value is determined by multiplying the number of units If this test is not available, a test such as the one described by the value of the unit, which is based on the fair value of the below will be carried out in order to examine if the current underlying financial instruments. When the value of unit-linked value of the future cash flows is covered by the concordant investments fluctuates subsequently, both the change on the technical provision. Should this prove not to be the case, the asset side and the resulting change on the liabilities side are entire deficiency would be recognised in profit or loss. accounted to the statement of income immediately (at fair value through profit or loss). For life insurance liabilities set up where no local LAT test is imposed by the authorities, an IFRS LAT test will be carried out Management fees and commissions are recognised immedi- using the following parameters: ately in the statement of income. Settlements are not accounted to the statement of income but will result in a decrease in the ●● premiums: collected premiums plus contractually provided carrying amount of the liability. future premiums; ●● interest rate for actualisation of cash flows: average OLO on The unit-linked products that can be converted into a guaranteed 10 year during the last (consecutive) year until the 15th investment product (insurance class 21) with profit sharing before closing; (type 7) fall under the same rules as financial instruments with ●● mortality table: Assuralia experience table; discretionary participation feature (type 2) and are not un ●● costs : calculation based on the latest tariff costs and the bundled. booked costs; ●● tariff costs take into account the inventory surcharges, 10.1.7. Embedded derivatives commercial surcharges and fixed sums; IAS 39 applies to derivatives embedded in an insurance contract ●● real assigned costs take into account management expenses, unless the embedded derivative is itself an insurance contract. claims handling expenses and commissions. These costs are The requirements for insurance contracts with DPF also prevail stipulated by product group and are indexed. Taking into for financial instruments with DPF elements. account lapses, death and the expiry period the annual Managementreport delta is stipulated as being somewhere between the tariff As an exception to the IAS 39 requirement, Dexia Bank does costs and the real assigned costs. Deltas are then actualised not need to separate, and measure at fair value, a policyholder’s to the LAT-rate. option to surrender an insurance contract for a fixed amount (or for an amount based on a fixed amount and an interest For non-life insurance, the LAT that examines whether the rate), even if the exercise price differs from the carrying amount premium and claim provisions are sufficient to settle defini- of the host insurance liability. However, the IAS 39 requirement tively the opened claim files and the claims that will occur does apply to any put option or cash surrender option embed- within the contractual duration of the contracts to open and ded in an insurance contract if the surrender value varies in to settle definitively. response to a change in a financial variable (such as an equity or commodity price or index), or a non-financial variable that All products are subject to LAT. The test is subdivided into two
statements is not specific to a party to the contract. parts. Dexia Bank first examines whether the built-up reserves for claim files already opened are sufficient, then makes an 10.1.8. DPF in financial instruments estimation of the expected loss burden for the insurance port- Consolidated financial If the issuer classifies part of, or the entire feature as a separate folios and examines whether the unearned premium reserves component of equity, the liability recognised for the whole are sufficient. contract shall not be less than the amount that would result from applying IAS 39 to the guaranteed element. Regarding reserves for the files already opened, Dexia Bank performs run-off calculations, using estimates for the claims- At each reporting date, Dexia Bank checks as to whether this handling expenses. minimum requirement has been met: if it has not, the corre- sponding liabilities are adjusted accordingly. 10.1.10. Technical provisions Provisions for unearned premiums 10.1.9. Liability adequacy tests For primary business, the provision for unearned premiums is An insurer applies a liability adequacy test (LAT) to its insurance calculated on a daily basis, based on the premiums, net of statements products and investment contracts with DPF. Dexia Bank commissions. assesses at each reporting date whether its recognised insurance liabilities are adequate, using current estimates of future cash For inward treaties, the provision for unearned premiums is
Non-consolidated financial flows under its insurance contracts. calculated on the basis of the information communicated by the ceding company. If that assessment (based on all individual life and non-life insurance portfolios) shows that the carrying amount of its The provision for unearned premiums for the life insurance insurance liabilities (less the related deferred acquisition costs business is accounted to the life insurance provisions. and related intangible assets) is inadequate in the light of the estimated future cash flows, the entire deficiency shall be Life insurance provision recognised in profit or loss. Except for unit-linked insurance products this provision is calculated according to the current actuarial principles, taking into account the provision for unearned premiums, the ageing reserves etc.
78 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 79 Notes to the consolidated financial statements
In theory, this provision is calculated separately for every The bonuses are awarded according to the procedures submitted insurance contract. to the official authorities.
The life insurance provision is calculated taking into account the 10.2. Reinsurance legal restrictions and measures. Dexia Bank’s reinsurance contracts with third parties that contain enough insurance risk to be classified as an insurance The following rules apply: contract continue to be accounted for in accordance with Local Valuation according to the prospective method: this method GAAP. is applied to the provisions for conventional non-unit-linked life insurances and modern non-unit-linked universal life A reinsurance asset is impaired if, and only if: insurances offering a guaranteed interest rate on future pre- mium payments. The calculations are based on the technical ●● there is objective evidence, as a result of an event that assumptions made in the contracts. occurred after initial recognition of the reinsurance asset, that the cedant may not receive all amounts due to it under Valuation according to the retrospective method: this method the terms of the contract; and is applied to the provision for the other modern non-unit-linked ●● that event has a reliably measurable impact on the amounts universal life insurances. Calculations are based on the technical that the cedant will receive from the reinsurer. assumptions made in the contracts, but do not take into account the future payments. To measure the solvency of a reinsurer, Dexia Bank refers to its attributed credit rating and the impairment rules. Besides the rules set out above, an additional provision for low interest risks is constituted as required by local regulations. 11. Network costs
For accepted business, a provision is constituted for each indi- This heading records the commission paid to intermediaries vidual contract based on the information supplied by the ceding associated by exclusive sales mandate for drumming up business. company. 12. Hedging derivatives Provision for claims outstanding The amount of the provision for claims outstanding for direct Hedging derivatives are categorised as either: Managementreport life business is equal to the amount due to the policyholder, increased by the costs of settling claims. ●● a hedge of the fair value of a recognised asset or liability or a firm commitment (fair value hedge); or For claims reported in the non-life business, the provision is ●● a hedge of a future cash flow attributable to a recognised measured separately in each case or as an additional provision asset or liability or a forecast transaction (cash flow hedge); for a set of policies, taking into account the costs of settling or claims. ●● a hedge of a net investment in a foreign operation.
When benefits have to be paid in the form of an annuity, the Dexia Bank designates derivatives as hedging instruments if amounts to be constituted for that purpose are calculated using certain criteria are met:
recognised actuarial methods. statements ●● formal documentation of the hedging instrument, hedged For claims incurred but not reported at balance-sheet date, a item, hedging objective, strategy and relationship is available provision is constituted. The calculations are based on past before hedge accounting is applied; Consolidated financial experience. For extraordinary events, additional amounts are ●● the hedge is documented in such a way as to show that it added to the IBNR provision. is expected to be highly effective (within a range of 80% to 125%) in offsetting changes in the fair value or cash flows For claims incurred but not enough reserved at balance-sheet attributable to the hedged risk in the hedged item through- date (IBNER), a provision is constituted if the procedures out the reporting period; and demonstrate that the other provisions are insufficient to meet ●● the hedge is effective at inception and on an ongoing basis. future liabilities. Dexia Bank records changes in the fair value of derivatives that If necessary, a provision is constituted on a prudent basis for are designated, and qualify, as fair value hedges in the statement liabilities possibly related to claims files that are already created. of income, along with the corresponding change in fair value of the hedged assets or the liabilities that is attributable to that statements A provision for the internal cost of settling claims is calculated specific hedged risk. at a percentage that is based on past experience.
If the hedge no longer meets the criteria for a fair value hedge, Non-consolidated financial Additional provisions are also constituted as required by law, Dexia Bank amortises the adjustment to the carrying amount such as supplementary workmen’s compensation provisions. of a hedged interest-bearing financial instrument to the statement of income over the remaining life of the hedged or Provision for bonuses related to participation features hedging instrument if shorter by an adjustment of the yield of and rebates the hedged item. This item includes the provision for bonuses related to participa- tion features that have been allocated but not yet awarded at Dexia Bank recognises the effective part of the changes in the the balance-sheet date. fair value of derivatives that are designated and qualify as cash flow hedges, in “Other comprehensive income” under the heading “Gains and losses not recognised in the statement of
78 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 79 Notes to the consolidated financial statements
income” (see ”Consolidated statement of changes in share market value adjustments, such as a liquidity adjustment, holders’ equity”). Any non-effective portion of the changes in model adjustment or credit adjustment in cases where the the fair value of the hedging instrument is recognised in the transaction is not quoted. statement of income. Amounts deferred in equity are transferred to the statement of income and classified as revenue or expense If Dexia Bank considers the main parameters of the model as in the periods during which the hedged firm commitment or observable and if the Risk Management department validates forecast transaction affects the statement of income. the model, the day one profit or loss will be recognised immediately in the statement of income. 13. Hedge of the interest-rate risk exposure of a portfolio If Dexia Bank does not consider the main parameters as ob- servable or if Risk Management does not validate the model, As explained in I.1.1. General, Dexia Bank makes use of IAS 39 the day one profit or loss will be amortised linearly over the as adopted by the European Union (“IAS 39 carve-out”) because expected life of the transaction. However, if the data becomes it better reflects the way in which Dexia Bank manages its observable subsequently, Dexia Bank will recognise the remaining financial instruments. portion of day one profit or loss in the statement of income.
Hedge accounting is intended to reduce the interest-rate risk In cases of early termination, the remaining portion of day one exposure stemming from the selected category of assets or profit or loss will be recognised in the statement of income. In liabilities designated as the qualifying hedged items. cases of partial early termination, Dexia Bank will recognise in the statement of income the part of the day one profit or loss Dexia Bank performs a global analysis of interest-rate risk relating to the partial early termination. exposure. It consists in assessing fixed-rate exposure, taking into account all the exposure coming from balance-sheet and 15. Tangible fixed assets off-balance-sheet items. This global analysis may exclude certain components of the exposure, such as financial market activities, Tangible fixed assets include property, plant & equipment and provided that the risk exposure stemming from the excluded investment properties. activities is monitored on an activity-by-activity basis. All property, plant & equipment are stated at their cost less Managementreport Dexia Bank applies the same methodology to select which accumulated depreciation and impairments. Subsequent costs assets and/or liabilities will be entered into the hedge of are, where necessary, included in the carrying amount of the interest-rate risk exposure of the portfolio. Assets and liabilities asset or recognised as a separate component, if it is probable are included in all the time buckets of the portfolio. Hence, that future economic benefits will flow to Dexia Bank and the when they are removed from the portfolio, they must be cost of the asset can be reliably measured. removed from all the time buckets in which they had an impact. Demand deposits and savings accounts may be included in the Depreciation is calculated using the straight-line method to portfolio based on behavioural study for estimating expected write down the cost of such assets to their residual values over maturity date. Dexia Bank may designate as qualifying hedged their estimated useful lives. items different categories of assets or liabilities such as available- for-sale assets or loan portfolios. The main useful lives are as follows: statements
On the basis of this gap analysis, which is realised on a net ●● buildings (including acquisition costs and non-deductible basis, Dexia Bank defines, at inception, the risk exposure to be taxes): 20 to 50 years; Consolidated financial hedged, the length of the time bucket, the test method and ●● computer equipment: 3 to 6 years; the frequency of the tests. ●● leasehold improvements, equipment and furniture: 2 to 12 years; The hedging instruments are a portfolio of derivatives, which ●● vehicles: 2 to 5 years. may contain offsetting positions. Dexia Bank recognises the hedging items at fair value with adjustments accounted for in An item of property, plant & equipment can be composed of the statement of income. significant parts with individually varying useful lives. In such a case, each part is depreciated separately over its estimated Dexia Bank reports hedged interest-rate risk revaluation of useful life. The following parts have been defined: elements carried at amortised cost on the balance sheet under the line “Fair value revaluation of portfolio hedges”. ●● structure of the building : 50 years; statements ●● roof and frontage : 30 years; 14. Day one profit or loss ●● technical installations : 10 to 20 years; ●● fixtures and fittings: 10 to 20 years.
Non-consolidated financial The day one profit or loss is applicable to all transactions measured at fair value through profit or loss. The exchange losses on liabilities for the acquisition of an asset are expensed immediately. The interest on specific or general The day one profit or loss is the difference between: borrowings to finance the construction of qualifying assets, as far as the commencement date for capitalisation is before ●● the transaction price and the quoted market price, in cases 1 January 2009 is also expensed immediately. If the commence- where the transaction is quoted; or ment date for capitalisation is on or after 1 January 2009, the ●● the transaction price and the fair value determined by using interest is included in the valuation basis of the qualifying a valuation technique, (mark-to-model) adjusted with some tangible fixed assets.
80 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 81 Notes to the consolidated financial statements
Tangible fixed assets are tested for impairment when an indica- presented separately in the balance sheet, without restatement tion of impairment loss exists. Where the carrying amount of for previous periods. These assets are no longer depreciated an asset is greater than its estimated recoverable amount, it is once they qualify as assets (or disposal groups) held for sale. written down to its recoverable amount. Where the recoverable amount of an asset cannot be determined individually Dexia A discontinued operation is defined as a component of an Bank determines the recoverable amount of the cash generating entity that either has been disposed of or is classified as held unit or group of cash generating units to which the asset for sale and represents a separate major line of business or belongs. Gains and losses on disposals of property and equip- geographical area of operations. Post-tax profit or loss of ment are determined by reference to their carrying amount discontinued operations is presented under a separate line in and are included under “Net income on investments”. the statement of income.
Investment properties are those properties held to earn rentals 18. Goodwill or for capital appreciation. Dexia Bank may also partly use such properties. If the “own use” portions can be sold separately or 18.1. Measurement of goodwill leased out separately under finance lease, then these portions Goodwill is as an asset representing the future economic are accounted for separately. If the “own use” portions cannot benefits arising from other assets acquired in a business be sold separately, the property will be considered as an invest- combination that are not individually identified and separately ment property only if Dexia Bank holds an insignificant portion recognised. for its own use. It is measured as the difference between: Investment properties are recorded at their cost less accumu- lated depreciation and impairments. The investment properties ●● The sum of the following elements: are depreciated over their useful lives on a straight-line basis. ■■ consideration transferred, Depreciation on buildings and other assets given in operating ■■ amount of any non-controlling interests in the acquiree, lease are booked under “Other net income”. and ■■ fair value of the acquirer’s previously held equity interest 16. Intangible assets in the acquiree (if any) and is ●● Net of the acquisition-date amounts of the identifiable assets Intangible assets consist mainly of (a) internally generated and acquired and the liabilities assumed. Managementreport (b) acquired software. The costs associated with maintaining computer software programs are recognised as expense as If, after reassessment, this difference is negative (“negative incurred. However, expenditure that enhances or extends the goodwill”), it is recognised immediately in profit or loss as a benefits of computer software programs beyond one year is bargain purchase gain. used to increase the original cost of the software. Computer software development costs recognised as assets are amortised Variations in the percentage of ownership in fully-consolidated using the straight-line method over their useful lives from the companies are considered as transactions with shareholders. time the software is available for use. This amortization period Therefore neither fair value adjustments nor goodwill adjust- is usually between three and five years, except for core business ments are made whenever percentage increases or decreases applications, for which the amortization period can be up to take place without any change in the consolidation method.
10 years. The difference between the purchase or the sale of a net asset statements and the purchase or sale price is directly recorded in equity. As borrowing costs that are directly attributable to the acquisi- tion, construction or production of a qualifying asset form part 18.2. Impairment of goodwill Consolidated financial of the cost of that asset they are capitalised. Other borrowing The carrying amount of goodwill is reviewed at year-end. For costs are recognised as an expense. the purpose of this impairment testing, Dexia Bank allocates goodwill to cash-generating units (CGUs) or groups of such Intangible assets (other than goodwill) are tested for impairment units. when an indication of impairment loss exists. Where the carrying amount of an asset is greater than its estimated recoverable When circumstances or events indicate that there may be amount, it is written down to its recoverable amount. Gains uncertainty about the carrying amount, goodwill is written and losses on disposals of intangible assets are determined by down for impairment when the recoverable amount of the reference to their carrying amount and are included under “Net CGU or group of cash-generating units to which it has been income on investments”. allocated is lower than the carrying value. statements
17. Non-current assets held for sale and The recoverable amount is the “fair value less cost to sell” or discontinued operations the “value in use” (whichever is the higher). The “value in use”
is the sum of the future cash flows that are expected to be Non-consolidated financial If the carrying amount of a non-current asset (or disposal group) derived from a CGU. Expected cash flows used by Dexia Bank is recovered principally through a sale transaction, rather than are those of the 3-year management-improved financial plan. through continuing use, it will be classified as “Held for sale”. The calculation of the “value in use” shall also reflect the time Dexia Bank measures a non-current asset (or disposal group) value of money (current market risk-free rate of interest) classified as held for sale at its carrying amount or at its fair adjusted for the price for bearing the uncertainty inherent in value less costs to sell (whichever is the lower). Non-current the asset. This is reflected in the discount rate. assets (or disposal groups) classified as held for sale are
80 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 81 Notes to the consolidated financial statements
For subsidiaries operating in economically mature and finan- 21. Sale and repurchase agreements and cially stable markets, the discount rate used is the Cost of lending of securities Equity of Dexia Bank defined under a dividend discount model. For subsidiaries operating in emerging markets, a specific Securities sold subject to a linked repurchase agreement discount rate is applied on a case-by-case basis. (“repos”) are not derecognised and remain in their original category. The corresponding liability is entered under “Due to 19. Other assets banks” or “Customer borrowings and deposits”, as appropriate. The asset is reported as “pledged” in the notes. Other assets mainly include accrued income (non-interest related), prepayments, operational taxes and other accounts Securities purchased under agreements to resell (“reverse receivable as well as insurance products (reinsurance, insurance repos”) are recorded as off-balance-sheet items and the premiums receivables, etc.), construction contracts, inventories, corresponding loans recorded as “Loans and advances due from plan assets relating to employee benefit obligations. These banks” or “Loans and advances to customers”. other assets are measured in accordance with the applicable standard less any allowance for impairment if applicable or The difference between the sale and repurchase price is treated following the applicable standard. Plan assets are recognised as interest income or expense and is accrued over the life of the in accordance with IAS 19 requirements. agreements using the effective interest-rate method.
20. Leases Securities lent to counterparties are not derecognised but, rather recorded in the financial statements in the same heading. A finance lease is one that transfers substantially all the risks and rewards incidental to ownership of an asset. An operating Securities borrowed are not recognised in the financial state- lease is a lease other than a finance lease. ments.
20.1. Dexia Bank is the lessee If they are sold to third parties, the gain or loss is entered under Dexia Bank grants operating leases principally for the rental of “Net income from financial instruments at fair value through equipment or real estate. Lease rentals are recognised in the profit or loss” and the obligation to return them is recorded at statement of income on a straight-line basis over the lease term. fair value under “Financial liabilities measured at fair value Managementreport When an operating lease is terminated before the lease period through profit or loss”. has expired, any payment to be made to the lessor by way of penalty is recognised as an expense in the period in which 22. Deferred income tax termination takes place. Deferred income tax is recognised in full, using the liability If the lease agreement substantially transfers the risk and rewards method, on temporary differences arising between the tax of ownership of the asset, the lease is recorded as a finance bases of assets and liabilities and their carrying amounts in the lease and the related asset is capitalised. At inception the asset financial statements. is recorded as the present value of the minimum lease payments or the fair value (whichever is the lower) and is depreciated over The principal temporary differences arise from the depreciation its estimated useful life unless the lease term is short and the of property, plant & equipment, the revaluation of certain
statements title is not expected to be transferred to Dexia Bank. Subsequent financial assets and liabilities (including derivative contracts, to initial recognition, the asset is accounted for in accordance provisions for pensions and other post-retirement benefits), with the accounting policies applicable to that asset. The provisions for loan and other impairments and, in relation to Consolidated financial corresponding rental obligations are recorded as borrowings acquisitions, from the difference between the fair value of the and interest payments are recorded using the effective interest- net assets acquired and their tax base. rate method. The rates enacted or substantively enacted at the balance-sheet 20.2. Dexia Bank is the lessor date are used to determine the deferred income tax. Dexia Bank grants both operating and finance leases. Deferred tax assets and liabilities are not discounted. Deferred Revenue from operating leases is recognised in the statement tax assets on deductible temporary differences and tax loss of income on a straight-line basis over the lease term. The carry-forwards are recognised to the extent that it is probable underlying asset is accounted for in accordance with the that future taxable profit will be available against which the accounting policies applicable to this type of asset. temporary differences and tax losses can be utilised. statements
For finance leases, Dexia Bank recognises “Leases receivable” Deferred tax liability is provided on taxable temporary differ- at an amount equal to the net investment in the lease, which ences arising from investments in subsidiaries, associates and
Non-consolidated financial can be different from the present value of minimum lease joint ventures, except where the timing of the reversal of the payments. temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future. The interest rate implicit in the lease contract acts as the discount rate. Interest income is recognised over the term of the lease Deferred tax related to the fair value remeasurement of using the interest rate implicit in the lease. available-for-sale investments and cash-flow hedges, and other transactions recorded directly in equity, are also credited or charged directly to equity.
82 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 83 Notes to the consolidated financial statements
23. Employee benefits 23.2.2. Defined contribution pension plans Dexia Bank’s contributions to defined contribution pension 23.1. Short-term benefits plans are charged to the statement of income in the year to Short-term benefits, payable within 12 months of the service which they relate. Under such plans, Dexia Bank’s obligations being rendered, are measured on an undiscounted basis and are limited to the contributions that Dexia Bank agrees to pay recognised as an expense. into the fund on behalf of its employees.
23.2. Post-employment benefits 23.2.3. Post-employment medical care If Dexia Bank has a legal or constructive obligation to pay post- The entitlement to these benefits is usually based on the employment benefits, the plan is either classified as “defined employee remaining in service up to retirement age and the benefit” or “defined contribution plan”. Dexia Bank offers a completion of a minimum service period. The expected costs number of defined benefit and defined contribution plans of these benefits are accrued over the period of employment, throughout the world, the assets of which are generally held using a methodology similar to that for defined benefit pension by insurance companies or pension funds. The pension plans plans. are generally funded by payments from both Dexia Bank and its employees. 23.3. Other long-term benefits These mainly includes provisions for jubilee premiums that In some cases, Dexia Bank provides post-retirement health care employees receive after completion of specified periods of benefits to its retirees. service.
23.2.1. Defined benefit plans Unlike defined benefit plans, actuarial gains and losses relating Employee benefit obligations are measured at the present to these benefits are immediately recognised. All past service value of the estimated future cash outflows using the interest costs are recognised immediately in the statement of income. rates of AA-rated corporate bonds, which have terms to maturity approximating to the terms of the related liability. Assumptions Employee entitlement to annual leave or long-service leave is on this assessment of pension expenses are based, among recognised when it is granted to the employee. A provision is other things, on actuarial and demographic assumptions, and made for the estimated liability for annual leave and long- on the inflation rate. service leave as a result of services rendered by employees up to the balance-sheet date. Managementreport Pension costs are determined based on the Projected Unit Credit Method, under which each period of service gives rise 23.4. Termination benefits to an additional unit of benefit entitlement and each unit is A termination benefit provision is only recorded when Dexia measured separately to build up the final obligation. Net Bank is obliged to terminate the employment before the normal cumulative unrecognised actuarial gains and losses exceeding date of retirement or to provide benefits as a result of an offer the corridor (greater than 10% of the present value of the gross made in order to encourage voluntary redundancy. In such defined benefit obligation and 10% of the fair value of any plan cases Dexia Bank has a detailed formal plan and no realistic assets) are recognised in income over the average remaining possibility of withdrawal. working lives of the plan participants. 23.5. Share-based payment
The amount recognised in the balance sheet is the present Dexia Bank offers equity-settled share-based payments like statements value of the defined benefit obligation (i.e., the present value stock option plans (SOPs) and employee share purchase plans of the expected future payments required to settle the obliga- (ESPPs) and cash-settled share-based payments. tion resulting from the employee service in the current and Consolidated financial prior periods), as adjusted for unrecognised actuarial gains and The fair value of equity-settled plans is measured at grant date losses and unrecognised past service cost, and reduced by the by reference to the fair value of the underlying equity instrument fair value of plan assets at the balance-sheet date. The defined based on valuation techniques and on market data and takes obligation is presented net of plan assets as a liability or an into account market-based vesting conditions. The impact of asset. Therefore an asset may arise where a plan has been other vesting conditions is reflected in the accounts via an overfunded and will be recorded separately if those assets are adjustment of the number of equity instruments included in held by a Group entity. the measurement. The fair value, recognised as a remuneration expense, is credited against equity. Any asset recognised is limited to the total of any cumulative unrecognised net actuarial losses and past service cost, and the In cash-settled share-based payments, the services received and present value of any economic benefits available in the form of the liability incurred, to pay for those services, are measured at statements refunds from the plan or reductions in future contributions to the fair value of the liability. This fair value is measured at the the plan. grant date and at each reporting date until settled. The fair
value is recognised as a remuneration expense with a corre- Non-consolidated financial Qualified internal and external actuaries carry out valuations of sponding increase in liabilities. these obligations. All valuations assumptions and results are reviewed and validated by an external actuary for Dexia Bank that ensures that all calculations are harmonised and calculated in compliance with IAS 19.
82 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 83 Notes to the consolidated financial statements
24. Provisions
Provisions are mainly recognised for litigations claims, restruc- turing, and loan commitments.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The discount rate is the pre-tax rate that reflects current market assessments of the time value of money.
Provisions are recognised when:
●● Dexia Bank has a present legal or constructive obligation as a result of past events; ●● it is probable that an outflow of resources embodying eco- nomic benefits will be required to settle the obligation; and ●● a reliable estimate of the amount of the obligation can be made.
Provisions on loan commitments are recognised when there is uncertainty about the creditworthiness of the counterparty.
25. Share capital and treasury shares
25.1. Share issue costs External incremental costs directly attributable to the issue of new equity securities, other than as part of a business combina- tion, are deducted from equity net of any related income tax. Managementreport 25.2. Dividends on Dexia Bank’s ordinary shares Dexia Bank recognises its dividends on its ordinary shares as a liability from the date on which they are declared. Any dividends for the year declared post-balance-sheet date are disclosed in the subsequent events note.
25.3. Insurance discretionary participation features Dexia Bank classifies any unrealised gains and losses relating to assets classified as available for sale and backing insurance
statements contracts with discretionary participation feature by Dexia Bank as follows: Consolidated financial ●● as a liability in respect of the return guaranteed to the contract holders; ●● as a separate component of equity to the extent of that feature.
26. Fiduciary activities
Assets and income arising thereon, together with related un- dertakings to return such assets to customers, are excluded from these financial statements in cases where Dexia Bank acts in a fiduciary capacity such as nominee, trustee or agent. statements 27. Cash and cash equivalents
Non-consolidated financial For the purposes of the statement of cash flows, cash and cash equivalents comprise balances with a maturity of less than 3 months maturity included within cash and balances with central banks, interbank loans and advances, financial assets available for sale.
84 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 85 Notes to the consolidated financial statements
II. Significant changes in scope of consolidation and list of subsidiaries and affiliated enterprises of Dexia Bank
2.1. Significant changes in scope of consolidation Following the signing of the agreement, DEP was recorded in “Non current assets held for sale” and in “Liabilities included in disposal groups held for sale” for amounts around EUR 4.3 bil 1. As at 31 December 2009 lion as at 31 December 2009. See also note 9.6.3. Assets and liabilities included in disposal groups held for sale. Certain subsidiaries have been excluded from the scope of consolidation because their inclusion would not have a material 2. As at 31 December 2010 impact on consolidated assets, net assets or income. Following its sale in April 2010, Dexia Épargne Pension left the Subsidiaries are considered as not material under the condition scope of consolidation. Its results of the first three months 2010 that the aggregate of their total assets, liabilities, equity and have been consolidated. net income does not exceed 1% at the level of the publishing company. Dexia Bank sold its 51% stake in Adinfo group. Adinfo group’s results for the first six months 2010 have been consolidated. As from the fourth quarter 2009, Crédit du Nord was no longer included in Dexia Bank’s consolidated financial statements On 16 July 2010, Dexia Real Estate Capital Markets (DRECM) pursuant to the agreement under which Société Générale has been sold to Dexia Crédit Local. would buy Dexia Bank’s 10% stake in Crédit du Nord for a cash consideration consisting of EUR 338 million. The EUR 15 million On 25 November 2010, Dexia Bank signed an agreement first-nine-month result of Crédit du Nord was considered in relating to the sale of Parfipar to Dexia Banque Internationale Dexia Bank’s annual result 2009. The transaction generated a à Luxembourg. The transaction is expected to be finalised in capital gain of around EUR 77 million. the first semester of 2011. Managementreport
As at 9 December 2009, Dexia signed an agreement relating As required by IFRS 5, the assets and liabilities of Parfipar have to the sale of Dexia Épargne Pension (“DEP”) to BNP Paribas been recorded as a group held for sale as from 31 December Assurance. DEP, a 88% subsidiary of Dexia Bank, offers life 2010. insurance products in France. statements Consolidated financial statements Non-consolidated financial
84 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 85 Notes to the consolidated financial statements Notes to the consolidated financial statements
2.2. Subsidiaries, equity accounted enterprises, affiliated enterprises and enterprises in which the Group holds rights representing at least 20% of the issued capital
1. Fully-consolidated subsidiaries
Name Head office % of Business capital held(1) code Assurance Asset Management Sudermanstraat 5 100 28 Cy AAMC NV B-2000 Antwerpen Audit en Ingénierie Sociale Consulting 99bis, avenue du Général Leclerc 100 30 SA F-75014 Paris Copharma Industries Unlimited International Financial Services Centre 15,41 28 6 George’s Dock IRL-Dublin 1 Corona SA Avenue de la Métrologie 2 100 28 B-1130 Bruxelles Delp Invest SCRL Namur Office Park 92,88 21 Avenue des Dessus de Lives 2 B-5101 Loyers Dexia Asset Finance Holding SA Boulevard Pachéco 44 100 10 B-1000 Bruxelles Dexia Auto Lease SA Place Rogier 11 100 5 B-1210 Bruxelles Dexia Capital Ireland Unltd International Financial Services Centre 100 49 6 George’s Dock Managementreport IRL-Dublin 1 Dexia Commercial Finance SA Place Rogier 11 100 15 B-1210 Bruxelles Dexia Crédits Logement SA Boulevard Pachéco 44 100 6 B-1000 Bruxelles Dexia Financial Products Inc. 1209 Orange Street 100 21 Wilmington, New Castle 19801 Delaware – USA Dexia Funding Netherlands NV Atrium 7th floor 100 49 Strawinskylaan 3105
statements NL-1077 ZX Amsterdam Dexia Ingénierie Sociale SA 13, rue Croquechâtaigne 85 30
Consolidated financial BP 30064 F-45380 La Chapelle Saint-Mesmin Dexia Insurance Belgium SA Avenue Livingstone 6 99,79 28 B-1000 Bruxelles Dexia Insurance Belgium Invest SA Rue Joseph II 96 100 21 B-1000 Bruxelles Dexia Insurance Services Finance SA 2, rue Nicolas Bové 100 28 (DIS Finance) L-1253 Luxembourg Dexia Investment Company SA Boulevard Pachéco 44 100 35 B-1000 Bruxelles
statements Dexia Investments Ireland Unltd International Financial Services Centre 100 49 6 George’s Dock IRL-Dublin 1 Dexia Lease Belgium SA Place Rogier 11 100 5 Non-consolidated financial B-1210 Bruxelles Dexia Lease Services SA Place Rogier 11 100 5 B-1210 Bruxelles Dexia Life & Pensions SA 2, rue Nicolas Bové 100 25 L-1253 Luxembourg
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
86 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 87 Notes to the consolidated financial statements
Name Head office % of Business capital held(1) code Dexia Re SA 2, rue Nicolas Bové 100 28 L-1253 Luxembourg Dexia Secured Funding Belgium SA Boulevard Pachéco 44 10 49 B-1000 Bruxelles Dexia Securities Belgium SA Boulevard Pachéco 44 100 11 B-1000 Bruxelles Deximmo SA Boulevard Pachéco 44 100 31 B-1000 Bruxelles Dublin Oak Ltd International Financial Services Centre 0 49 6 George’s Dock IRL-Dublin 1 Elantis SA Rue des Clarisses 38 100 6 B-4000 Liège Eurco Ireland Ltd International Financial Services Centre 100 28 6 George’s Dock IRL-Dublin 1 Eurco Re Ltd International Financial Services Centre 100 28 6 George’s Dock IRL-Dublin 1 Eurco Rück AG Beethovenstrasse 49 99,98 28 CH-8002 Zürich Ibro Holdings Unltd International Financial Services Centre 99,98 10 6 George’s Dock IRL-Dublin 1 Managementreport Livingstone Building NV Sudermanstraat 5 100 28 B-2000 Antwerpen Parfipar SA 69, route d’Esch 100 21 L-2953 Luxembourg Penates Funding SA Avenue Louise 486 0 49 B-1050 Bruxelles Realex SA Avenue Livingstone 6 100 28 B-1000 Bruxelles statements 2. Non-consolidated subsidiaries Name Head office % of Reason for Business Consolidated financial capital held(1) exclusion code Artesimmo I SA Boulevard Pachéco 44 100 non-significant 31 B-1000 Bruxelles Atrium 1 Rue des Colonies 40 0 non-significant 21 B-1000 Bruxelles Atrium 2 Rue des Colonies 40 0 non-significant 21 B-1000 Bruxelles Boonefaes Verzekeringen NV Sint-Walburgapark 1 100 non-significant 30 B-8360 Veurne
Bureau Laveaux & Martin SPRL Rue Albert Clément 9 100 non-significant 30 statements B-6840 Neufchâteau Caring people SA Avenue de la Métrologie 2 100 non-significant 47 B-1130 Bruxelles Non-consolidated financial Dexia Overseas SA 180, rue des Aubépines 100 non-significant 49 L-1145 Luxembourg Dexia Public Facilities Financing US SA Boulevard Pachéco 44 100 non-significant 10 B-1000 Bruxelles DVV Kantoor Eke NV Avenue Livingstone 6 100 non-significant 30 B-1000 Bruxelles
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
86 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 87 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Reason for Business capital held(1) exclusion code Fiduciaire Dexia SA Boulevard Pachéco 44 100 non-significant 23 B-1000 Bruxelles Fynergie SA Boulevard Pachéco 44 100 non-significant 32 B-1000 Bruxelles Immorente SA Boulevard Pachéco 44 100 non-significant 31 B-1000 Bruxelles MBS NV Pontbeek 63 0 non-significant 21 B-1731 Asse Sci St-Mesmin Immobilier 13, rue Croquechâtaigne 100 non-significant 32 F-45380 La Chapelle Saint-Mesmin Service Communal de Belgique SC Rue d’Arlon 53 bte 13 63,59 disproportional 47 B-1040 Bruxelles costs Shop Equipments NV Scheldekaai 5-7 100 non-significant 31 B-9820 Merelbeke VDL – Interass NV Brusselsesteenweg 346C 100 non-significant 30 B-9090 Melle
3. Joint subsidiaries consolidated by the proportional method Name Head office % of Business capital held(1) code Erasmus Gardens SA Avenue Hermann-Debroux 42 33,33 31 Managementreport B-1160 Bruxelles Lex 2000 SA Boulevard Pachéco 44 50 31 B-1000 Bruxelles Société Espace Léopold SA Rue Godecharle 15-17 50 31 B-1050 Bruxelles
4. Non-consolidated joint subsidiaries Name Head office % of Reason for Business capital held(1) exclusion code statements Arlinvest NV Hamiltonpark 24-26 49 non-significant 19 B-8000 Brugge Consolidated financial Finimmo NV Pacificatiestraat 39 50 non-significant 16 B-2000 Antwerpen Himba NV Hamiltonpark 24-26 48,94 non-significant 31 B-8000 Brugge Inforum GIE Rue d’Arlon 53 50 non-significant 41 B-1040 Bruxelles Leskoo SA Avenue des 50 non-significant 31 Communautés 100 B-1200 Bruxelles Rainbow ICT–Services GIE Rue Royale 192 50 disproportional 47 statements B-1000 Bruxelles costs Sepia SCRL Avenue Livingstone 6 50 non-significant 28 B-1000 Bruxelles Non-consolidated financial (1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
88 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 89 Notes to the consolidated financial statements Notes to the consolidated financial statements
5. Affiliated companies accounted for by the equity method Name Head office % of Business capital held(1) code Auxipar SA Avenue Britsiers 5 39,69 10 B-1030 Schaerbeek Aviabel SA Avenue Louise 54 20 25 B-1050 Bruxelles Bogey SA Chaussée d’Alsemberg 1021 49 31 B-1420 Braine-l’Alleud Dexia Asset Management SA groupe 136, route d’Arlon 49 19 L-1150 Luxembourg Dexia Auto Lease Luxembourg SA 136, route d’Arlon 49 5 L-1150 Luxembourg Dexia Immorent SA Boulevard Pachéco 44 45 31 B-1000 Bruxelles Esplanade 64 SA rue Godecharle 15-17 25 31 B-1050 Bruxelles Isabel SA Boulevard de l’Impératrice 13-15 24 39 B-1000 Bruxelles Promotion Léopold SA Avenue Livingstone 6 35,5 31 B-1000 Bruxelles SLF Finances SA Rue Sainte-Marie 5 27,99 43 B-4000 Liège SLF Participations SA Rue Sainte-Marie 5 20,57 10 B-4000 Liège Managementreport
6. Affiliated companies not accounted for by the equity method Name Head office % of Reason for Business capital held(1) exclusion code Arkafund NV Alfons Gossetlaan 30 25 non-significant 32 B-1702 Groot-Bijgaarden Banking Funding Company SA Rue d’Arlon 82 21,59 non-significant 48 B-1040 Bruxelles
Bedrijvencentrum Regio Mechelen NV De regenboog 11 24,33 non-significant 41 statements B-2800 Mechelen Brand & Licence Company SA Rue d’Arlon 82 20 non-significant 48 Consolidated financial B-1040 Bruxelles DG Infra+ SA Boulevard Pachéco 44 18 non-significant 10 B-1000 Bruxelles DG Infra Yield SA Boulevard Pachéco 44 25 non-significant 10 B-1000 Bruxelles IDE Lux Finances SCRL Drève de l’Arc-en-ciel 98 36,87 non-significant 16 B-6700 Arlon IHF SC Hôtel de Ville 24,62 non-significant 43 B-7100 La Louvière
Immo Foire SA 48, boulevard Grande 20 non-significant 31 statements Duchesse Charlotte L-1330 Luxembourg Inframan SA Boulevard Pachéco 44 50 non-significant 47 B-1000 Bruxelles Non-consolidated financial IP-1 SA Rue Sainte-Marie 5 20,33 non-significant 31 B-4000 Liège IP-2 SA Rue Sainte-Marie 5 20,33 non-significant 31 B-4000 Liège Justinvest Antwerpen NV Heistraat 129 33,33 non-significant 32 B-2610 Antwerpen
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
88 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 89 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Reason for Business capital held(1) exclusion code Ondernemerstalent NV P/A Universiteit Hasselt 44,29 non-significant 10 Agoralaan gebouw D B-3590 Diepenbeek Rabot Invest NV Heistraat 129 25 non-significant 46 B-2610 Antwerpen Re-Vive Brownfield CVBA Oude Brusselseweg 71 49 non-significant 31 B-9050 Ledeberg SLF Immo SA Rue Sainte-Marie 5 20,49 non-significant 31 B-4000 Liège Société Mixte de Développement Rue de l’Écluse 21 25,04 non-significant 32 Immobilier SA B-6000 Charleroi Sofibru SA Rue de Stassart 32 20 non-significant 16 B-1050 Bruxelles Sustainable Energy Ventures SA Vieux Marché aux Grains 63 22,51 non-significant 42 B-1000 Bruxelles Vlabo Invest NV Pater Damiaanstraat 5 41,43 non-significant 32 B-3130 Betekom Wandelaar Invest SA Vieux Marché aux Grains 63 39,98 non-significant 5 B-1000 Bruxelles Zakenkantoor Vandepitte-Laplae NV Astridlaan 37 26 non-significant 30 B-8310 Assebroek
Managementreport 7. DBB Branches Name Head office % of Business capital held(1) code Dexia Aéropole SCRL Avenue Georges Lemaitre 58 26 4 B-6041 Gosselies Dexia Anderlecht SCRL(2) Place de la Vaillance 35 26 4 B-1070 Bruxelles Dexia Antwerpen Berchem CVBA Grote Steenweg 456 26 4 B-2600 Berchem Dexia Antwerpen-Noord CVBA(3) Antwerpsesteenweg 49 26 4
statements B-2950 Kapellen Dexia Antwerpen Zuidrand CVBA Kioskplaats 49 26 4
Consolidated financial B-2660 Hoboken Dexia Auderghem-Boisfort SCRL Boulevard du Souverain 282 26 4 B-1160 Bruxelles Dexia Basilix SCRL(3) Chaussée de Gand 444 26 4 B-1080 Bruxelles Dexia Berchem-Wilrijk CVBA(3) Grote Steenweg 456 26 4 B-2600 Berchem Dexia Binche Mariemont SCRL Avenue Charles Deliège 56 26 4 B-7130 Binche Dexia Borinage SCRL Rue J. Dufrane 3-5 26 4
statements B-7080 Frameries Dexia Brugmann SCRL Avenue Brugmann 247 26 4 B-1180 Bruxelles
Non-consolidated financial Dexia Brugs Ommeland CVBA(2) Gistelse Steenweg 447 26 4 B-8200 Brugge Sint-Andries Dexia Bruxelles Centre SCRL(3) Place de Brouckère 41 26 4 B-1000 Bruxelles Dexia Centre Ardenne SCRL Avenue de Bouillon 16 26 4 B-6800 Libramont
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
90 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 91 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Business capital held(1) code Dexia Charleroi Pont-à-Nôle SCRL Avenue Paul Pastur 114 26 4 B-6032 Mont-sur-Marchienne Dexia Charleroi-Sud SCRL Boulevard Joseph Tirou 76-82 26 4 B-6000 Charleroi Dexia Châtelet-Fleurus SCRL(3) Chaussée de Charleroi 181 26 4 B-6220 Fleurus Dexia Ciney-Dinant SCRL(3) Rue Saint-Eloi 1 26 4 B-5590 Ciney Dexia De Voorkempen CVBA(2) Lage Kaart 301 26 4 B-2930 Brasschaat Dexia Dilbeek-Lennik CVBA Ninoofsesteenweg 117 26 4 B-1700 Dilbeek Dexia Druivenstreek CVBA Stationsplein 17 26 4 B-3090 Overijse Dexia Durmevallei CVBA Marktplein 3 26 4 B-9220 Hamme Dexia Eeklo Gent-Oost CVBA Grondwetlaan 9 26 4 B-9040 Sint-Amandsberg Dexia Entre Sambre & Fagnes SCRL(2) Faubourg Saint Germain 84 26 4 B-5660 Couvin Dexia Etterbeek SCRL Rue des Champs 6 26 4 B-1040 Bruxelles Dexia Famenne Ardenne SCRL(2) Chaussée de Liège 1 26 4 B-6900 Marche-en-Famenne Managementreport Dexia Famenne-Semois SCRL Rue des Ardennes 2 26 4 B-5570 Beauraing Dexia Fléron-Beyne-Soumagne SCRL Avenue des Martyrs 257 26 4 B-4620 Fléron Dexia Geer-Visé SCRL Rue Saint Hadelin 1 26 4 B-4600 Visé Dexia Gent-Ledeberg CVBA(3) Zonnestraat 23-25 26 4 B-9000 Gent Dexia Gent Noord-West CVBA(2) Brugsesteenweg 514 26 4 B-9030 Mariakerke statements Dexia Geraardsbergen-Ninove CVBA Oudenaardsestraat 4-6 26 4
B-9500 Geraardsbergen Consolidated financial Dexia Groot Deurne CVBA Andre Hermanslaan 1 26 4 B-2100 Deurne Dexia Hageland Noord CVBA Bogaardenstraat 26 26 4 B-3200 Aarschot Dexia Hainaut Centre & Senne SCRL Rue Albert 1er 23 26 4 B-7100 La Louvière Dexia Haspengouw-West CVBA Clockemstraat 38 26 4 B-3800 Sint-Truiden Dexia Haute-Ardenne SCRL Rue du Vieux Marché 21C 26 4 B-6690 Vielsalm statements Dexia Hauts de Liège SCRL(2) Chaussée de Tongres 391 26 4 B-4000 Liège
Dexia Herstal Liège-Est SCRL(3) Place Jean Jaurès 34 26 4 Non-consolidated financial B-4040 Herstal Dexia Hesbaye SCRL Grand-Place 5 26 4 B-4280 Hannut Dexia Jette SCRL(2) Boulevard de Smet de Nayer 2A 26 4 B-1090 Bruxelles
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
90 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 91 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Business capital held(1) code Dexia Kempen Noord CVBA Gemeenteplaats 6 26 4 B-2960 Brecht Dexia Kempen Oost CVBA Markt 27 26 4 B-2400 Mol Dexia Klein Brabant CVBA Nieuwstraat 21 26 4 B-2830 Willebroek Dexia Kortrijk CVBA Doorniksewijk 19 26 4 B-8500 Kortrijk Dexia Lambermont-Laeken SCRL Avenue H. Conscience 182 26 4 B-1140 Bruxelles Dexia Leeuw-Calevoet-Rode CVBA Weerstandsplein 1 26 4 B-1600 Sint-Pieters-Leeuw Dexia Leuven CVBA Brusselsestraat 2 26 4 B-3000 Leuven Dexia Liège Centre & Sud SCRL Rue des Mineurs 12 26 4 B-4000 Liège Dexia Limburg Centrum CVBA Dorpsstraat 1A 26 4 B-3530 Houthalen-Helchteren Dexia Louise SCRL Place Flagey 28B 26 4 B-1050 Bruxelles Dexia Mandel-Leie CVBA Holdestraat 19 26 4 B-8760 Meulebeke Dexia Meetjesland CVBA Ninoofsesteenweg 643 26 4 Managementreport (in liquidation) B-1070 Anderlecht Dexia Meuse Ourthe Amblève SCRL Place Joseph Thiry 47 26 4 B-4920 Aywaille Dexia Midden-Brabant CVBA Van Beethovenlaan 2 51 4 (in liquidation) B-1910 Kampenhout Dexia Mons-Nord SCRL(2) Rue de Nimy 61-65 26 4 B-7000 Mons Dexia Mons-Sud SCRL(3) Avenue Jean d’Avesnes 9 26 4 B-7000 Mons Dexia Namur-Eghezée SCRL Chaussée de Louvain 440 26 4 statements B-5004 Bouge Dexia Namur Gembloux SCRL Avenue de la Faculté d’Agronomie 12 26 4
Consolidated financial B-5030 Gembloux Dexia Namur Haute-Meuse SCRL Rue de Marchovelette 1 26 4 B-5000 Namur Dexia Netevallei CVBA Grote Markt 13 26 4 B-2500 Lier Dexia Nivelles-Tubize SCRL Rue de Mons 55 26 4 B-1480 Tubize Dexia Noord-Limburg CVBA Oude Markt 26 26 4 B-3900 Overpelt Dexia Nord Picardie SCRL Rue de la Station 52 26 4 statements B-7700 Mouscron Dexia Ostbelgien CVBA Rue Belle-Vue 30B 26 4 (in liquidation) B-4840 Welkenraedt
Non-consolidated financial Dexia Pays de Herve SCRL(3) Place du Marché 22 26 4 B-4651 Battice Dexia Regio Aalst CVBA Stationsstraat 4 26 4 B-9300 Aalst Dexia Regio Asse-Ternat CVBA Kattestraat 2 26 4 B-1730 Asse
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
92 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 93 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Business capital held(1) code Dexia Regio Dendermonde Zuidlaan 2 26 4 Buggenhout CVBA B-9200 Dendermonde Dexia Regio Erpe-Mere CVBA Marktplein 36 26 4 B-9520 St-Lievens-Houtem Dexia Regio Evergem-Zelzate CVBA Ninoofsesteenweg 643 26 4 (in liquidation) B-1070 Anderlecht Dexia Regio Genk-Maaseik CVBA Fruitmarkt 7 26 4 B-3600 Genk Dexia Regio Hasselt CVBA Havermarkt 36 26 4 B-3500 Hasselt Dexia Regio Leie Schipdonk CVBA Volhardingslaan 72 26 4 B-9800 Deinze Dexia Regio Mechelen CVBA Dorp 56 26 4 B-2820 Bonheiden Dexia Regio Menen-Wevelgem CVBA Kerkomtrek 16 26 4 B-8930 Menen Dexia Regio Mortsel Kontich CVBA Mechelsesteenweg 56 26 4 B-2640 Mortsel Dexia Regio Oostende-Oostkust CVBA Monnikenwerve 200 26 4 B-8000 Brugge Dexia Regio Oudenburg CVBA(3) Ettelgemsestraat 2 26 4 B-8460 Oudenburg Dexia Regio Roeselare Izegem CVBA Hendrik Consciencestraat 23 B6 26 4 B-8800 Roeselare Managementreport Dexia Regio Sint-Niklaas CVBA Parklaan 33 26 4 B-9100 St-Niklaas Dexia Regio Tienen CVBA Nieuwstraat 36 26 4 B-3300 Tienen Dexia Regio Torhout Middelkerke Markt 28 26 4 CVBA B-8820 Torhout Dexia Regio Turnhout-Hoogstraten Vrijheid 109 26 4 CVBA B-2320 Hoogstraten Dexia Regio Waregem-Kruishoutem Markt 12 26 4 CVBA B-8790 Waregem statements Dexia Regio Westhoek CVBA Grote Markt 31 26 4
B-8600 Diksmuide Consolidated financial Dexia Regio Zuid-Gent CVBA Koning Albertlaan 142 26 4 B-9000 Gent Dexia Région Huy-Andenne SCRL Avenue des Ardennes 33 26 4 B-4500 Huy Dexia Région Liège Airport SCRL Chaussée du Roi Albert 50 26 4 B-4431 Loncin Dexia Région Verviers-Spa SCRL(2) Place du Perron 41 26 4 B-4910 Theux Dexia Scheldeland CVBA Kalkendorp 21 26 4 B-9270 Kalken statements Dexia Sille & Dendre SCRL Grand Place 72 26 4 B-7850 Enghien
Dexia Stockel SCRL Place Dumon 22 26 4 Non-consolidated financial B-1150 Bruxelles Dexia Sud Luxembourg SCRL Rue de la Poste 13 26 4 B-6700 Arlon Dexia Tournai-Val de Verne SCRL Rue Royale 105-109 26 4 B-7500 Tournai
(1) % of capital held by holding company. (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011.
92 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 93 Notes to the consolidated financial statements Notes to the consolidated financial statements
Name Head office % of Business capital held(1) code Dexia Uccle-Rhode SCRL Avenue de Fre 173 26 4 B-1180 Bruxelles Dexia Val de Sambre SCRL(2) Rue de la Station 15-17 26 4 B-5060 Tamines Dexia Val d’Haine et Haut-Pays SCRL Rue Grande 49 26 4 B-7380 Quiévrain Dexia Val d’Heure SCRL(3) Rue de Mettet 17A 26 4 B-5620 Florennes Dexia Val du Piéton SCRL Grand-Rue 12 26 4 B-6183 Trazegnies Dexia Vallée de la Dyle SCRL Avenue Einstein 8 26 4 B-1300 Wavre Dexia Vallée de la Lys SCRL Bloemenstraat 1 26 4 (in liquidation) B-8900 Ieper Dexia Verviers-Heusy SCRL Crapaurue 14 26 4 (in liquidation) B-4800 Verviers Dexia Vilvoorde-Zaventem CVBA Portaelsplein 68 26 4 B-1800 Vilvoorde Dexia Vlaamse Ardennen CVBA Nederstraat 17 26 4 B-9700 Oudenaarde Dexia Waterloo SCRL Chaussée de Bruxelles 306 26 4 B-1410 Waterloo Dexia Wemmel-Meise-Strombeek Markt 60-62 26 4 Managementreport CVBA B-1780 Wemmel Dexia West-Limburg CVBA Kerkstraat 2 26 4 B-3560 Lummen Dexia Woluwe SCRL Parvis Saint-Henri 49 26 4 B-1200 Bruxelles Dexia Zennevallei CVBA Basiliekstraat 13 26 4 B-1500 Halle Dexia Zottegem Land van Rhode Heldenlaan 33 26 4 CVBA B-9620 Zottegem Dexia Zuid-Oost Limburg CVBA Visesteenweg 204 B1 26 4 statements B-3770 Zichen-Zussen-Bolder
(1) % of capital held by holding company. Consolidated financial (2) Taken over by merger on 1 January 2011. (3) Liquidated on 1 January 2011. statements Non-consolidated financial
94 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 95 Notes to the consolidated financial statements Notes to the consolidated financial statements
Business code 1. Bank, credit institution 27. Captive reinsurance 2. Private savings bank 28. General insurance 3. Government credit institution 29. Financial product agency and broking 4. Banking agency 30. Insurance agency and broking 5. Leasing 31. Real estate (proprietary portfolio) 6. Home loans 32. Real estate agency (third party) 7. Development capital 33. Health and welfare 8. Consumer credits 34. Computer business 9. Other lending activities 35. Banking associations 10. Investment company 36. Other associations 11. Stock broking 37. Sewage. road cleaning and maintenance and waste management 12. Variable-capital investment company 38. Recreation 13. Mutual funds 39. Telecommunications 14. Fund manager 40. Transportation 15. Factoring 41. Other services 16. Infrastructure and construction financing 42. Energy 17. Other specific financing 43. Economic development 18. Financial market administration 44. Water 19. Asset and portfolio management, financial advisory services 45. Book publishing and multimedia
20. Financial engineering, consultancy, financial research 46. Research and development Managementreport 21. Other professional services in financial sector 47. Other service activities 22. Guarantee company 48. Production, management, distribution of computerised payment media 23. Trust company 49. Financing 24. Foreign currency exchange 50. Merchant banking 25. Life insurance 26. Nonlife insurance statements Consolidated financial statements Non-consolidated financial
94 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 95 Notes to the consolidated financial statements
III. Business reporting
A segment is a distinguishable component of Dexia Bank Belgium that ●● The Legacy Portfolio Management Division remains on the balance is engaged either in providing products or services (business segment) sheet in a separate unit which qualifies as non-core, with a clearly or in providing products or services within a particular economic identified and allocated funding. The State-guaranteed funding is environment (geographic segment) which is subject to risks and returns allocated to this division, meaning that the Core Division is no more that are different from those of the other segments. Segments with a impacted by the funding guaranteed by the States. majority of revenue earned from sales to external customers and whose ●● Interests allocated from the Group Center to the other core business revenue, result or assets are 10% or more of all the segments are lines and to the Legacy Portfolio Management Division are now reported separately. related to the allocated equity which is: ■■ the economic equity in the core business lines; In accordance with the European Commission decision, Dexia Bank ■■ the normative equity in the Legacy Portfolio Management Belgium now classifies its portfolios in run-off in a Legacy Portfolio Division. The normative equity is 12.5% of the weighted risks. Management Division, alongside the Core Division which is composed Return on allocated equity measures the performance of each of the Retail and Commercial Banking (RCB), Public and Wholesale core business line. Banking (PWB), Asset Management and Services (AMS) and Group ●● If participations were sold in 2009 to meet the commitments Center busines lines. As a result, the business reporting of Dexia Bank concluded with the European Commission, figures are disclosed in Belgium was modified as from 1 January 2010 onwards. Figures for the Legacy Portfolio Management Division; if not, figures are 2009 were restated accordingly in order to enable comparisons. With reported in Group Center. In 2010, all participations sold are this change, the visibility on core businesses will significantly improve. reported in Group Center. Detailed explanations are available in the press release of Dexia dated 11 May 2010.
Major changes compared to previous segmentation:
●● The group is now split into 2 divisions: ■■ Core Division, composed of the following business lines: Managementreport (i) Retail & Commercial Banking (RCB); (ii) Public & Wholesale Banking (PWB); (iii) Asset Management and Services (AMS) of which Asset Management, Investor Services and Insurance; (iv) Group Center. ■■ Legacy Portfolio Management Division, which gathers the portfolios in run-off (non-core PWB loans and bonds portfolios in run-off).
1. Business reporting
statements 31/12/09 31/12/10 Assets o/w Liabilities Assets o/w Liabilities
Consolidated financial investments investments (In thousands of eur) in associates in associates Core Division 218,620,775 284,014 253,770,748 218,615,074 277,969 247,902,475 Retail and Commercial Banking 34,080,856 1,271 51,285,419 35,083,600 1,542 51,430,482 Public and Wholesale Banking 79,502,438 89,791 51,452,878 70,445,976 85,907 47,327,871 Asset Management and Services 24,026,740 23,700 24,026,740 22,093,488 8,271 19,649,613 Asset Management 0 0 0 0 0 0 Investor Services 0 0 0 0 0 0 Insurance 24,026,740 23,700 24,026,740 22,093,488 8,271 19,649,613 Group Center 81,010,741 169,252 127,005,711 90,992,010 182,250 129,494,509 Legacy Portfolio Management Division 35,149,782 0 0 29,287,401 0 0 statements Total 253,770,748 284,014 253,770,748 247,902,475 277,969 247,902,475
Some amounts may not add up due to roundings-off. Non-consolidated financial Figures as at 31 December 2009 have been restated to enable comparisons.
96 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 97 Notes to the consolidated financial statements
31/12/09 Income o/w net o/w net Net income income from interest before tax associates income and dividend (In thousands of eur) income Core Division 2,163,743 23,410 2,134,448 402,071 Retail and Commercial Banking 1,258,367 (43) 911,688 133,500 Public and Wholesale Banking 426,888 1,892 429,064 163,954 Asset Management and Services 295,740 1,854 583,405 48,252 Asset Management 0 0 0 0 Investor Services 0 0 0 0 Insurance 295,740 1,854 583,405 48,252 Group Center 182,748 19,707 210,291 56,365 Legacy Portfolio Management Division 88,629 14,950 365,526 (16,958)
Total 2,252,372 38,360 2,499,974 385,114
Net income before tax 385,114 Taxes 19,211 Non-controlling interests 17,094 Net income – Group share 421,418
Some amounts may not add up due to roundings-off. Figures as at 31 December 2009 have been restated to enable comparisons.
31/12/10 Income o/w net o/w net Net income Managementreport income from interest before tax associates income and dividend (In thousands of eur) income Core Division 2,295,969 28,670 2,055,733 612,481 Retail and Commercial Banking 1,323,536 230 1,005,605 226,259 Public and Wholesale Banking 455,561 (994) 340,859 237,773 Asset Management and Services 392,721 1,461 658,299 148,359 Asset Management 0 0 0 0 Investor Services 0 0 0 0 Insurance 392,721 1,461 658,299 148,359 Group Center 124,151 27,973 50,971 89 Legacy Portfolio Management Division 151,438 0 120,206 149,600 statements
Total 2,447,407 28,670 2,175,939 762,081 Consolidated financial
Net income before tax 762,081 Taxes (81,600) Non-controlling interests (2,159) Net income – Group share 678,321
Some amounts may not add up due to roundings-off. statements Non-consolidated financial
96 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 97 Notes to the consolidated financial statements
2. Other segment information 31/12/09 31/12/10 Capital Deprecia- Impair- Other Capital Deprecia- Impair- Other expendi- tion and ments non-cash expendi- tion and ments non-cash tures amortiza- (1) expenses tures amortiza- (1) expenses (In thousands of eur) tion (2) tion (2) Core Division (203,916) (122,136) 568,017 12,151 (196,276) (115,359) (23,499) (24,289) Retail and Commercial Banking 0 (75,323) (61,536) (5,575) (25,403) (72,220) (38,691) 5,020 Public and Wholesale Banking (141,238) (8,286) (42,155) (1,514) (167,244) (8,636) (7,483) (909) Asset Management and Services 0 (10,189) 505,288 0 0 (20,531) (7,542) 1 Asset Management 0 0 0 0 0 0 0 (8) Investor Services 0 0 0 0 0 0 0 (15) Insurance 0 (10,189) 505,288 0 0 (20,531) (7,542) 24 Group Center (62,678) (28,338) 166,420 19,240 (3,629) (13,972) 30,218 (28,401) Legacy Portfolio Management Division 0 (415) (82,662) (83) 0 (323) 24,564 (1,312)
Total (203,916) (122,551) 485,355 12,068 (196,276) (115,682) 1,065 (25,601)
(1) Includes impairments on tangible and other intangible assets, impairments on securities, impairments on loans and provisions for credit commitments, impairments on goodwill. (2) Includes IFRS 2 costs, net allowances to provisions for restructuring costs, net allowances to provisions related to IAS 19, capital losses on exchange of assets and provisions for legal litigations.
Some amounts may not add up due to roundings-off. Figures as at 31 December 2009 have been restated to enable comparisons.
Relations between business lines, and especially between commercial ●● Interest on economic capital: economic capital is allocated to the
Managementreport business lines, financial markets and production and service centres business lines for internal purposes and the return on economic are subject to retrocessions and/or analytical transfers, governed by capital is used to measure the performance of each business line; service level agreements based on normal commercial terms and ●● Funding cost. market conditions. The results of each business line also include: Tangible and intangible assets are allocated to “Group Center” except ●● The earnings from commercial transformation, including the when they are directly managed by a commercial or financial business management costs of this transformation and the Group equity line. allocated to this activity on the basis of medium and long-term outstanding; statements Consolidated financial statements Non-consolidated financial
98 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 99 Notes to the consolidated financial statements
IV. Significant items included in the statement of income
Reported amounts are significant and/or unusual transactions In the context of its restructuration plan, Dexia Bank Belgium and not only large transactions. The amounts mentioned are booked an amount of EUR 34,2 million as restructuration costs. year-to-date. A charge of EUR 34,5 million was recognised in interest margin In 2010, the European Commission approved the help provided for the retribution of the Belgian State for the guarantee it gives by the Belgian, French and Luxembourg States to Dexia and for Dexia Bank Belgium’s financing. Dexia undertook to restructure its activities. Dexia Bank Belgium recorded in “XI. Other net income” In order to comply with the commitments taken with the EUR 44 million, as a compensation for losses which were incurred European Commission, Dexia Bank Belgium continued to in the context of the fraud occured in the dealing room of deleverage its balance sheet. Assets were sold for an amount Dexia Bank Belgium between 1998 and 2001, and which were of EUR 7,5 billion. In this context, a capital loss net of provision fully accounted for between 2000 and 2004 (included). has been recognised for EUR 34 million. The CDS purchased within the framework of the synthetic Dexia Bank Belgium sold its stake in SPE, Dexia Épargne Pension securitisations Dublin Oak and Wise, together with the CDS and Adinfo group with a capital gain of respectively EUR 69 mil intermediation activity, led to a positive mark-to-market before lion, EUR 34 million and EUR 14 million disclosed in “VI. Net tax of EUR 66,5 million in “V. Net income from financial income on investments”. instruments at fair value through profit or loss”.
On 16 July 2010, Dexia Real Estate Capital Markets (DRECM) has been sold to Dexia Crédit Local.
V. Post-balance-sheet events Managementreport
Nil
VI. Litigation
We refer here to the chapter General information – Litigation, pages 54-56. statements Consolidated financial statements Non-consolidated financial
98 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 99 Notes to the consolidated financial statements
VII. Notes on the assets of the consolidated balance sheet (some amounts may not add up due to roundings-off)
7.1. Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprises the following balances with less than 90 days remaining duration.
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Cash and balances with central banks 499,171 1,459,314 Loans and advances due from banks 26,023,490 36,276,833 Financial assets available for sale 855,227 299,845 Non-current assets held for sale 126,289 0
Total 27,504,177 38,035,992
2. Of which restricted cash
(In thousands of eur) 31/12/09 31/12/10 Mandatory reserves(1) 78,947 1,005,415 Other 0 0
Total(2) 78,947 1,005,415
(1) Mandatory reserves: minimum reserve deposits credit institutions must have with the European Central Bank or with other central banks. (2) Cash collaterals have been removed from the restricted cash, figures as at December 2009 have been restated. Managementreport
Cash collaterals are paid or received based on the market value compensated by a negative value of the derivative, that requires of collaterised derivatives. a cash-collateral payment. In this context, low level of interest rates existing the last years, the level of cash collaterals remains Collaterised derivatives used by Dexia Bank Belgium are mainly very high and can no longer be considered as a fluctuating interest-rate derivatives, where Dexia Bank Belgium hedges short-term cash equivalent. Therefore they have been excluded fixed paying assets and credit derivatives. In case of decrease from cash equivalents, as some minor elements, like trading of interest rate, the fair value of the assets increases but is and fair-value option assets.
statements 7.2. Cash and balances with central banks
Analysis by nature Consolidated financial (In thousands of eur) 31/12/09 31/12/10 Cash in hand 420,223 453,899 Balances with central banks other than mandatory reserve deposits 0 0 Mandatory reserve deposits 81,414 1,007,009
Total 501,637 1,460,908 of which included in cash and cash equivalents 499,171 1,459,314 statements Non-consolidated financial
100 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 101 Notes to the consolidated financial statements
7.3. Loans and advances due from banks
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Nostro accounts and cash collaterals 12,359,329 13,459,180 Reverse repurchase agreements 20,185,741 19,847,039 Loans and other advances 25,212,457 33,215,832 Debt instruments 6,192,072 1,418,315 Impaired loans 10,788 12,811 Impaired debt instruments 2,066 22,291 Less: Specific impairment on impaired loans or impaired debt instruments (9,095) (25,122) Collective impairment (41,603) (13,562)
Total 63,911,755 67,936,784 of which included in cash and cash equivalents(1) 26,023,490 36,276,833 of which included in finance lease 0 0
(1) Cash collaterals have been removed from cash and cash equivalents; figures as at 31 December 2009 have been restated.
2. Analysis of quality See note 7.15.
3. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
4. Analysis of the fair value Managementreport See note 12.1.
5. Reclassification of financial assets (IAS 39 amended) See note 7.7. statements Consolidated financial statements Non-consolidated financial
100 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 101 Notes to the consolidated financial statements
7.4. Loans and advances to customers
1. Analysis by counterparty
(In thousands of eur) 31/12/09 31/12/10 Public sector 18,820,057 18,743,753 Other 83,958,642 80,681,545 Impaired loans 1,101,296 966,135 Impaired debt instruments 121,184 63,819 Less: Specific impairment on impaired loans or impaired debt instruments (589,681) (586,150) Collective impairment (404,304) (396,631)
Total 103,007,194 99,472,471 of which included in finance lease 2,736,850 2,875,089
2. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Cash collaterals 3,801,403 3,881,592 Reverse repurchase agreements 1,109,252 1,327,993 Loans and other advances 82,441,587 81,532,081 of which bills & own acceptances 20,060 25,902 of which finance leases 2,736,850 2,875,089 of which securitised loans 18,548,900 19,256,413 of which consumer credit 1,395,005 1,396,495 of which mortgage loans 10,950,318 10,875,801 of which term loans 44,745,421 42,793,593 of which current accounts 3,468,103 3,719,742 Managementreport of which other loans and advances 576,930 589,046 Debt instruments 15,426,457 12,683,633 Impaired loans 1,101,296 966,134 Impaired debt instruments 121,184 63,819 Less: Specific impairment on impaired loans or impaired debt instruments (589,681) (586,150) Collective impairment (404,304) (396,631)
Total 103,007,194 99,472,471
3. Analysis of quality
statements See note 7.15.
Consolidated financial 4. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
5. Analysis of the fair value See note 12.1.
6. Reclassification of financial assets (IAS 39 amended) See note 7.7. statements Non-consolidated financial
102 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 103 Notes to the consolidated financial statements
7.5. Financial assets measured at fair value through profit or loss
(In thousands of eur) 31/12/09 31/12/10 Financial assets held for trading 2,961,944 2,405,982 Financial assets designated at fair value 3,501,056 3,914,054
Total 6,463,000 6,320,036
FINANCIAL ASSETS HELD FOR TRADING
1. Analysis by counterparty
(In thousands of eur) 31/12/09 31/12/10 Public sector 1,043,589 363,396 Banks 262,123 578,277 Other 1,656,232 1,464,309
Total 2,961,944 2,405,982 of which included in finance lease 0 0
2. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Loans 0 214,405 Bonds issued by public bodies 989,392 297,039 Other bonds and fixed-income instruments 1,941,059 1,867,542 Equity and variable-income instruments 31,493 26,996 Managementreport Total 2,961,944 2,405,982
3. Treasury bills and other eligible bills for refinancing to the central banks
(In thousands of eur) 31/12/09 31/12/10 Treasury bills and other eligible bills for refinancing to the central banks 668,681 25,253
4. Securities pledged under repurchase agreements with other banks
Fair value statements (In thousands of eur) 31/12/09 31/12/10
Included in bonds issued by public bodies 568,149 51,659 Consolidated financial Included in other bonds and fixed-income instruments 0 0
5. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
6. Analysis of the fair value See note 12.1. statements 7. Reclassification of financial assets (IAS 39 amended) See note 7.7. Non-consolidated financial
102 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 103 Notes to the consolidated financial statements
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE
1. Analysis by counterparty
(In thousands of eur) 31/12/09 31/12/10 Public sector 4,081 3,547 Banks 16,329 114,908 Other 3,480,646 3,795,599
Total 3,501,056 3,914,054 of which included in finance lease 0 0
2. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Loans 230,522 331,177 Bonds issued by public bodies 4,081 3,547 Other bonds and fixed-income instruments 77,552 56,540 Equity and variable-income instruments 0 0 Unit-linked products Insurance – bonds and loans 655,424 458,750 Unit-linked products Insurance – equity and variable-income instruments 2,533,477 3,064,040
Total 4,156,480 3,914,054
Financial assets on public sector are disclosed in “Bonds issued by public bodies” and also partially in “Loans” and in “Unit-linked products”.
Managementreport 3. Treasury bills and other eligible bills for refinancing to the central banks Nil
4. Securities pledged under repurchase agreements with other banks Nil
5. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
statements 6. Analysis of the fair value See note 12.1.
Consolidated financial The Fair Value Option (FVO) for financial assets is mainly used The methodology followed to determine the fair value of financial in the following situations : assets designated at fair value is presented in the “Notes to the consolidated financial statements – Accounting policies – 7. Fair ●● by the insurances business for unit-linked products (Branch 23). value of financial instruments”. The return of the unit-linked product belongs entirely to its policyholder. ●● as an alternative method in order to reduce volatility in profit or loss when, at inception, there is a risk that the hedge accounting requirements will not be met. statements Non-consolidated financial
104 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 105 Notes to the consolidated financial statements
7.6. Financial investments
1. Analysis by counterparty
(In thousands of eur) 31/12/09 31/12/10 Public sector 19,511,122 17,580,991 Banks 15,757,545 10,237,238 Other 5,942,180 8,441,478 Impaired financial investments 712,019 581,557
Total financial investments before impairment 41,922,866 36,841,264 Less: Specific and collective impairment on impaired financial investments (465,875) (366,179)
Total 41,456,991 36,475,085 of which included in cash and cash equivalents 855,227 299,845
2. Analysis of quality See note 7.15.
3. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
4. Analysis by nature Available for sale Held to maturity Total (In thousands of eur) 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 Managementreport Loans 81,618 42,436 0 0 81,618 42,436 Bonds issued by public bodies 19,323,718 17,403,089 0 0 19,323,718 17,403,089 Other bonds and fixed- income instruments 20,409,328 17,716,465 0 0 20,409,328 17,716,465 Equity and variable- income instruments 2,108,202 1,679,274 0 0 2,108,202 1,679,274
Total financial investments before impairment 41,922,866 36,841,264 0 0 41,922,866 36,841,264
Specific and collective statements impairment on impaired financial investments (465,875) (366,179) 0 0 (465,875) (366,179) Consolidated financial
Total financial investments 41,456,991 36,475,085 0 0 41,456,991 36,475,085
5. Convertible bonds included in the available-for-sale portfolio (position greater than EUR 50 million) Nil
6. Reclassification (IFRS 7, 12) statements Nil
7. Analysis of the fair value Non-consolidated financial See note 12.1.
8. Reclassification of financial assets (IAS 39 amended) See note 7.7.
104 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 105 Notes to the consolidated financial statements
7.7. Reclassification of financial assets (IAS 39 amended)
From Trading From Trading From Available- to Loans and to Available- for-sale receivables (1) for-sale portfolio to portfolio (2) Loans and (In thousands of eur) receivables (3) Carrying amount of assets reclassified, as at 1 October 2008 2,800,549 0 15,446,859 Carrying amount of assets reclassified, as at 1 January 2009 0 0 872,647 Carrying amount of reclassified assets as at 31 December 2009 (A) 2,058,052 0 13,677,087 Fair value of reclassified assets as at 31 December 2009 (B) 1,994,298 0 13,715,335 Amount not taken in income (1)&(2) due to reclassification (B)-(A) (63,754) 0 n.a. Amount not taken in AFS reserve (3) due to reclassification (B)-(A) n.a. n.a. 38,248 P/D amortization in P&L during the year 27,082 0 n.a. P/D amortization in AFS reserve during the year n.a. n.a. 241,437
From Trading From Trading From Available- to Loans and to Available- for-sale receivables (1) for-sale portfolio to portfolio (2) Loans and (In thousands of eur) receivables (3) Carrying amount of reclassified assets as at 31 December 2010 (A) 1,151,337 0 11,456,038 Fair value of reclassified assets as at 31 December 2010 (B) 979,748 0 11,052,666 Cumulated amount not taken in income (1)&(2) due to reclassification (B)-(A) (171,589) 0 n.a. Cumulated amount not taken in AFS reserve (3) due to
Managementreport reclassification (B)-(A) n.a. n.a. (403,372) P/D amortization in P&L during the year 2,220 0 n.a. P/D amortization in AFS reserve during the year n.a. n.a. 159,574
Dexia Bank Belgium decided to apply the amendment of IAS If there is objective evidence of impairment for a financial asset 39 & IFRS 7 – Reclassification of financial assets for some initially classified as “Available for sale” but reclassified to “Loans financial assets. and Receivables” in accordance with the amended IAS 39, any difference between the net present value of expected future 1. Impact of reclassifications of 2008 and cash flows, discounted at the effective interest rate at the 2009 equity and results date of reclassification, and the carrying amount is recognised as an impairment loss. Transfer from Held for trading to Loans and statements receivables Consequently any outstanding non-amortised amount The difference between the carrying amount at reclassification recognised in the available-for-sale reserve is recognised as an
Consolidated financial date and the reimbursement amount is amortised over the impairment loss as well. remaining period. The impact of this amortization on the result of the period is shown in the line “Premium/Discount amortiza- The decrease of carrying amount reclassified comes mainly from tion in P&L during the year”. repayments, prepayments and opportunistic sale of bonds in the context of balance-sheet management. The difference between the “Carrying amount of reclassified assets as at 31 December 2010” and the fair value represents The positive difference between the carrying amount of reclas- the cumulated changes in fair value as from reclassification date sified assets and their fair value reflects the decrease of credit until 31 December 2010 and also includes the cumulated and liquidity spreads on the markets. amortization of the discount/premium since reclassification. 2. Impact on interest margin
statements The difference is negative for trading assets reclassified in Loans and Receivables as markets remain illiquid. For assets transferred from AFS to L&R, the amortization of the discount/premium on the bond is compensated by the Transfer from Available for sale (AFS) to Loans and amortization of the frozen AFS reserve, so that the net impact Non-consolidated financial Receivables (L&R) on result is zero. Dexia Bank has a particular “Available for sale” portfolio with a very long maturity, resulting in significant change in value For assets transferred from Trading to L&R, the impact on the following small shifts in spreads. interest margin of the amortization of the negative mark-to- market of previous periods amounts to EUR 27 million in 2009 The impact on the result in “cost of risk” is the net of allocation and to 2 millions EUR in 2010. and use of collective and specific impairments. Due to the reclassification of these assets to Loans and Receivables, the cost of risk of Dexia Bank was higher for EUR 86 million before tax in 2009 and lower for EUR 19 million before tax in 2010.
106 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 107 Notes to the consolidated financial statements
7.8. Investments in associates
1. Carrying value
(In thousands of eur) 2009 2010 Carrying value as at 1 Jan. 521,052 284,014 Acquisitions 0 617 Disposals(1) (196,094) (3,550) Change in scope of consolidation (in) 247 6 Change in scope of consolidation (out) (6,048) 0 Share of result before tax 48,291 33,435 Share of tax (9,931) (4,763) Dividend paid (19,607) (31,380) Changes in goodwill (see below) (71,023) 0 Share of gains and losses not recognised in the statement of income 15,212 (931) Translation adjustments 1,231 429 Other 684 92
Carrying value as at 31 Dec. 284,014 277,969
(1) Crédit du Nord in 2009.
2. Positive goodwill included in carrying value
(In thousands of eur) 2009 2010 Acquisition cost as at 1 Jan. 88,779 0 Disposals(1) (88,779) 0 Acquisition cost as at 31 Dec. (A) 0 0 Accumulated amortization(2) and accumulated impairment as at 1 Jan. (17,756) 0 Disposals(1) 17,756 0 Managementreport Accumulated amortization(2) and accumulated impairment as at 31 Dec. (B) 0 0
Net carrying amount as at 31 Dec. (A)+(B) 0 0
(1) Crédit du Nord in 2009. (2) Accumulated amortization represents the amount of depreciation recognised until 1 January 2004, before IFRS were applied. As at 1 January 2009, it represented an amount of EUR -17,8 million for Crédit du Nord.
3. List of major associates Associates 2009 2010 Website Book value Fair value Book value Fair value (In thousands of eur) of investment of investment statements Dexia Asset Management
Luxembourg SA 73,490 73,490 75,059 75,059 www.dexia-am.com Consolidated financial SLF Finance SA 63,742 63,742 63,369 63,369 www.slf.be Dexia Asset Management Belgium SA 48,227 48,227 39,507 39,507 www.dexia-am.com Dexia Asset Management France SA 34,212 34,212 33,845 33,845 www.dexia-am.com
Total 219,671 219,671 211,780 211,780
4. Discontinuation of recognition of share of loss (negative equity) Nil statements Non-consolidated financial
106 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 107 Notes to the consolidated financial statements
7.9. Tangible fixed assets
1. Net book value Land and buildings Office furniture and other equipment Investment Total property Own use Own use Own use Own use Operating (In thousands of eur) owner finance lease owner finance lease lease Acquisition cost as at 1 Jan. 2009 1,155,845 3,397 676,697 590 9,206 922,386 2,768,121 Acquisitions 152,416 7 35,998 3 378 15,113 203,915 Subsequent expenditures 4,838 0 0 0 0 27,489 32,327 Post-acquisition adjustment 0 0 0 0 0 0 0 Disposals (116,686) 0 (767) 0 0 (11,075) (128,528) Change in scope of consolidation (in) 0 0 0 0 0 0 0 Change in scope of consolidation (out) (5,248) 0 (964) 0 0 (1,374) (7,586) Transfers and cancellations (56,932) 0 (21,495) (38) (7,994) (48,166) (134,625) Translation adjustments 0 (27) (39) 0 0 0 (66) Other 0 0 1 (1) 0 0 0 Acquisition cost as at 31 Dec. 2009 (A) 1,134,233 3,377 689,431 554 1,590 904,373 2,733,558
Accumulated depreciation and impairment as at 1 Jan. 2009 (339,845) (407) (547,980) (565) (8,668) (506,612) (1,404,077) Post-acquisition adjustment 0 0 0 0 0 0 0 Booked (56,427) (599) (27,438) (25) (304) (18,887) (103,680) Impairment 0 0 0 0 0 0 0 Write-back 0 0 0 0 0 0 0
Managementreport Disposals 12,980 0 570 0 0 8,317 21,867 Change in scope of consolidation (in) 0 0 0 0 0 0 0 Change in scope of consolidation (out) 413 0 621 0 0 640 1,674 Transfers and cancellations 11,935 0 17,585 49 7,994 47,246 84,809 Translation adjustments 0 27 34 0 0 0 61 Other (1) 0 0 0 0 0 (1) Accumulated depreciation and impairment as at 31 Dec. 2009 (B) (370,945) (979) (556,608) (541) (978) (469,296) (1,399,347)
Net book value statements as at 31 Dec. 2009 (A)+(B) 763,288 2,398 132,823 13 612 435,077 1,334,211 Consolidated financial statements Non-consolidated financial
108 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 109 Notes to the consolidated financial statements
Land and buildings Office furniture and other equipment Investment Total property Own use Own use Own use Own use Operating (In thousands of eur) owner finance lease owner finance lease lease Acquisition cost as at 1 Jan. 2010 1,134,233 3,377 689,431 554 1,590 904,373 2,733,558 Acquisitions 162,734 1 21,192 1 225 12,137 196,290 Subsequent expenditures 18,740 0 0 0 0 31,944 50,684 Post-acquisition adjustment 0 0 0 0 0 0 0 Disposals (245,258) (196) (847) 0 (1) (35,459) (281,761) Change in scope of consolidation (in) 0 0 0 0 0 0 0 Change in scope of consolidation (out) (13,359) (742) (6,958) (126) (1,736) 0 (22,921) Transfers and cancellations (31,400) 0 (219,358) (407) (78) 65,721 (185,522) Translation adjustments 0 67 95 0 0 0 162 Other 0 0 0 0 0 0 0 Acquisition cost as at 31 Dec. 2010 (A) 1,025,690 2,507 483,555 22 0 978,716 2,490,490
Accumulated depreciation and impairment as at 1 Jan. 2010 (370,945) (979) (556,608) (541) (978) (469,296) (1,399,347) Post-acquisition adjustment 0 0 0 0 0 0 0 Booked (45,726) (28) (31,195) (13) (158) (15,768) (92,888) Impairment 0 0 0 0 0 (1,191) (1,191) Write-back 0 0 0 0 0 545 545 Disposals 1,939 197 769 0 0 27,546 30,451 Change in scope of consolidation (in) 0 0 0 0 0 0 0 Change in scope Managementreport of consolidation (out) 9,311 736 5,905 125 1,058 0 17,135 Transfers and cancellations 31,690 219,349 416 78 (55,270) 196,263 Translation adjustments 0 (67) (83) 0 0 0 (150) Other 0 0 0 0 0 (15) (15) Accumulated depreciation and impairment as at 31 Dec. 2010 (B) (373,731) (141) (361,863) (13) 0 (513,449) (1,249,197)
Net book value as at 31 Dec. 2010 (A)+(B) 651,959 2,366 121,692 9 0 465,267 1,241,293
2. Fair value of investment properties statements
(In thousands of eur) 31/12/09 31/12/10 Consolidated financial Total 434,858 481,303 Fair value subject to an independent valuation 0 0 Fair value not subject to an independent valuation 434,858 481,303
3. Expenditures
(In thousands of eur) 31/12/09 31/12/10 Expenditures capitalised for the construction of property, plant & equipment 2,874 0
4. Contractual obligations relating to investment property at the end of the period statements Nil
5. Contractual obligations relating to property, plant and equipment at the end of the period Non-consolidated financial Nil
108 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 109 Notes to the consolidated financial statements
7.10. Intangible assets and goodwill
Positive Internally Other Total goodwill(1) developed intangible (In thousands of eur) software assets(2) Acquisition cost as at 1 Jan. 2009 131,575 426,367 126,897 684,839 Acquisitions 0 39,757 10,729 50,486 Disposals 0 (899) (234) (1,133) Change in scope of consolidation (in) 0 0 0 0 Change in scope of consolidation (out) (1,688) 0 (1,175) (2,863) Transfers and cancellations 0 (65) (24,948) (25,013) Translation adjustments 0 0 (8) (8) Post-acquisition adjustment 0 0 0 0 Other (1) 0 (835) (836) Acquisition cost as at 31 Dec. 2009 (A) 129,886 465,160 110,426 705,472
Accumulated amortization and impairment as at 1 Jan. 2009 (25,920) (334,436) (97,071) (457,427) Booked 0 (27,492) (10,078) (37,570) Change in scope of consolidation (in) 0 0 0 0 Change in scope of consolidation (out) 0 0 975 975 Write-back 0 0 0 0 Disposals 0 94 219 313 Transfers and cancellations 0 65 15,836 15,901 Translation adjustments 0 0 7 7 Post-acquisition adjustment 0 0 0 0 Other 1 0 835 836 Accumulated amortization and impairment as at 31 Dec. 2009 (B) (25,919) (361,769) (89,277) (476,965)
Managementreport Net book value as at 31 Dec. 2009 (A)+(B) 103,967 103,391 21,149 228,507
Positive Internally Other Total goodwill(1) developed intangible (In thousands of eur) software assets(2) Acquisition cost as at 1 Jan. 2010 129,886 465,160 110,426 705,472 Acquisitions 0 37,137 8,527 45,664 Disposals 0 (2,860) (16) (2,876) Change in scope of consolidation (in) 0 0 0 0 Change in scope of consolidation (out) 0 (9,945) (1,217) (11,162) Transfers and cancellations 0 (11,217) (47,489) (58,706) statements Translation adjustments 0 0 18 18 Post-acquisition adjustment 0 0 0 0 Other 0 0 0 0 Consolidated financial Acquisition cost as at 31 Dec. 2010 (A) 129,886 478,275 70,249 678,410
Accumulated amortization and impairment as at 1 Jan. 2010 (25,919) (361,769) (89,277) (476,965) Booked 0 (30,285) (8,724) (39,009) Change in scope of consolidation (in) 0 0 0 0 Change in scope of consolidation (out) 0 7,085 915 8,000 Write-back 0 0 0 0 Disposals 0 111 1 112 Transfers and cancellations 0 11,216 47,489 58,705 Translation adjustments 0 0 (17) (17) Post-acquisition adjustment 0 0 0 0 statements Other (1) 0 0 (1) Accumulated amortization and impairment as at 31 Dec. 2010 (B) (25,920) (373,642) (49,613) (449,175)
Non-consolidated financial Net book value as at 31 Dec. 2010 (A)+(B) 103,966 104,633 20,636 229,235
(1) Positive goodwill only consists of the goodwill on the group DIS. (2) Other intangible assets include purchased softwares.
110 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 111 Notes to the consolidated financial statements
7.11. Tax assets
(In thousands of eur) 31/12/09 31/12/10 Current taxes 77,581 16,464 Deferred tax assets (see note 9.2.) 605,482 936,901
Total 683,063 953,365
Deferred tax assets (DTA) are constituted for an amount of EUR 619 million (EUR 236 million in 2009) by DTA coming from negative AFS reserves on bonds. Apart from this, DTA relates to other elements including recoverable tax losses and provisions.
7.12. Other assets
(In thousands of eur) 31/12/09 31/12/10 Other assets 896,936 1,149,655 Other assets specific to insurance companies 162,046 243,437
Total 1,058,982 1,393,092
1. Other assets
Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Accrued income 48,589 57,193 Deferred expenses 36,167 26,996 Other accounts receivables 513,541 659,723 Managementreport Plan assets(1) 9,213 6,151 Long-term construction contracts 22 0 Inventories 14,622 1,662 Operational taxes 30,898 32,284 Other assets 243,884 365,646
Total 896,936 1,149,655
(1) See note 8.6.4.I.
2. Other assets specific to insurance companies statements
Analysis by nature (acquisition costs and share of reinsurers) Consolidated financial (In thousands of eur) 31/12/09 31/12/10 Share of the reinsurers in the technical reserves 74,209 75,017 Receivables resulting from direct insurance transactions 48,313 45,311 Premiums still to be issued 0 49,699 Deferred acquisition costs 0 1,839 Other insurance assets 39,524 71,571 Impaired insurance assets 493 487 Less: 0 0 Specific impairment (493) (487) Provisions on not impaired insurance assets 0 0
Total 162,046 243,437 statements Non-consolidated financial
110 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 111 Notes to the consolidated financial statements
7.13. Non-current assets held for sale
(In thousands of eur) 31/12/09 31/12/10 Assets of subsidiaries held for sale(1)(2) 4,312,646 770 Tangible and intangible assets held for sale 44,133 15,385 Discontinued operations 0 0 Other assets 698 509
Total 4,357,477 16,664
(1) 2009: Dexia Épargne Pension. See note 9.6.3. Assets and liabilities included in disposal groups held for sale. (2) 2010: Parfipar. See note 9.6.3. Assets and liabilities included in disposal groups held for sale.
7.14. Leasing
1. Dexia as a lessor
A. Finance lease
(In thousands of eur) 31/12/09 31/12/10 Gross investment in finance leases : Not later than 1 year 739,071 767,115 Later than 1 year and not later than 5 years 1,166,011 1,462,089 Later than 5 years 1,455,365 1,322,485 Subtotal (A) 3,360,447 3,551,689 Unearned future finance income on finance leases (B) 628,545 681,777
Net investment in finance leases (A)-(B) 2,731,902 2,869,912 Managementreport
(In thousands of eur) 31/12/09 31/12/10 The net investment in finance leases may be analysed as follows: Not later than 1 year 657,305 651,433 Later than 1 year and not later than 5 years 960,766 1,167,947 Later than 5 years 1,113,831 1,050,532
Total 2,731,902 2,869,912
statements (In thousands of eur) 31/12/09 31/12/10 Amount of contingent rents recognised in the statement of income during the period 0 0
Consolidated financial Amount of uncollectible finance lease receivables included in the provision for loan losses at end of period 32,102 43,942 Residual values unguaranteed by lessees 0 0 Estimated fair value of finance lease 2,392,471 2,668,767 Accumulated allowance for uncollectible minimum lease payments receivable 23,545 22,398
B. Operating lease
(In thousands of eur) 31/12/09 31/12/10 Future net minimum lease receivables under non-cancellable operating leases are as follows: Not later than 1 year 6,969 3,461
statements Later than 1 year and not later than 5 years 27,059 10,969 Later than 5 years 33,067 33,051
Total 67,095 47,481
Non-consolidated financial Amount of contingent rents recognised in the statement of income during the period 12 13
112 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 113 Notes to the consolidated financial statements
2. Dexia as a lessee
A. Finance lease
Amounts involved are immaterial. See note 7.9.
B. Operating lease
(In thousands of eur) 31/12/09 31/12/10 Future net minimum lease payments under non-cancellable operating leases are as follows Not later than 1 year 19,145 19,638 Later than 1 year and not later than 5 years 35,813 24,962 Later than 5 years 15,606 18,014 Total 70,564 62,614
Amount of future minimum sublease payments expected to be received under non-cancellable subleases at the balance-sheet date 5,416 5,359
Lease and sublease payments recognised as an expense during the period Minimum lease payments 25,312 22,432 Contingent rents 82 79 Sublease payments (1,940) (1,074) Total 23,454 21,437 Managementreport statements Consolidated financial statements Non-consolidated financial
112 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 113 Notes to the consolidated financial statements
7.15. Quality of financial assets
1. Analysis of normal loans and securities Gross amount (A) (In thousands of eur) 31/12/09 31/12/10 Normal loans and advances due from banks 63,949,599 67,940,366 Normal loans and advances to customers 102,778,699 99,425,298 Normal investments held to maturity 0 0 Normal financial assets available for sale 41,210,847 36,259,707 of which fixed-income instruments 39,338,526 34,731,176 of which equity instruments 1,872,321 1,528,531 Collective impairment on not specifically impaired loans (-) (445,907) (410,193)
Total 207,493,238 203,215,178
2. Analysis of impaired loans and securities Gross amount Specific loan loss allowance Total (B) (C) (B)+(C) (In thousands of eur) 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 Impaired loans and advances due from banks 12,854 35,102 (9,095) (25,122) 3,759 9,980 Impaired loans and advances to customers 1,222,480 1,029,954 (589,681) (586,150) 632,799 443,804 Impaired investments held to maturity 0 0 0 0 0 0
Managementreport Impaired financial assets available for sale 712,019 581,556 (465,875) (366,179) 246,144 215,377 of which fixed- income instruments 476,138 430,813 (354,681) (292,647) 121,457 138,166 of which equity instruments 235,881 150,743 (111,194) (73,532) 124,687 77,211
Total 1,947,353 1,646,612 (1,064,651) (977,451) 882,702 669,161
3. Normal + impaired statements Gross amount Specific loan loss allowance Total (A)+(B) (C) (A)+(B)+(C)
Consolidated financial (In thousands of eur) 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 Loans and advances due from banks 63,962,453 67,975,468 (9,095) (25,122) 63,953,358 67,950,346 Loans and advances to customers 104,001,179 100,455,252 (589,681) (586,150) 103,411,498 99,869,102 Investments held to maturity 0 0 0 0 0 0 Financial assets available for sale 41,922,866 36,841,263 (465,875) (366,179) 41,456,991 36,475,084 of which fixed-income instruments 39,814,664 35,161,989 (354,681) (292,647) 39,459,983 34,869,342 of which equity statements instruments 2,108,202 1,679,274 (111,194) (73,532) 1,997,008 1,605,742 Collective impairment on not impaired loans (-) (445,907) (410,193) 0 0 (445,907) (410,193)
Non-consolidated financial Total 209,440,591 204,861,790 (1,064,651) (977,451) 208,375,940 203,884,339
114 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 115 Notes to the consolidated financial statements
VIII. Notes on the liabilities of the consolidated balance sheet (some amounts may not add up due to roundings-off)
8.1. Due to banks
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 On demand 8,688,179 7,750,236 Term 6,730,676 9,353,074 Repurchase activity 27,206,599 31,970,073 Central banks 25,685,583 6,800,250 Other borrowings 5,808,083 6,494,611
Total 74,119,120 62,368,244
2. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
3. Analysis of the fair value See note 12.1.
8.2. Customer borrowings and deposits
1. Analysis by nature Managementreport
(In thousands of eur) 31/12/09 31/12/10 Demand deposits 20,869,957 17,299,488 Savings deposits 24,886,778 27,544,617 Term deposits 9,261,623 11,966,184 Other customer deposits 5,388,517 7,760,015 Total customer deposits 60,406,875 64,570,304 Repurchase activity 17,367,028 18,282,711 Other borrowings 24,872 23,516 Total customer borrowings 17,391,900 18,306,227
Total 77,798,775 82,876,531 statements
2. Analysis by maturity and interest rate Consolidated financial See notes 12.4., 12.5. and 12.6.
3. Analysis of the fair value See note 12.1. statements Non-consolidated financial
114 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 115 Notes to the consolidated financial statements
8.3. Financial liabilities measured at fair value through profit or loss
(In thousands of eur) 31/12/09 31/12/10 Financial liabilities held for trading 212,176 701,356 Financial liabilities designated at fair value 10,625,380 11,493,311
Total 10,837,556 12,194,667
FINANCIAL LIABILITIES HELD FOR TRADING
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Bonds issued by public bodies 191,226 457,238 Other bonds 7,874 231,589 Repurchase agreements 0 0 Equity instruments 13,076 12,529
Total 212,176 701,356
2. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
3. Analysis of the fair value See note 12.1. Managementreport
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Non-subordinated liabilities 7,080,402 7,638,525 Subordinated liabilities(1) 353,067 331,502 Unit-linked products 3,191,911 3,523,284
Total 10,625,380 11,493,311
statements (1) For details see list 8.5.5. Data for each subordinated debt, number 31.
Consolidated financial 2. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
3. Analysis of the fair value See note 12.1. and 12.2.1. for own credit risk.
The “Fair Value Option” (FVO) for financial liabilities is mainly used in the following situations:
●● by the insurance business for unit-linked contracts (branch 23).
statements ●● by companies issuing debt. Non-consolidated financial
116 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 117 Notes to the consolidated financial statements
8.4. Debt securities
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Certificates of deposit 4,451,481 1,850,128 Customer savings certificates 13,050,344 12,387,064 Convertible debts 0 0 Other dilutive instruments 0 0 Non-convertible bonds 11,935,213 14,720,691
Total 29,437,038 28,957,883
2. Analysis by maturity and interest rate See notes 12.4., 12.5. and 12.6.
3. Analysis of the fair value See note 12.1.
8.5. Subordinated debts
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Non-convertible subordinated debt Loan capital perpetual subordinated notes 901,062 1,047,217 Other 1,540,415 1,165,823 Managementreport
Total 2,441,477 2,213,040 Hybrid capital and redeemable preference shares 502,354 502,601
For details see list 8.5.5. Data for each subordinated debt, number 20.
2. Analysis of subordinated debt convertible in Dexia shares Nil
3. Analysis by maturity and interest rate statements See notes 12.4., 12.5. and 12.6. Consolidated financial 4. Analysis of the fair value See note 12.1. statements Non-consolidated financial
116 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 117 Notes to the consolidated financial statements
5. Data for each subordinated debt Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination for compensations of currency determining c) Conditions for convertibility units the duration
1. EUR 99,333 28/02/2011 a) not applicable 5.625% b) no specific conditions c) none 2. EUR 9,920 2011 a) not applicable Variable b) no specific conditions c) none 3. EUR 5,227 2012 a) not applicable Variable b) no specific conditions c) none 4. EUR 200 2013 a) not applicable Variable b) no specific conditions c) none 5. EUR 35,000 15/12/2014 a) not applicable CMS linked b) no specific conditions c) none 6. EUR 15,000 15/12/2015 a) not applicable basket linked (Nikkei, b) no specific conditions EURO STOXX 50, c) none A&P 500) 7. EUR 15,000 15/07/2019 a) not applicable CMS linked b) no specific conditions c) none Managementreport 8. EUR 40,000 03/12/2019 a) not applicable year 1 to 3 : 8.00%, b) no specific conditions year 4 to 20 : c) none - if GBP Libor 12 months < 5%: rate = GBP Libor 12 months + 20 bp, -if GBP Libor 12 months ≥ 5%: rate = 7.55% 9. EUR 11,000 16/12/2019 a) not applicable year 1 to 5 : 8.875% b) no specific conditions year 6 to 20 : CMS linked c) none 10. EUR 29,906 01/03/2022 a) not applicable Euribor 3 months + 43 bp
statements b) no specific conditions c) none
Consolidated financial 11. EUR 44,914 04/04/2022 a) not applicable 6.00% b) no specific conditions c) none 12. EUR 20,000 04/02/2037 a) possible, with the agreement of the CBFA, 4.86% (call date: from the date of the call, 02/04/2017) then at the end of each period of 5 years b) no specific conditions c) none 13. EUR 20,000 01/03/2047 a) possible, with the agreement of the CBFA, 5.04% (call date: from the date of the call, 01/03/2017) then at the end of each period of 5 years b) no specific conditions statements c) none 14.(1) EUR 17,500 undetermined a) possible, with the agreement of the CBFA, CMS linked till 29/12/2011, (call date: from the date of the call, then:
Non-consolidated financial 29/12/2011) then at the end of each period of 12 years IRS 12 years + 200 bp b) no specific conditions c) none 15. EUR 17,500 undetermined a) possible, with the agreement of the CBFA, 6.20% till 29/12/2009, (call date: at the date of the call then: 29/12/2019) b) no specific conditions IRS 10 years + 200 bp c) none
(1) Following an agreement with the European Commission, Dexia Bank will not proceed to any early redemption (call) untill the end of 2011. (2) Hybrid subordinated debt. (3) This issue falls within the scope of the restrictions on coupon payments on Dexia Bank’s subordinated debt as agreed with the European Commission. (4) Subordinated liability measured at fair value through profit or loss, see statement 8.3.
118 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 119 Notes to the consolidated financial statements
Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination for compensations of currency determining c) Conditions for convertibility units the duration
16. EUR 42,768 undetermined 17.(1) EUR 50,000 undetermined a) possible, with the agreement of the CBFA, CMS linked till 15/07/2011, (call date: from the date of the call, then: 15/07/2011) then at the end of each period of 12 years IRS 12 years + 250 bp b) no specific conditions c) none 18. EUR 94,701 undetermined 19. EUR 170,000 undetermined a) possible, with the agreement of the CBFA, Euribor 3 months + 90 bp, (call date: from the date of the call, after 07/08/2016: 07/08/2011) then at the end of each period of 12 years Euribor 3 months b) no specific conditions + 190 bp c) none 20.(2)(3) EUR 498,556 undetermined a) possible, with the agreement of the CBFA, 4.922% till 02/11/2016, (call date: from the date of the call, then: 02/11/2016) then at the end of each interest period Euribor 3 months + 181 bp b) no specific conditions c) possible in profit-sharing certificates 21.(1)(3) FRF 1,500,000 undetermined a) possible, with the agreement of the CBFA, 6.25% till 18/11/2009, (call date: from the date of the call, then: 18/05/2012) then at the end of each interest period Euribor 6 months + 187 bp b) no specific conditions c) none
22. GBP 150,000 09/02/2017 a) possible, with the agreement of the CBFA, 5.875% till 09/02/2012, Managementreport (call date: from the date of the call, then: GBP Libor 3 months 09/02/2012) then at the end of each interest period + 70 bp b) no specific conditions c) none 23.(1) USD 50,000 undetermined a) possible, with the agreement of the CBFA, USD Libor 3 months (call date: from the date of the call, + 75 bp till 25/08/2010, 25/02/2012) then at the end of each interest period then: USD Libor 3 months b) no specific conditions + 175 bp c) none 24.(1) USD 100,000 undetermined a) possible, with the agreement of the CBFA, USD Libor 3 months (call date: from the date of the call, + 75 bp till 21/09/2010, 21/03/2012) then at the end of each interest period then: USD Libor 3 months statements b) no specific conditions + 175 bp c) none Consolidated financial 25. JPY 10,026,383 11/09/2025 a) not applicable 6.37%, b) no specific conditions after 11/09/2004: 6.10% c) none 26. JPY 10,026,383 11/09/2025 a) not applicable 6.37%, b) no specific conditions after 11/09/2004: 6.10% c) none 27.(3) JPY 15,000,000 undetermined a) possible, with the agreement of the CBFA, 4.50% (in USD) till (call date: from the date of the call, 29/01/2029, 29/01/2029) then at the end of each interest period then: JPY Libor 6 months b) no specific conditions + 190 bp
c) none statements 28.(1) JPY 10,000,000 undetermined a) possible, with the agreement of the CBFA, 3.65% till 29/01/2011, (call date: from the date of the call, then: JPY Libor 6 months 29/01/2011) then at the end of each interest period; + 210 bp after 29/01/2031, every 5 years Non-consolidated financial b) no specific conditions c) none
(1) Following an agreement with the European Commission, Dexia Bank will not proceed to any early redemption (call) untill the end of 2011. (2) Hybrid subordinated debt. (3) This issue falls within the scope of the restrictions on coupon payments on Dexia Bank’s subordinated debt as agreed with the European Commission. (4) Subordinated liability measured at fair value through profit or loss, see statement 8.3.
118 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 119 Notes to the consolidated financial statements
Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination for compensations of currency determining c) Conditions for convertibility units the duration
29.(1) JPY 5,000,000 undetermined a) possible, with the agreement of the CBFA, 3.65% till 29/01/2011, (call date: from the date of the call, then: JPY Libor 6 months 29/01/2011) then at the end of each interest period; + 210 bp after 29/01/2031, every 5 years b) no specific conditions c) none 30.(3) JPY 15,000,000 undetermined a) possible, with the agreement of the CBFA, year 1 to 30: 5.00%, (call date: at the date of the call then: JPY IRS 5 years 27/11/2027) b) no specific conditions + 250 bp; may be changed c) none every 5 years 31.(4) EUR 297,779 20/06/2018 a) possible, with the agreement of the CBFA, 5.25% till 20/06/2013, (call date: from the date of the call, then: Euribor 12 months 20/06/2013) then at the end of each interest period + 150 bp b) no specific conditions c) none 32. EUR 180,000 30/09/2018 a) possible, with the agreement of the CBFA, Euribor 3 months (call date: from the date of the call, + 300 bp till 30/09/2013, 30/09/2013) then at the end of each interest period then: Euribor 3 months b) no specific conditions + 350 bp c) none 33. USD 100,000 30/09/2018 a) possible, with the agreement of the CBFA, Libor 3 months (call date: from the date of the call, + 300 bp till 30/09/2013, 30/09/2013) then at the end of each interest period then: Libor 3 months b) no specific conditions + 350 bp Managementreport c) none
(1) Following an agreement with the European Commission, Dexia Bank will not proceed to any early redemption (call) untill the end of 2011. (2) Hybrid subordinated debt. (3) This issue falls within the scope of the restrictions on coupon payments on Dexia Bank’s subordinated debt as agreed with the European Commission. (4) Subordinated liability measured at fair value through profit or loss, see statement 8.3. statements Consolidated financial statements Non-consolidated financial
120 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 121 Notes to the consolidated financial statements
8.6. Provisions and other obligations
1. Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Litigation claims(1) 108,898 88,693 Restructuring 86,217 91,999 Long-term defined benefit plans 514,000 526,146 Other post-retirement obligations 47,891 49,182 Other long-term employee benefits 16,772 16,641 Provision for off-balance-sheet credit commitments 23,233 23,211 Onerous contracts 51,530 35,029 Other provisions (non-insurance) 63,010 69,958
Total 911,551 900,859
(1) We refer here to the chapter Risk Management – part Legal Risk – presented page XX.
2. Analysis of movements Litigation Restructuring Pensions Provision for Onerous Other Total claims and other off-balance- contracts provisions employee sheet credit (In thousands of eur) benefits commitments As at 1 Jan. 2009 131,515 104,130 550,904 16,816 53,329 55,801 912,495 Exchange difference (32) 0 0 (2,953) 0 0 (2,985) Additional provisions 11,749 21,315 83,109 10,397 4,888 19,655 151,113 Unused amounts reversed (24,032) (1,053) 78 (971) (56) (7,440) (33,474) Utilised during the year (10,224) (38,206) (55,411) (56) (6,687) (4,879) (115,463) Changes in scope of consolidation (in) 0 0 0 0 0 0 0 Managementreport Changes in scope of consolidation (out) (78) 0 (17) 0 0 0 (95) Transfers 0 0 0 0 0 (127) (127) Other movements 0 31 0 0 56 0 87
As at 31 Dec. 2009 108,898 86,217 578,663 23,233 51,530 63,010 911,551
Litigation Restructuring Pensions Provision for Onerous Other Total claims and other off-balance- contracts provisions employee sheet credit (In thousands of eur) benefits commitments statements As at 1 Jan. 2010 108,898 86,217 578,663 23,233 51,530 63,010 911,551
Exchange difference 91 139 1,494 175 145 2,044 Consolidated financial Additional provisions 10,826 35,511 94,678 231 975 16,629 158,850 Unused amounts reversed (19,938) (1,138) (4,760) (1,700) (8,711) (5,331) (41,578) Utilised during the year (11,184) (28,237) (68,611) (47) (8,940) (6,309) (123,328) Changes in scope of consolidation (in) 0 0 0 0 0 0 0 Changes in scope of consolidation (out) 0 (688) (6,207) 0 0 0 (6,895) Transfers 0 195 (1,794) 0 0 1,814 215 Other movements 0 0 0 0 0 0 0
As at 31 Dec. 2010 88,693 91,999 591,969 23,211 35,029 69,958 900,859 statements
3. Analysis by maturity See note 12.6. Non-consolidated financial
120 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 121 Notes to the consolidated financial statements
4. Provisions for pensions and other long-term benefits
A. Change in benefit obligation
(In thousands of eur) 31/12/09 31/12/10 Benefit obligation at beginning of year 1,432,454 1,491,493 Current service cost 58,400 58,025 Interest cost 81,330 71,677 Plan participants’ contributions 3,215 2,966 Amendments 0 (42) Actuarial (gains)/losses 148,424 7,511 Benefits paid (39,304) (55,149) Expenses paid (40) 0 Taxes paid 0 0 Premiums paid (3,321) (3,061) Acquisitions/divestitures (2,718) (37,277) Plan curtailments 0 (1,032) Plan settlements (188,648) 0 Exchange rate changes 1,701 1,097
Benefit obligation as at end of year 1,491,493 1,536,208
B. Change in plan assets
(In thousands of eur) 31/12/09 31/12/10 Fair value of plan assets as at beginning of year 1,007,501 924,018 Expected return on plan assets 49,704 45,064 Actuarial gains/(losses) on plan assets 33,605 (6,328) Employer contributions 60,478 57,956 Managementreport Member contributions 2,406 2,966 Benefits paid (39,304) (55,149) Expenses paid (40) 0 Taxes paid 0 0 Premiums paid (3,321) (3,061) Plan settlements (188,648) 0 Acquisitions/divestitures 0 (26,401) Exchange rate changes 1,637 1,010
Fair value of plan assets as at end of year 924,018 940,075
statements C. Amounts recognised in the balance sheet
(In thousands of eur) 31/12/09 31/12/10 Consolidated financial Present value of funded obligations 1,043,057 1,046,086 Fair value of plan assets 924,018 940,074 Deficit/(surplus) for funded plans 119,039 106,012 Present value of unfunded obligations 448,440 490,121 Unrecognised net actuarial gains/(losses) (6,134) (17,699) Unrecognised past service (cost)/benefit 0 0 Effect of paragraph 58b limit 8,105 7,384
Net liability/(asset) 569,450 585,818 Amounts in the balance sheet Liabilities 578,663 591,969 Assets (9,213) (6,151) statements
Net liability/(asset) 569,450 585,818 Non-consolidated financial
122 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 123 Notes to the consolidated financial statements
D. Components of pension cost
(In thousands of eur) 31/12/09 31/12/10 Amounts recognised in statement of income Current service cost 58,400 58,025 Interest cost 81,329 71,677 Expected return on plan assets (49,704) (45,064) Expected return on reimbursement assets 0 0 Amortization of past service cost incl. §58a 0 (42) Amortization of net (gain)/loss incl. §58a (703) 1,076 Effect of paragraph 58b limit 1,232 (720) Curtailment (gain)/loss recognised 0 810 Settlement (gain)/loss recognised (1,207) 0
Total pension cost recognised in the statement of income 89,347 85,762 Actual return on assets Actual return on plan assets 83,309 38,737 Actual return on reimbursement assets 0 0
E. Balance-sheet reconciliation
(In thousands of eur) 31/12/09 31/12/10 Balance-sheet liability/(asset) as at beginning of year 542,614 569,449 Pension expense recognised in the statement of income in the financial year 89,350 85,761 Amounts recognised in SORIE in the financial year 0 0 Employer contributions made in the financial year (33,524) (39,317) Benefits paid directly by company in the financial year (26,954) (18,639) Credit to reimbursements 0 0 Net transfer in/(out) (including the effect of any business combinations/divestitures) (2,718) (11,363) Exchange rate adjustment – (gain)/loss (127) (73) Managementreport Plan participants contributions – defined contribution plans Belgium 809 0
Balance-sheet liability/(asset) as at end of year 569,450 585,818
F. Plan assets Asset category Percentage of plan assets 31/12/09 31/12/10 Equity securities 11.04% 12.51% Debt securities 87.42% 86.90% statements Real estate 0.00% 0.00% Other(1) 1.54% 0.59% Consolidated financial (1) Includes qualifying insurance policies.
G. History of experience gains and losses
(In thousands of eur) 31/12/09 31/12/10 Difference between the actual and expected return on plan assets Amount 33,605 (6,328) Percentage of plan assets 3.64% -0.67% Experience gains (-) and losses on plan liabilities Amount (8,690) 5,335
Percentage of present value of plan liabilities -0.74% 0.38% statements Non-consolidated financial
122 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 123 Notes to the consolidated financial statements
H. Range of assumptions to determine pension expense
Discount rate Inflation Expected return Expected return Expected return Salary increase 31/12/09 on assets on bonds on shares rate Europe 3.50% - 5.00% 2.50% 5.00% - 6.17% 2.95% - 4.68% 5.95% - 7.68% 5.00% - 5.50% United Kingdom 5.70% 3.60% 6.74% 4.20% 8.40% 4.70%
Discount rate Inflation Expected return Expected return Expected return Salary increase 31/12/10 on assets on bonds on shares rate Europe 3.25% - 4.50% 2.00% 3.75% - 5.55% 2.25% - 4.25% 5.75% - 7.38% 2.50% - 5.50% United Kingdom 5.30% 3.70% 6.46% 4.10% 8.30% 5.10%
Comment on assumptions: ●● Due to decrease in interest rates, discount rates have been reduced by 25 bp to 50 bp in comparison with 2009. ●● The inflation rate has been reduced from 2.5% to 2.0% due to the low level of inflation of the last period. ●● Return on shares takes into account a risk premium.
The expected return on assets depends on the asset allocation.
I. Reconciliation with financial statements
(In thousands of eur) 31/12/09 31/12/10 Long-term obligations Outstanding liability relating to defined benefit plans 514,000 526,146 Outstanding liability relating to other post-retirement obligations 47,891 49,182 Outstanding liability relating to other long-term employee benefits 16,772 16,641 Total outstanding liability reported in the financial statements(1) 578,663 591,969 Managementreport Total liability calculated by actuaries 578,663 591,969 Total liabiltiy relating to insignificant plans 0 0
Outstanding asset reported in the financial statements(2) 9,213 6,151
Total assets analysed by actuaries 9,213 6,151
Total assets relating to insignificant plans 0 0
(1) See note 8.6.1. (2) See note 7.12.1.
statements J. Concentration risk Most of the Dexia’s plan assets are insurance policies issued by Ethias. The fair value of these plan assets amounts to EUR 809.62 millions as at 31 December 2010. Consolidated financial
Sensitivity to changes of interest rates An increase/decrease of 25 bp of interest rate would have the following consequences on 2010 amounts:
●● The Benefit Obligation as at end of year 2010 would decrease/increase by 2.9/3.1% but the amount reported in “provision” would remain unchanged for the pension plans as the actuarial gains and losses would absorb the differences. ●● The service cost for the year 2011 would decrease/increase by 3.2/3.2%, interest cost would increase/decrease by 2.4/2.8% and the expected return on plan assets would increase/decrease by 5.4%/5.4%. ●● The total net pension cost would decrease/increase in 2011 by 3.3/3.0% as a decrease of 25 bp would result in a higher amortization of actuarial losses. Without any amortization, the decrease/increase of total net pension cost would be 2.9/2.5%. statements 5. Defined contribution plan
Non-consolidated financial Contributions to legal pensions are not included in the amounts. For 2009 and 2010, the amount recognised as an expense for defined contribution plans is respectively EUR 14,988,522 and EUR 13,592,234.
124 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 125 Notes to the consolidated financial statements
8.7. Tax liabilities
Analysis by nature
(In thousands of eur) 31/12/09 31/12/10 Current income tax 31,519 31,540 Deferred tax liabilities (see note 9.2.) 7,516 3,396
Total 39,035 34,936
8.8. Other liabilities
(In thousands of eur) 31/12/09 31/12/10 Other liabilities (except relating to insurance activities) 1,741,868 1,722,171 Other liabilities specific to insurance activities 235,642 198,298
Total 1,977,510 1,920,469
1. Other liabilities (except relating to insurance activities)
(In thousands of eur) 31/12/09 31/12/10 Accrued costs 45,043 44,823 Deferred income 21,766 30,541 Subsidies 0 0 Other accounts payable 1,235,971 1,196,105 Other granted amounts received 303 500
Salaries and social charges (payable) 155,244 150,985 Managementreport Shareholder dividends payable 0 0 Operational taxes 68,720 71,334 Long-term construction contracts 0 0 Other liabilities 214,821 227,883
Total 1,741,868 1,722,171
2. Liabilities specific to insurance activities
(In thousands of eur) 31/12/09 31/12/10
Debts for deposits from assignees 31,484 63,880 statements Debts resulting from direct insurance transactions 189,977 120,997 Debts resulting from reinsurance transactions 14,181 13,421 Other insurance liabilities 0 0 Consolidated financial
Total 235,642 198,298
8.9. Liabilities included in disposal groups held for sale
(In thousands of eur) 31/12/09 31/12/10 Liabilities of subsidiaries held for sale(1)(2) 4,335,466 2 Discontinued operations 0 0
statements Total 4,335,466 2
(1) 2009: Dexia Épargne Pension. See note 9.6.3. Assets and liabilities included in disposal groups held for sale. (2) 2010: Parfipar. See note 9.6.3. Assets and liabilities included in disposal groups held for sale. Non-consolidated financial
124 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 125 Notes to the consolidated financial statements
IX. Other notes on the consolidated balance sheet (some amounts may not add up due to roundings-off)
9.1. Derivatives
1. Analysis by nature 31/12/09 31/12/10 (In thousands of eur) Assets Liabilities Assets Liabilities Derivatives held for trading 27,453,373 27,534,269 28,457,498 29,448,857 Derivatives designated as fair value hedges 94,692 228,832 91,728 262,519 Derivatives designated as cash flow hedges 130,705 143,342 8,698 31,607 Derivatives of portfolio hedge 1,065,849 4,404,766 1,755,305 5,159,923 Derivatives designated as hedge of a net investment in foreign entities 0 0 0 0
Total 28,744,619 32,311,209 30,313,229 34,902,906
2. Detail of derivatives held for trading 31/12/09 31/12/10 Notional amount Assets Liabilities Notional amount Assets Liabilities (In thousands of eur) To receive To deliver To receive To deliver Foreign exchange derivatives 37,721,444 38,020,628 858,559 1,072,864 41,359,456 41,621,760 2,196,806 2,447,755 of which fx forward 11,450,264 11,508,784 35,598 48,364 13,694,367 13,736,922 27,362 33,058 of which cross currency swaps 25,452,929 25,693,580 804,110 1,005,669 26,873,967 27,093,716 2,151,157 2,396,410 of which fx option 779,290 779,290 18,851 18,831 791,122 791,122 18,287 18,287
Managementreport of which fx forward rate agreements 38,960 38,974 0 0 0 0 0 0 Interest-rate derivatives 736,405,170 767,895,819 24,886,103 24,520,048 783,102,323 805,543,067 24,081,709 24,608,394 of which option/cap/floor/ collar/swaption 53,949,511 87,809,428 711,796 991,127 101,565,734 122,906,272 1,264,443 1,628,516 of which interest-rate swaps 638,783,699 638,903,191 24,137,538 23,498,521 601,362,703 601,493,638 22,773,787 22,938,021 of which forward rate agreements 35,501,935 32,791,330 34,147 27,483 57,682,285 58,170,048 41,231 40,781 of which forwards 4,644 1,907 402 241 0 0 0 0 of which interest futures 8,165,381 8,302,801 2,220 1,990 22,491,601 22,973,109 2,248 1,076 of which other interest-rate derivatives 0 87,162 0 686 0 0 0 0 Equity derivatives 4,952,628 5,912,095 439,967 448,885 4,636,254 5,620,569 339,720 400,417 statements of which equity forwards 20,158 32,681 16,883 9,580 16,687 45,358 13,791 8,006 of which equity futures 34,118 7,358 226 241 77,777 11,503 307 116 of which equity options 1,735,382 2,658,933 221,212 231,739 1,189,876 2,042,748 107,392 130,469 Consolidated financial of which warrants 54,041 104,189 268 4,140 53,264 222,266 13 5,989 of which other equity 3,108,929 3,108,933 201,378 203,185 3,298,650 3,298,694 218,217 255,837 Credit derivatives 17,740,463 15,830,958 1,265,281 1,489,126 16,065,716 14,115,633 1,835,184 1,988,280 of which credit default swaps(1) 14,067,884 12,158,379 1,211,954 1,283,837 12,340,036 10,389,952 1,549,554 1,596,665 of which total return swaps 3,672,579 3,672,579 53,327 205,289 3,725,680 3,725,681 285,630 391,615 Commodity derivatives 21,925 21,925 3,463 3,346 1,004 1,004 4,079 4,011
Total 796,841,630 827,681,425 27,453,373 27,534,269 845,164,753 866,902,033 28,457,498 29,448,857
(1) Figures as at December 2009 have been restated. statements Non-consolidated financial
126 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 127 Notes to the consolidated financial statements
3. Detail of derivatives designated as fair value hedges 31/12/09 31/12/10 Notional amount Assets Liabilities Notional amount Assets Liabilities (In thousands of eur) To receive To deliver To receive To deliver Foreign exchange derivatives 1,451,586 1,501,258 37,159 62,326 1,020,248 1,172,510 56,914 99,257 of which cross currency swaps 1,451,586 1,501,258 37,159 62,326 1,020,248 1,172,510 56,914 99,257 Interest-rate derivatives 1,927,961 1,976,505 46,515 101,735 1,794,517 1,880,902 11,872 108,519 of which option/cap/floor/ collar/swaption 0 0 0 0 13,500 13,500 0 49 of which interest-rate swaps 1,927,961 1,976,505 46,515 101,735 1,781,017 1,867,402 11,872 108,470 Equity derivatives 663,205 1,455,031 11,018 64,771 574,918 1,194,120 22,942 54,743 of which equity option 0 791,826 0 26,029 0 619,202 0 27,291 of which other equity 663,205 663,205 11,018 38,742 574,918 574,918 22,942 27,452 Credit derivatives 0 0 0 0 0 0 0 0 Commodity derivatives 0 0 0 0 0 0 0 0
Total 4,042,752 4,932,794 94,692 228,832 3,389,683 4,247,532 91,728 262,519
4. Detail of derivatives designated as cash flow hedges 31/12/09 31/12/10 Notional amount Assets Liabilities Notional amount Assets Liabilities (In thousands of eur) To receive To deliver To receive To deliver Foreign exchange derivatives 0 0 0 22,367 0 0 0 18,262 of which cross currency swaps 0 0 0 22,367 0 0 0 18,262 Interest-rate derivatives 22,095,027 22,095,027 130,705 120,975 7,241,606 7,241,606 8,698 13,345
of which interest-rate swaps 22,095,027 22,095,027 130,705 120,975 7,241,606 7,241,606 8,698 13,345 Managementreport Equity derivatives 0 0 0 0 0 0 0 0 Credit derivatives 0 0 0 0 0 0 0 0 Commodity derivatives 0 0 0 0 0 0 0 0
Total 22,095,027 22,095,027 130,705 143,342 7,241,606 7,241,606 8,698 31,607
5. Detail of derivatives of portfolio hedge(1) 31/12/09 31/12/10 Notional amount Assets Liabilities Notional amount Assets Liabilities
(In thousands of eur) To receive To deliver To receive To deliver statements Foreign exchange derivatives 0 0 0 1 0 0 0 0
Interest-rate derivatives 77,781,807 77,781,807 1,065,849 4,404,765 88,863,474 88,863,474 1,755,305 5,159,923 Consolidated financial
Total 77,781,807 77,781,807 1,065,849 4,404,766 88,863,474 88,863,474 1,755,305 5,159,923
(1) Used only in a fair value hedge strategy.
6. Detail of derivatives designated as hedge of a net investment in foreign entities Nil statements Non-consolidated financial
126 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 127 Notes to the consolidated financial statements
9.2. Deferred taxes
1. Analysis
(In thousands of eur) 31/12/09 31/12/10 Net deferred income tax assets/(liabilities) 597,965 933,505 of which: Deferred income tax liabilities (7,516) (3,396) Deferred income tax assets 675,518 940,863 Deferred tax 668,002 937,467 Unrecognised deferred tax assets (70,036) (3,962)
2. Movements
(In thousands of eur) 2009 2010 As at 1 January 1,019,984 597,965 Movements of the year Statement of income charge/credit 1,093 (41,961) Items directly computed by equity (422,478) 385,066 Effect of change in tax rates – statement of income 0 264 Effect of change in tax rates – equity 0 38 Changes in scope of consolidation (181) (8,218) Exchange differences (121) 282 Other movements (333) 69
As at 31 December 597,965 933,505
Managementreport A. Deferred tax coming from assets of the balance sheet
31/12/09 31/12/10 Total o/w impact Total o/w impact (In thousands of eur) in result in result Cash, loans and loan loss provisions (381,695) 82,747 (454,873) (68,620) Securities 109,724 9,804 420,226 (66,866) Derivatives 454,411 (76,907) 466,599 6,230 Investment in associates 0 0 0 0 Tangible and intangible fixed assets (154,876) (20,816) (168,531) (13,438) Other assets specific to insurance companies (23) (1,291) (643) (619) Other (496) 45 17 17
statements Total 27,045 (6,418) 262,795 (143,296) Consolidated financial B. Deferred tax coming from liabilities of the balance sheet
31/12/09 31/12/10 Total o/w impact Total o/w impact (In thousands of eur) in result in result Securities 0 0 0 0 Derivatives 178,988 (37,619) 224,959 45,971 Borrowings, deposits and issuance of debt securities 66,164 13,259 59,608 (6,556) Provisions 95,892 (1,643) 92,981 (2,975) Pensions 83,299 1,919 76,595 (4,561)
statements Other liabilities specific to insurance companies 6,358 24,610 17,158 8,981 Legal tax-free provisions 0 0 0 0 Entities with special tax status 0 0 0 0 Non-controlling interest, reserves of associates
Non-consolidated financial and treasury shares 0 0 0 0 Other 105,043 (5,953) 153,861 49,127
Total 535,744 (5,427) 625,162 89,987
128 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 129 Notes to the consolidated financial statements
C. Deferred tax coming from other elements
31/12/09 31/12/10 Total o/w impact Total o/w impact (In thousands of eur) in result in result Tax losses carried forward 105,208 0 49,510 0 Tax credit carried forward 4 0 0 0 Entities with special tax status 0 0 0 0 Total 105,212 0 49,510 0
Total deferred tax 668,002 0 937,467 0
3. Expiry date of unrecognised deferred tax assets
Nature Less than Between Over 5 years Unlimited Total (In thousands of eur) 1 year 1 to 5 years maturity Temporary difference 0 0 0 (2,102) (2,102) Tax losses carried forward 0 0 (104) (1,756) (1,860)
Total 0 0 (104) (3,858) (3,962)
9.3. Insurance contracts
31/12/09 31/12/10 Managementreport Life contracts Non-life Total Life contracts Non-life Total (In thousands of eur) contracts contracts Gross reserves(1) 12,615,185 769,491 13,384,676 14,791,115 828,776 15,619,891 Gross reserves – share of reinsurers(2) 10,933 63,276 74,209 10,747 64,270 75,017 Premiums and contributions received(3) 1,754,675 443,496 2,198,171 2,414,579 469,066 2,883,645 Claims incurred and changes in technical reserves – part of reinsurers(3) 38,763 8,635 47,398 46,305 18,058 64,363 Premiums transferred to reinsurers(4) (90,216) (32,174) (122,390) (110,319) (36,121) (146,440) Claims incurred(4) (1,305,585) (261,351) (1,566,936) (845,525) (281,734) (1,127,259) Change in technical reserves(4) (1,080,454) (29,215) (1,109,669) (2,322,620) (59,283) (2,381,903)
(1) Liabilities VIII. Technical provisions of insurance companies. statements (2) See note 7.12. Other assets, table 2. (3) See note 11.7. Technical margin of insurance contracts – Premiums and technical income from insurance activities.
(4) See note 11.7. Technical margin of insurance contracts – Technical expense from insurance activities. Consolidated financial statements Non-consolidated financial
128 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 129 Notes to the consolidated financial statements
1. Life contracts
A. Income and expenses Premium income 31/12/09 Insurance Investment contracts Total contracts with DPF(1) (In thousands of eur) Individual Group Individual Group Gross premiums written 309,403 319,213 1,092,247 33,812 1,754,675 Premiums ceded to reinsurers (2,301) (83,915) (4,000) 0 (90,216) Change in gross unearned premium reserves (UPR) (273) 0 0 17 (256) Share of reinsurer in change of unearned premium reserves (UPR) (17) 0 0 0 (17)
Net premium after reinsurance 306,812 235,298 1,088,247 33,829 1,664,186
(1) Discretionary participation features.
31/12/10 Insurance Investment contracts Total contracts with DPF(1) (In thousands of eur) Individual Group Individual Group Gross premiums written 257,693 376,929 1,740,927 39,030 2,414,579 Premiums ceded to reinsurers (3,174) (106,315) (830) 0 (110,319) Change in gross unearned premium
Managementreport reserves (UPR) (131) (5) 0 0 (136) Share of reinsurer in change of unearned premium reserves (UPR) (27) 11 0 0 (16)
Net premium after reinsurance 254,361 270,620 1,740,097 39,030 2,304,108
(1) Discretionary participation features.
Life premiums
(In thousands of eur) 31/12/09 31/12/10 Gross earned premiums, less premium reserves statements Direct business 1,569,077 2,186,613 Accepted reinsurance 185,342 227,830 Breakdown of direct business Consolidated financial Individual contracts 1,401,377 1,998,489 Group contracts 167,700 188,124 statements Non-consolidated financial
130 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 131 Notes to the consolidated financial statements
Claims expenses 2009 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Gross claims paid (188,759) (143,837) (943,131) (29,858) (1,305,585) Claims reserve as at 1 January 34,996 9,887 22,671 434 67,988 Variation in opening due to variation of scope of consolidation 0 (85) 0 0 (85) Claims reserve as at 31 December (38,145) (6,329) (25,632) 0 (70,106) Transferred claims reserves 1,202 (1,202) 0 0 Share of reinsurers 2,914 34,837 1,107 0 38,858
Net claims incurred (187,792) (105,527) (946,187) (29,424) (1,268,930)
2010 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Gross claims paid (180,097) (142,964) (504,845) (17,619) (845,525) Claims reserve as at 1 January 38,145 6,329 25,632 0 70,106 Variation in opening due to variation of scope of consolidation 0 0 0 0 0 Claims reserve as at 31 December (40,769) (5,942) (31,046) 0 (77,757) Transferred claims reserves 0 0 0 0 0 Share of reinsurers 3,252 42,821 403 0 46,476 Managementreport Net claims incurred (179,469) (99,756) (509,856) (17,619) (806,700) statements Consolidated financial statements Non-consolidated financial
130 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 131 Notes to the consolidated financial statements
Changes in technical reserves Change in life-insurance reserve
2009 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Life-insurance reserve as at 1 January 2,743,415 820,963 12,059,339 269,420 15,893,137 Variation in opening due to conversion rate and to variation of scope of consolidation 0 (46,961) 0 0 (46,961) Life-insurance reserve as at 31 December (2,697,053) (888,081) (12,655,552) (280,472) (16,521,158) of which Dexia Épargne Pension as at 31 December(1) (250,807) 0 (3,672,280) (148,822) (4,071,909) of which life-insurance reserve as at 31 December without Dexia Épargne Pension(1) (2,446,246) (888,081) (8,983,272) (131,650) (12,449,249) Transferred life-insurance reserve (261,972) (18,510) (54,221) (5,001) (339,704) Share of reinsurers in life-insurance reserve as at 1 January (12,567) (3,042) 0 0 (15,609) Variation in opening due to conversion rate and to variation of scope of consolidation 0 0 0 0 0 Share of reinsurers in life-insurance reserve as at 31 December 7,861 3,087 31,087 0 42,035 of which Dexia Épargne Pension as at 31 December(1) 1,341 0 31,087 0 32,428 of which share of reinsurers in life-insurance reserve Managementreport as at 31 December without Dexia Épargne Pension(1) 6,520 3,087 0 0 9,607 Share of reinsurers in transferred life-insurance reserve 171,273 0 (197,788) 0 (26,515)
Net change in life-insurance reserve (49,043) (132,544) (817,135) (16,053) (1,014,775)
Change in other technical reserves – Life(2) 0 0 0 0 8
(1) Dexia Épargne Pension was transferred to held for sale in application of IFRS 5 in 2009 and consolidated until 31 march 2010. (2) Delays or errors in claim processing can give rise to disputed claims. To cover this event, a reserve is held. statements Consolidated financial statements Non-consolidated financial
132 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 133 Notes to the consolidated financial statements
2010 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Life-insurance reserve as at 1 January 2,446,246 888,081 8,983,272 131,650 12,449,249 Variation in opening due to conversion rate and to variation of scope of consolidation 0 0 0 0 0 Life-insurance reserve as at 31 December (2,476,712) (1,049,834) (10,861,774) (190,902) (14,579,222) of which Dexia Épargne Pension as at 31 December(1) 0 0 0 0 0 of which life-insurance reserve as at 31 December without Dexia Épargne Pension(1) 0 0 0 0 0 Transferred life-insurance reserve 2,682 (20,960) 9,552 912 (7,814) Share of reinsurers in life-insurance reserve as at 1 January (6,520) (3,087) 0 0 (9,607) Variation in opening due to conversion rate and to variation of scope of consolidation 0 0 0 0 0 Share of reinsurers in life-insurance reserve as at 31 December 6,054 2,795 0 0 8,849 of which Dexia Épargne Pension as at 31 December(1) 0 0 0 0 0 of which Share of reinsurers in life-insurance reserve as at 31 December without Dexia Épargne Pension(1) 0 0 0 0 0
Share of reinsurers in transferred Managementreport life-insurance reserve 0 0 0 0 0
Net change in life-insurance reserve (28,251) (183,005) (1,868,949) (58,340) (2,138,545)
Change in other technical reserves – Life(2) 0 0 0 0 219 Change in life-insurance reserve 2010 due to Dexia Épargne Pension(1) (7,972) 0 (116,720) (4,730) (129,422) Change in share of reinsurers in life-insurance reserve 2010 due to Dexia Épargne Pension(1) 373 0 218 0 591 statements (1) Dexia Épargne Pension was transferred to held for sale in application of IFRS 5 in 2009 and consolidated until 31 march 2010. (2) Delays or errors in claim processing can give rise to disputed claims. To cover this event, a reserve is held. Consolidated financial statements Non-consolidated financial
132 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 133 Notes to the consolidated financial statements
Change in profit-sharing reserve
2009 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Profit-sharing reserve as at 1 January 11,605 6,436 9,082 1,251 28,374 Variation in opening due to variation of scope of consolidation 0 (367) 0 0 (367) Profit-sharing reserve as at 31 December (4,391) (8,204) (74,080) (830) (87,505) Paid profit share 0 0 0 0 0 Transferred profit-sharing reserve (11,592) (302) 8,923 (848) (3,819) Share of reinsurers in profit-sharing reserve as at 1 January (9) (368) 0 0 (377) Variation in opening due to variation of scope of consolidation 0 368 0 0 368 Share of reinsurers in profit-sharing reserve as at 31 December 20 0 0 0 20 Share of reinsurers in paid profit share 0 0 0 0 0 Share of reinsurers in transferred profit-sharing reserve 0 0 0 0 0
Net change in profit-sharing reserve (4,367) (2,437) (56,075) (427) (63,306)
2010 Insurance Investment contracts Total Managementreport contracts with DPF (In thousands of eur) Individual Group Individual Group Profit-sharing reserve as at 1 January 4,390 8,204 74,080 830 87,504 Variation in opening due to variation of scope of consolidation 0 0 0 0 0 Profit-sharing reserve as at 31 December (5,442) (11,284) (108,682) (1,240) (126,648) Paid profit share 0 0 0 0 0 Transferred profit-sharing reserve 0 (31) (7,757) (911) (8,699) Share of reinsurers in profit-sharing reserve as at 1 January (20) 0 0 0 (20)
statements Variation in opening due to variation of scope of consolidation 0 0 0 0 0 Share of reinsurers in profit-sharing
Consolidated financial reserve as at 31 December 32 0 0 0 32 Share of reinsurers in paid profit share 0 0 0 0 0 Share of reinsurers in transferred profit-sharing reserve 0 0 0 0 0
Net change in profit-sharing reserve (1,040) (3,111) (42,359) (1,321) (47,831)
Losses resulting from Liability Adequacy Test (LAT) Nil statements Non-consolidated financial
134 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 135 Notes to the consolidated financial statements
B. Assets and liabilities Gross reserves 31/12/09 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Life-insurance reserve local GAAP 2,697,053 888,081 12,655,552 280,472 16,521,158 Life-insurance reserve Dexia épargne Pension transferred to liabilities held for sale (248,558) 0 (3,672,279) (148,821) (4,069,658) Reserves due to results of LAT (Liability Adequacy Test) 0 0 0 0 0 Reserves due to shadow-accounting adjustments 0 5,492 0 0 5,492 Reserves due to results of IAS 39 0 0 0 0 0 Total life-insurance reserve 2,448,495 893,573 8,983,273 131,651 12,456,992 Claims reserves 38,145 6,330 25,631 0 70,106 Gross unearned premium reserves (UPR) 273 60 0 0 333 Other technical reserves 4,391 8,204 74,080 830 87,505
Total gross reserves 2,491,304 908,167 9,082,984 132,481 12,614,936
Other technical reserves – Life(1) 0 0 0 0 249
(1) Delays or errors in claim processing can give rise to disputed claims. To cover this event, a reserve is held.
31/12/10 Managementreport Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Life-insurance reserve local GAAP 2,478,614 1,049,834 10,861,774 190,902 14,581,124 Life-insurance reserve Dexia épargne Pension transferred to liabilities held for sale 0 0 0 0 0 Reserves due to results of LAT (Liability Adequacy Test) 0 0 0 0 0 Reserves due to shadow-accounting adjustments 0 5,087 0 0 5,087
Reserves due to results of IAS 39 0 0 0 0 0 statements Total life-insurance reserve 2,478,614 1,054,921 10,861,773 190,902 14,586,210 Claims reserves 40,769 5,942 31,046 77,757 Gross unearned premium reserves Consolidated financial (UPR) 404 65 0 469 Other technical reserves 5,442 11,284 108,682 1,240 126,648
Total gross reserves 2,525,229 1,072,212 11,001,501 192,142 14,791,084
Other technical reserves – Life(1) 0 0 0 0 31
(1) Delays or errors in claim processing can give rise to disputed claims. To cover this event, a reserve is held. statements Non-consolidated financial
134 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 135 Notes to the consolidated financial statements
Share of reinsurers 31/12/09 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Share of reinsurers in life-insurance reserve 7,862 3,087 31,087 0 42,036 Share of Dexia Épargne Pension transferred to assets held for sale (1,341) 0 (31,087) 0 (32,428) Share of reinsurers in claims reserves 1,131 146 0 0 1,277 Share of reinsurers in unearned premium reserves (UPR) 0 0 0 0 0 Share of reinsurers in other technical reserves 48 0 0 0 48
Total share of reinsurers 7,700 3,233 0 0 10,933
31/12/10 Insurance Investment contracts Total contracts with DPF (In thousands of eur) Individual Group Individual Group Share of reinsurers in life-insurance reserve 6,054 2,795 0 0 8,849 Share of Dexia Épargne Pension transferred to assets held for sale 0 0 0 0 0 Share of reinsurers in claims reserves 1,708 147 0 0 1,855 Share of reinsurers in unearned premium reserves (UPR) 0 11 0 0 11 Share of reinsurers in other technical reserves 32 0 0 0 32 Managementreport Total share of reinsurers 7,794 2,953 0 0 10,747
Discretionary participation feature included in equity 31/12/09 31/12/10 Contracts with DPF Contracts with DPF (In thousands of eur) Individual Group Total Individual Group Total Net discretionary participation feature included in equity 649 124 773 0 0 0 statements Insurance or investment contracts with DPF that have embedded derivatives that need to be separated and fair valued through profit or loss are
Consolidated financial limited to two products. Their amounts are not significant. statements Non-consolidated financial
136 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 137 Notes to the consolidated financial statements
Reconciliation of changes in life-insurance reserve 2009 2010 Gross amount Reinsurance Net amount Gross amount Reinsurance Net amount (In thousands of eur) amount amount Life-insurance reserve as at 1 January 15,894,611 15,608 15,879,003 12,456,992 9,608 12,447,384 Variation in opening due to variation of scope of consolidation (46,961) 0 (46,961) 0 0 0 Net payments received/premiums receivable 1,544,394 43,288 1,501,106 1,783,545 1,023 1,782,522 Additional reserves due to shadow- accounting adjustments 4,018 0 4,018 (405) 0 (405) Additional reserves due to results of LAT (Liability Adequacy Test) 0 0 0 0 0 0 Claims paid (1,225,865) (9,579) (1,216,286) (659,690) (1,975) (657,715) Results on death and on life (73,650) 4,949 (78,599) (81,692) (149) (81,543) Attribution of technical interest 487,096 (1,264) 488,360 426,649 389 426,260 Other changes (56,992) (10,967) (46,025) 660,812 (47) 660,859 Variation of scope of consolidation 0 0 0 0 0 0 Variation due to Dexia épargne Pension(1) (4,069,659) (32,427) (4,037,232) 0 0 0
Life-insurance reserve as at 31 December 12,456,992 9,608 12,447,384 14,586,211 8,849 14,577,362
(1) In 2009 Dexia Épargne Pension is transferred to non-current assets held for sale and liabilities included in disposal groups held for sale.
Classification of the reserve for life insurances branches 21 and 26 by guaranteed interest rate
Guaranteed Other Managementreport interest rate 4.75% 4.50% 3.75% 3.50% 3.30% 3.25% 3.00% 2.80% 2.75% 2.50% 2.25% 2.00% 0% rates Total Classification of the reserve 9% 3% 13% 6% 7% 13% 13% 2% 12% 3% 4% 0% 10% 5% 100%
2. Non-life contracts
A. Income and expenses Premium income
(In thousands of eur) 31/12/09 31/12/10 Gross premiums written 443,496 469,067 statements Premiums ceded to reinsurer (32,174) (36,122)
Net premiums after reinsurance (A) 411,322 432,945 Consolidated financial Change in gross Unearned Premium Reserves (UPR) (5,095) (4,992) Share of reinsurers in change of Unearned Premium Reserve (UPR) (329) (70) Change in net unearned premium reserve (UPR) (B) (5,424) (5,062)
Total net earned premiums (A)+(B) 405,898 427,883
Claims expenses
(In thousands of eur) 2009 2010 Gross claims paid (261,351) (281,734) Claims reserve as at 1 January 627,553 649,883 statements Claims reserve as at 31 December (649,883) (703,531) Transferred claims reserves (70) 0 Share of reinsurers 9,076 18,128 Non-consolidated financial Net claims incurred (274,675) (317,254)
136 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 137 Notes to the consolidated financial statements
Change in other non-life-insurance reserves
(In thousands of eur) 2009 2010 Other non-life-insurance reserves (incl. profit sharing) as at 1 January 19,031 20,751 Other non-life-insurance reserves as at 31 December (20,751) (21,396) Transferred other non-life-insurance reserves 0 0 Share of reinsurers in other non-life-insurance reserves as at 1 January (818) (707) Share of reinsurers in other non-life-insurance reserves as at 31 December 706 707 Share of reinsurers in transferred other non-life-insurance reserves 0 0
Net changes in insurance liabilities (1,832) (645)
Losses resulting from Liability Adequacy Test (LAT) Nil
Non-life insurance by product group Gross Claims Technical Costs Net income Other Total P&L earned incurred result on capital (In thousands of eur) premiums reinsurance Total as at 31 December 2009 438,401 (285,560) (21,761) (134,732) 22,986 16,909 36,243 Accepted reinsurance 2,370 (1,171) 363 (43) 914 4,729 7,162 Direct business 436,031 (284,389) (22,124) (134,689) 22,072 12,180 29,081 All risks/accidents 64,279 (26,614) (4,385) (25,058) 3,776 (1,122) 10,876 Cars/third-party liability 125,700 (89,347) (4,471) (40,536) 11,789 12,760 15,895 Cars/other branches 61,271 (50,131) 340 (19,782) 1,012 (1,657) (8,947) Credit and suretyship 968 (3,634) 1,996 (6) 21 (29) (684) Non-life distribution 0 0 0 (88) 0 6,599 6,511 Managementreport Health 22,929 (19,006) 131 (4,714) 943 (553) (270) Fire and other damage to property 143,396 (80,681) (14,738) (41,591) 2,390 (3,505) 5,271 Accidents at work 17,488 (14,976) (997) (2,914) 2,141 (313) 429
Gross Claims Technical Costs Net income Other Total P&L earned incurred result on capital (In thousands of eur) premiums reinsurance Total as at 31 December 2010 464,074 (335,699) (15,543) (144,992) 39,819 (5,607) 2,052 Accepted reinsurance 2,434 (5,725) 18 (16) 933 (290) (2,646)
statements Direct business 461,640 (329,974) (15,560) (144,976) 38,886 (5,317) 4,699 All risks/accidents 67,329 (34,537) (2,409) (26,440) 7,610 (1,477) 10,076 Cars/third-party liability 134,569 (110,972) 1,382 (44,145) 19,853 (2,446) (1,759)
Consolidated financial Cars/other branches 67,689 (53,558) (298) (21,083) 2,061 (1,798) (6,987) Credit and suretyship 1,013 (4,963) 2,979 (22) 55 (35) (973) Non-life distribution 0 0 0 (190) 0 5,277 5,087 Health 22,836 (17,092) (26) (5,901) 1,937 (370) 1,384 Fire and other damage to property 146,157 (88,432) (15,888) (43,544) 5,097 (3,936) (546) Accidents at work 22,047 (20,420) (1,300) (3,651) 2,273 (532) (1,583) statements Non-consolidated financial
138 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 139 Notes to the consolidated financial statements
B. Assets and liabilities Gross reserves
(In thousands of eur) 31/12/09 31/12/10 Claims reserves 593,124 635,952 Reserves Unallocated Loss Adjustment Expenses (ULAE) 22,653 25,479 Premium deficiency reserves (non-life LAT) 0 0 Reserves for claims Incurred But Not Reported (IBNR) 34,106 42,100 Total claims reserves 649,883 703,531 Other technical reserves 20,751 21,396 Unearned Premium Reserve (UPR) 98,857 103,849
Total gross reserves 769,491 828,776
Share of reinsurers
(In thousands of eur) 31/12/09 31/12/10 Share of reinsurers in claims reserves 60,775 61,839 Share of reinsurers in reserves ULAE 0 0 Share of reinsurers in IBNR 0 0 Share of reinsurers in total claims reserve 60,775 61,839 Share of reinsurers in other technical reserves 707 707 Share of reinsurers in UPR 1,794 1,724
Total share of reinsurers 63,276 64,270
Reconciliation of changes in claims reserves
2009 2010 Managementreport Gross amount Reinsurance Net amount Gross amount Reinsurance Net amount (In thousands of eur) amount amount Claims reserves as at 1 January 627,553 65,137 562,416 649,882 60,775 589,107 Claims paid on previous years (114,396) (7,908) (106,488) (123,232) (1,701) (121,531) Change in claim charges on previous years (44,457) 1,194 (45,651) (46,792) (1,465) (45,327) Liabilities on claims current year 181,182 2,352 178,830 223,673 4,230 219,443
Claims reserves as at 31 December 649,882 60,775 589,107 703,531 61,839 641,692 statements Claims development Run-off triangle total costs (gross figures) Consolidated financial Liquidation year Occurrence year (In thousands of eur) Previous 2006 2007 2008 2009 2010 2006 463,387 238,455 0 0 0 0 2007 352,559 132,559 267,153 0 0 0 2008 295,361 77,246 144,342 285,228 0 0 2009 244,798 57,225 77,447 167,197 330,317 0 2010 205,621 50,752 57,905 93,392 161,536 376,969
The run-off shows us that the ratio per occurrence year total loss remains very stable during the liquidation years, but the incurred losses increased in 2010 due to the storms and flood. statements Non-consolidated financial
138 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 139 Notes to the consolidated financial statements
9.4. Related parties transactions
1. Related parties transactions Directors and key Parent company Entities with joint control management personnel(1) or significant influence over the entity(2) (In thousands of eur) 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 Loans(3) 1,424 1,398 2,054,260 1,981,057 1,661,220 1,509,036 Interest income 59 50 38,223 32,497 65,823 57,047 Deposits(3) 5,426 7,068 59,493 23,309 111,337 21,762 Interest expense (141) (141) (53) (6,330) (508) (204) Net commission 0 0 266 1,807 58 352 Guarantees issued and commitments provided by the Group 0 0 0 0 146,350 239,650 Guarantees and commitments received by the Group 0 0 0 0 740,059 533,534
Subsidiaries Associates Joint ventures Other related parties in which the entity is a venturer (In thousands of eur) 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 Loans(3) 2,104 6,760 217,169 235,256 22,971 20,980 56,792,819 55,079,241 Interest income 49 80 11,726 10,719 983 891 751,166 534,937 Deposits(3) 89,637 68,094 112,072 131,255 9,646 6,366 11,134,452 17,265,819 Interest expense (6,660) (2,507) (1,947) (1,405) (119) (25) (115,264) (60,952) Net commission 601 198 101,671 102,365 36 31 5,893 1,276 Guarantees issued and commitments Managementreport provided by the Group 8,794 823 56,529 67,507 1,515 3,580 3,669,891 4,571,996 Guarantees and commitments received by the Group 0 0 8,836 14,607 29,708 29,708 23,045,687 21,556,823
(1) Key management includes the Board of Directors and the Management Board. (2) We refer here to the main shareholders of Dexia (2009-2010): Arcofin, Holding Communal, Caisse des dépôts et consignations. (3) Transactions with related parties are concluded at general market conditions.
No provisions were recorded on loans given to related parties.
2. Key management compensations
statements (In thousands of eur) 31/12/09 31/12/10 Short-term benefits 2,509 6,094
Consolidated financial Post-employment benefits 22 35 Other long-term benefits 0 0 Termination benefits 0 0 Share-based payments 0 0
Short-term benefits include the salaries, bonuses and other advantages. Post-employment benefits: service cost calculated in accordance with IAS 19. Share-based payments include the cost of stock options and the discount given on capital increase allowed to the key management. statements Non-consolidated financial
140 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 141 Notes to the consolidated financial statements
9.5. Securitisation
Dexia Bank has five securitisation vehicles: Atrium-1, Atrium-2, DSFB-4 (using the fourth ring-fenced compartment of DSFB) is MBS, Dexia Secured Funding Belgium and Penates. The total a securitisation transaction of loans granted to Belgian public assets of these companies amount to EUR 20,100 million as entities. This EUR 5,060 million transaction was launched on at 31 December 2010 compared to EUR 18,750 million as at 14 December 2009. Three classes of floating rate notes were 31 December 2009. issued: EUR 4,700 million Class A notes (rated AA by Fitch Ratings), EUR 300 million non-rated Class B notes and EUR 60 mil The assets of Dexia Secured Funding Belgium and Penates are lion non-rated Class C notes. As at the end of December 2010, included in the consolidated financial statements. Dexia Bank’s EUR 4,630 million is still outstanding. other securitisation vehicles have been deconsolidated due to their non-significant amounts. The DSFB transactions have been fully subscribed by Dexia Bank and other Dexia Group entities. Atrium-1 is a securitisation transaction of social housing loans pursuant to a long-term credit facility between Dexia Bank and Penates Funding NV is a Belgian securitisation vehicle (SIC) with Domus Flandria NV (the borrower) and guaranteed by the currently six compartments. Two compartments, Penates-1 and Flemish Region. The guarantee of the Flemish Region was Penates-3, had outstanding notes at the end of 2010. Penates-2 transferred to the special purpose entity (SPE). The original size has been called in April 2010. of the transaction was EUR 188 million. Two classes of fixed-rate notes were issued on 30 April 1996, both carrying a Moody’s On 27 October 2008, Dexia Bank closed a EUR 8,080 million rating equal to that of the Flemish government (initially Aa2, RMBS securitisation transaction. The SPE, Penates Funding currently Aaa). As at 31 December 2010 EUR 76.8 million is still acting through its compartment Penates-1, securitised Belgian outstanding under class A2 while class A1 has been repaid. residential mortgage loans originated by Dexia Bank and issued five classes of notes: EUR 7,600 million Class A Mortgage-Backed Atrium-2 is a securitisation transaction of social housing loans Floating Rate Notes due 2041 (Fitch AAA/ S&P AAA), EUR 160 mil pursuant to a long-term credit facility between Dexia Bank and lion Class B Mortgage-Backed Floating Rate Notes due 2041 Domus Flandria NV (the borrower) and guaranteed by the (Fitch AA), EUR 120 million Class C Mortgage-Backed Floating Flemish Region. The guarantee of the Flemish Region was Rate Notes due 2041 (Fitch A), EUR 120 million Class D transferred to the SPE. The original size of the transaction was Mortgage-Backed Floating Rate Notes due 2041 (Fitch BBB) Managementreport EUR 129.3 million. Two classes of fixed-rate notes were issued and EUR 80 million Subordinated Class E Floating Rate Notes on 19 June 1997, both carrying a Moody’s rating equal to that due 2041 (not rated). As at 31 December 2010 all the notes still of the Flemish government (initially Aa2, currently Aaa). As at have their initial rating and the outstanding amounts for all 31 December 2010 EUR 59.4 million is still outstanding under classes of notes are still at their initial amount except for the class A2. Class A notes where the balance decreased to EUR 6,059.3 mil lion. There is hence EUR 6,539.3 million outstanding under The Belgian securitisation vehicle MBS has six compartments. Penates-1 as at 31 December 2010. The last active compartment, MBS-4, has exercised its clean-up call in January 2010. As such there are no outstanding issues On 28 June 2010, Dexia Bank closed a EUR 6,060 million RMBS anymore under the MBS program at the end of 2010. securitisation transaction. The SPE, Penates Funding acting
through its compartment Penates-3, securitised Belgian resi- statements Dexia Secured Funding Belgium NV (DSFB) is a Belgian securi- dential mortgage loans originated by Dexia Bank and issued tisation vehicle (société d’investissement en créances (SIC) four classes of notes: EUR 2,250 million Class A1 Mortgage- under Belgian law) with currently six compartments, of which Backed Floating Rate Notes due 2044 (Fitch AAA/ S&P AAA), Consolidated financial three with activity. EUR 3,195 million Class A2 Mortgage-Backed Floating Rate Notes due 2044 (Fitch AAA/S&P AAA), EUR 555 million DSFB-1 (using the first ring-fenced compartment of DSFB) is Class B Mortgage-Backed Floating Rate Notes due 2044 (not a securitisation transaction of loans granted to public entities rated) and EUR 60 million Subordinated Class C Floating Rate in Belgium or 100% guaranteed by such public entities. This Notes due 2044 (not rated). The class A1 notes have amortised EUR 1,700 million transaction was launched on 28 June 2007. to EUR 2,009.8 million, meaning that EUR 5,819.8 million was One tranche of floating rate notes, rated AA/Aa1/AA+ at still outstanding under Penates-3 at the end of 2010. closing by respectively S&P, Moody’s and Fitch, was issued. Dexia Bank has guaranteed the full and timely payment of The Penates transactions have been fully subscribed by Dexia principal and interest on the notes. As at 31 December 2010 Bank (95%) and by other Dexia Group’s entities. there is EUR 1,490 million outstanding and the notes have a statements rating of A/A1/A+. The notes can be used as a collateral in repurchase agreements with the European Central Bank.
DSFB-2 (using the second ring-fenced compartment of DSFB) Non-consolidated financial is a securitisation transaction of loans granted to Belgian entities (public and other). All the loans are 100% guaranteed by one of the three Belgian regions. This EUR 1,621 million transaction was launched on 28 April 2008. One tranche of floating rate notes, rated at closing AA/Aa1/AA+ by respectively S&P, Moody’s and Fitch, was issued. Dexia Bank has guaranteed the full and timely payment of principal and interest on the notes. As at 31 December 2010 EUR 1,480 million is still outstanding and the notes have a rating of A/A1/A+.
140 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 141 Notes to the consolidated financial statements
9.6. Acquisitions and disposals of consolidated companies
1. Main acquisitions
There were no significant acquisitions in 2009 nor in 2010.
2. Main disposals
Year 2009 There were no significant disposals in 2009.
Year 2010 On 30 April 2010, Dexia Épargne Pension has been sold to BNP Paribas Assurance. On 16 July 2010, Dexia Real Estate Capital Markets (DRECM) has been sold to Dexia Crédit Local. On 6 September 2010, the 51% stake in the group Adinfo has been sold to Network Research Belgium. Adinfo is a group active in IT services for Belgian local authorities.
The assets and liabilities disposed are as follows:
2010 DRECM Group Adinfo Dexia épargne (In thousands of eur) Pension Cash and cash equivalents 20,524 102 65,525 Loans and advances due from banks 1,896 12,639 752 Loans and advances to customers 436,493 0 369,269 Financial assets measured at fair value through profit or loss 39,025 0 1,768,825 Financial investments 139 0 2,146,905 Derivatives 1,311 0 4
Managementreport Tax assets 7,846 3,447 5,045 Other assets 19,817 24,936 58,599 Due to banks (461,719) (1,818) (86,364) Derivatives (6,524) 0 (314) Subordinated debts 0 0 (108,127) Technical provisions of insurance companies 0 0 (4,224,195) Other liabilities (4,154) (14,939) (26,548) Net assets 54,654 24,367 (30,624)
Proceeds from sale (in cash) 54,543 26,349 (1) Less: Cost of the transaction 0 (275) (1) Cash and cash equivalents in the subsidiary sold (20,524) (102) (1)
statements Net cash inflow on sale 34,019 25,972 (1)
(1) In accordance with the sale contract, the sale conditions can not be disclosed. Consolidated financial statements Non-consolidated financial
142 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 143 Notes to the consolidated financial statements
3. Assets and liabilities included in disposal groups held for sale
Year 2009 As required by IFRS 5, the assets and liabilities of Dexia Épargne Pension (DEP) have been recorded as a group held for sale as from 31 December 2009.
On 9 December 2009, Dexia signed an agreement relating to the sale of Dexia Épargne Pension to BNP Paribas Assurance. The transaction has been closed on 30 April 2010.
Year 2010 As required by IFRS 5, the assets and liabilities of Parfipar have been recorded as a group held for sale as from 31 December 2010. On 25 November 2010, Dexia Bank signed an agreement relating to the sale of Parfipar to Dexia Banque Internationale à Luxem- bourg. The transaction is expected to be finalised in the first semester of 2011.
The assets and liabilities included in the group held for sale are as follows.
2009 2010 (In thousands of eur) DEP Parfipar Cash and cash equivalents 126,289 461 Loans and advances due from banks 1,588 2 Loans and advances to customers 377,447 0 Financial assets measured at fair value through profit or loss 1,657,988 0 Financial investments 2,066,126 0 Other assets 83,208 307 XIII. Non-current assets held for sale 4,312,646 770
Due to banks (109,418) 0 Subordinated debts (107,560) 0 Technical provisions of insurance companies (4,071,909) 0
Other liabilities (46,579) (2) Managementreport XII. Liabilities included in disposal groups held for sale (4,335,466) (2)
Net assets (22,820) 768
9.7. Equity
(In thousands of eur) 2009 2010 By category of share Number of shares authorised and not issued 0 0
Number of shares issued and fully paid 359,412,616 359,412,616 statements Number of shares issued and not fully paid 0 0
Value per share no nominal no nominal Consolidated financial value value Outstanding as at 1 January 359,412,616 359,412,616 Number of shares issued 0 0 Number of shares cancelled 0 0 Outstanding as at 31 December 359,412,616 359,412,616
Rights, preferences and restrictions, including restrictions on the distribution of dividends and the repayment of capital 0 0 Number of treasury shares 0 0 Number of shares reserved for issue under stock options and contracts for the sale of shares 0 0 statements Non-consolidated financial
142 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 143 Notes to the consolidated financial statements
9.8. Share-based payments
1. Stock option plans settled in Dexia shares 31/12/09 31/12/10 Number of Number of options options Outstanding at beginning of period 24,393,931 24,172,357 Granted during the period 0 0 Exercised during the period 0 0 Expired or forfeited during the period (221,574) (822,519) Adjustment(1) 0 1,112,914 Outstanding at the end of the period 24,172,357 24,462,752 Exercisable at the end of the period 17,640,239 21,065,449
(1) In order to protect warrant holders against adverse economic consequences arising from the issue of bonus shares following the resolution passed by the extraordinary shareholders’ meeting held on 12 May 2010, the exercise price for warrants has been reduced and the number of warrants increased in accordance with an adjustment ratio determined in line with the Corporate Action Policy of Euronext NYSE Liffe.
2. Range of exercise prices (EUR) 31/12/09 31/12/10 Range of Number Weighted Weighted Range of Number Weighted Weighted exercise prices of outstanding average average exercise prices of outstanding average average (EUR)(1) options options remaining (EUR)(1) options options remaining exercise price contractual exercise price contractual (EUR) life (year) (EUR) life (year) 10.09 2,983,248 0.00 8.50 9.63 3,108,950 0.00 7.5 10.97 - 11.37 3,524,275 11.37 3.56 10.47 - 10.85 3,692,080 10.85 2.56 11.88 - 13.66 5,088,129 13.09 4.08 11.34 - 13.04 5,330,394 12.49 3.08 Managementreport 13.81 - 14.58 608,663 14.58 1.00 13.18 - 13.92 0 0.00 0.00 15.17 - 15.88 0 0.00 0.00 14.48 - 15.16 0 0.00 0.00 17.23 - 17.86 1,704,672 17.86 2.00 16.45 - 17.05 1,785,838 17.05 1 18.03 - 18.20 3,748,672 18.03 5.26 17.21 - 17.37 3,728,144 17.21 4.5 18.62 - 21.25 3,401,048 18.62 6.23 17.77 - 20.28 3,562,985 17.77 5.23 23.25 3,113,650 0.00 7.50 22.19 3,254,361 22.19 6.5
(1) In order to protect warrant holders against adverse economic consequences arising from the issue of bonus shares following the resolution passed by the extraordinary shareholders’ meeting held on 12 May 2010, the exercise price for warrants has been reduced and the number of warrants increased in accordance with an adjustment ratio determined in line with the Corporate Action Policy of Euronext NYSE Liffe.
(In thousands of eur) 31/12/09 31/12/10 statements Equity-settled arrangements (2,762) (912) Cash-settled arrangements(1) 0 (508) Consolidated financial Arrangements with settlement alternatives 0 0 Total expenses (2,762) (1,420)
Liabilities for cash-settled arrangement 0 508 Liabilities for arrangements with settlement alternatives 0 0 Total Liabilities 0 508
(1) The Board of Directors decided to apply the principles of the Belgian regulations which are applicable to the variable compensation for 2009 to be paid in 2010: a deferment of the variable compensation over three years, a measure of performance over the long term and a link of the deferred part with the share price. statements Non-consolidated financial
144 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 145 Notes to the consolidated financial statements
9.9. Non-controlling interests – Core equity
(In thousands of eur) As at 1 January 2009 69,423 Increase of capital 77 Dividends (4,194) Net income for the period (17,094) Translation adjustments 0 Variation of scope of consolidation (14,043) Other (2,160) As at 31 December 2009 32,009
(In thousands of eur) As at 1 January 2010 32,009 Increase of capital 0 Dividends (4,327) Net income for the period 2,159 Translation adjustments Variation of scope of consolidation (8,424) Other 14 As at 31 December 2010 21,431 Managementreport statements Consolidated financial statements Non-consolidated financial
144 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 145 Notes to the consolidated financial statements
9.10. Contribution by activity
31/12/09 31/12/10 Banking Other Total Banking Other Total and other insurance and other insurance (In thousands of eur) activities activities(1) activities activities(1)
I. Cash and balances with central banks 501,628 9 501,637 1,460,900 8 1,460,908 II. Loans and advances due from banks 63,304,187 607,568 63,911,755 67,343,372 593,412 67,936,784 III. Loans and advances to customers 100,878,487 2,128,707 103,007,194 97,494,163 1,978,308 99,472,471 IV. Financial assets measured at fair value through profit or loss 3,274,099 3,188,901 6,463,000 2,797,246 3,522,790 6,320,036 V. Financial investments 28,307,353 13,149,638 41,456,991 21,289,201 15,185,884 36,475,085 VI. Derivatives 28,741,474 3,145 28,744,619 30,312,735 494 30,313,229 VII. Fair value revaluation of portfolio hedge 1,739,298 0 1,739,298 1,812,004 0 1,812,004 VIII. Investments in associates 251,932 32,082 284,014 244,656 33,313 277,969 IX. Tangible fixed assets 1,172,591 161,620 1,334,211 1,093,388 147,905 1,241,293 X. Intangible assets and goodwill 110,470 118,037 228,507 111,796 117,439 229,235 XI. Tax assets 584,911 98,152 683,063 709,036 244,329 953,365 XII. Other assets 821,428 237,554 1,058,982 1,097,635 295,457 1,393,092 XIII. Non-current assets held for sale 44,831 4,312,646 4,357,477 16,664 0 16,664 Total assets 229,732,689 24,038,059 253,770,748 225,782,796 22,119,339 247,902,135
I. Due to banks 74,115,184 3,936 74,119,120 62,329,301 38,943 62,368,244 II. Customer borrowings and deposits 77,298,707 500,068 77,798,775 82,793,358 83,173 82,876,531 III. Financial liabilities measured at Managementreport fair value through profit or loss 7,645,645 3,191,911 10,837,556 8,671,383 3,523,284 12,194,667 IV. Derivatives 32,311,190 19 32,311,209 34,902,890 16 34,902,906 V. Fair value revaluation of portfolio hedge 0 0 0 (42,023) 0 (42,023) VI. Debt securities 29,437,038 0 29,437,038 28,957,883 0 28,957,883 VII. Subordinated debts 2,725,146 218,685 2,943,831 2,496,733 218,908 2,715,641 VIII. Technical provisions of insurance companies 0 13,384,676 13,384,676 0 15,619,891 15,619,891 IX. Provisions and other obligations 610,035 301,516 911,551 562,973 337,886 900,859 X. Tax liabilities 32,382 6,653 39,035 31,426 3,510 34,936 XI. Other liabilities 1,634,591 342,919 1,977,510 1,619,931 300,538 1,920,469 XII. Liabilities included in disposal
statements groups held for sale 0 4,335,466 4,335,466 2 0 2 Total liabilities 225,809,918 22,285,849 248,095,767 222,323,857 20,126,149 242,450,006
(1) The item “Insurance” includes Dexia Insurance Services Group. Consolidated financial statements Non-consolidated financial
146 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 147 Notes to the consolidated financial statements
31/12/09 31/12/10 Banking Other Total Banking Other Total companies insurance companies insurance (In thousands of eur) activities(1) activities(1) Interest margin 1,753,277 655,693 2,408,970 1,443,759 666,047 2,109,806 Dividend income 36,764 54,240 91,004 12,676 53,457 66,133 Net income from associates 35,453 2,907 38,360 26,887 1,785 28,672 Net income from financial instruments at fair value through profit or loss (270,434) (23,670) (294,104) (35,078) 6,814 (28,264) Net income on investments 120,329 (100,017) 20,312 148,331 58,819 207,150 Net fees and commissions 308,484 22,044 330,528 342,917 25,459 368,376 Premiums and technical income from insurance activities 0 2661,284 2,661,284 6,872 3,442,602 3,449,474 Technical expense from insurance activities 0 (3,032,309) (3,032,309) 0 (3,830,654) (3,830,654) Other net income(2) 29,312 (,933) 28,379 59,768 16,947 76,715 Income 2,013,185 239,239 2,252,424 2,006,132 441,276 2,447,408
Staff expense (593,440) (105,317) (698,757) (567,869) (101,298) (669,167) General and administrative expense (442,310) (55,297) (497,607) (449,993) (52,989) (502,982) Network costs (305,871) (60,227) (366,098) (308,014) (61,113) (369,127) Depreciation & amortization (100,842) (21,709) (122,551) (95,151) (20,617) (115,768) Expenses (1,442,463) (242,550) (1,685,013) (1,421,027) (236,017) (1,657,044)
Gross operating income 570,722 (3,311) 567,411 585,105 205,259 790,364
Impairment on loans and provisions for credit commitments (167,591) (16,445) (184,036) (19,089) (7,282) (26,371) Impairment on tangible and intangible assets (1,506) 0 (1,506) (12) 0 (12) Managementreport Impairment on goodwill 0 0 0 0 0 0 Provisions for legal litigations(2) 3,375 (,79) 3,296 (1,588) (311) (1,899) Net income before tax 405,000 (19,835) 385,165 564,416 197,666 762,082
Tax expense (15,702) 34,913 19,211 (81,278) (323) (81,601) Net income of continuing operations 389,298 15,078 404,376 483,138 197,343 680,481
Discontinued operations (net of tax) 0 0 0 0 0 0 Net income 389,298 15,078 404,376 483,138 197,343 680,481
Attributable to non-controlling
interests 1,635 (18,728) (17,093) 748 1,411 2,159 statements Attributable to equity holders of the parent 387,663 33,806 421,469 482,390 195,932 678,322 Consolidated financial (1) The item “Insurance” includes Dexia Insurance Services Group. (2) Figures as at 31 December 2009 have been restated.
The contribution to financial statements is presented under IFRS after elimination of intercompany balances and transactions, and therefore does not correspond to the financial statements of Dexia Insurance Belgium published under Belgian GAAP. statements Non-consolidated financial
146 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 147 Notes to the consolidated financial statements
9.11. Exchange rates
31/12/09 31/12/10 Closing rate Average rate Closing rate Average rate Australian dollar AUD 1.6028 1.7641 1.3118 1.4388 Canadian dollar CAD 1.5104 1.5830 1.3346 1.3675 Swiss franc CHF 1.4832 1.5076 1.2490 1.3700 Koruna (Czech republic) CZK 26.4515 26.5315 25.0425 25.2419 Danish krone DKK 7.4423 7.4464 7.4531 7.4477 Euro EUR 1.0000 1.0000 1.0000 1.0000 Pound sterling GBP 0.8879 0.8908 0.8573 0.8570 Hong Kong dollar HKD 11.1648 10.8220 10.4144 10.2718 Forint HUF 270.6846 281.7823 278.3240 276.2157 Shekel ILS 5.4491 5.4740 4.7457 4.9283 Yen JPY 133.4453 130.5573 108.7690 115.2675 Mexican peso MXN 18.8445 18.8996 16.5478 16.7025 Norwegian Krone NOK 8.2997 8.7083 7.8065 8.0048 New Zealand dollar NZD 1.9811 2.2081 1.7245 1.8343 Swedish krona SEK 10.2514 10.5881 8.9795 9.4884 Singapore dollar SGD 2.0195 2.0241 1.7174 1.7955 New Turkish lira TRY 2.1427 2.1505 2.0551 1.9880 US dollar USD 1.4399 1.3962 1.3399 1.3221 Managementreport statements Consolidated financial statements Non-consolidated financial
148 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 149 Notes to the consolidated financial statements
X. Notes on the consolidated off-balance-sheet items (some amounts may not add up due to roundings-off)
10.1. Regular way trade
(In thousands of eur) 31/12/09 31/12/10 Loans to be delivered and purchases of assets 3,862,292 2,915,616 Borrowings to be received and sales of assets 5,563,067 6,352,034
10.2. Guarantees
(In thousands of eur) 31/12/09 31/12/10 Guarantees given to credit institutions 2,107,544 2,144,987 Guarantees given to customers 4,797,342 5,533,953 Guarantees received from credit institutions 24,742 22,197 Guarantees received from customers 36,879,186 36,804,608 Guarantees received from the States 7,250,386 2,012,071
10.3. Loan commitments
(In thousands of eur) 31/12/09 31/12/10 Unused lines granted to credit institutions 190,348 121,192 Unused lines granted to customers 26,941,048 26,548,956
Unused lines obtained from credit institutions 6,760,233 7,215,132 Managementreport Unused lines obtained from customers 0 0
10.4. Other commitments
(In thousands of eur) 31/12/09 31/12/10 Insurance activity – Commitments given 813 0 Insurance activity – Commitments received 28,392 31,008 Banking activity – Commitments given(1) 124,517,534 123,658,536 Banking activity – Commitments received(1) 71,294,113 78,242,308 statements (1) Mainly related to repurchase agrements. Consolidated financial statements Non-consolidated financial
148 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 149 Notes to the consolidated financial statements
XI. Notes on the consolidated statement of income (some amounts may not add up due to roundings-off)
11.1. Interest income – Interest expense
(In thousands of eur) 31/12/09 31/12/10 Interest income 35,384,889 25,238,192
Interest income of assets not at fair value through profit or loss 6,426,985 5,422,070 Cash and balances with central banks 20,089 15,030 Loans and advances due from banks 917,033 609,675 Loans and advances to customers 3,779,150 3,252,042 Financial assets available for sale 1,655,304 1,488,697 Investments held to maturity 1,984 0 Interest on impaired assets 25,489 37,193 Other 27,936 19,433
Interest income of assets at fair value through profit or loss 28,957,904 19,816,122 Financial assets held for trading 215,150 97,835 Financial assets designated at fair value 6,465 14,518 Derivatives held for trading 26,246,514 18,125,751 Derivatives used for hedging 2,489,775 1,578,018
Interest expense (32,975,919) (23,128,386)
Interest expense of liabilities not at fair value through profit or loss(1) (3,065,115) (2,205,984) Due to banks (960,506) (432,620) Customer borrowings and deposits (1,137,014) (882,675) Debt securities (671,987) (745,055) Managementreport Subordinated debts (109,825) (74,558) Preferred shares and hybrid capital (24,610) (24,610) Expenses linked to the amounts guaranteed by the States (133,603) (34,512) Other (27,570) (11,954)
Interest expense of liabilities at fair value through profit or loss (29,910,804) (20,922,402) Financial liabilities held for trading (4,896) (9,201) Financial liabilities designated at fair value (313,225) (328,563) Derivatives held for trading (26,093,977) (17,903,242) Derivatives used for hedging (3,498,706) (2,681,396)
Net interest income 2,408,970 2,109,806 statements (1) In 2010, an amount of EUR -73 million was booked as contribution to the Belgian deposit guaranty mechanism. Consolidated financial 11.2. Dividend income
(In thousands of eur) 31/12/09 31/12/10 Financial assets available for sale 89,251 65,207 Financial assets held for trading 378 926 Financial assets designated at fair value through profit or loss 1,375 0
Total 91,004 66,133 statements Non-consolidated financial
150 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 151 Notes to the consolidated financial statements
11.3. Net income from associates
(In thousands of eur) 31/12/09 31/12/10 Income from associates before tax 48,291 33,435 Share of tax (9,931) (4,763) Impairment on goodwill 0 0
Total 38,360 28,672
11.4. Net income from financial instruments at fair value through profit or loss
(In thousands of eur) 31/12/09 31/12/10 Net trading income (320,263) (63,523) Net result of hedge accounting (30,417) 45,216 Net result of financial instruments designated at fair value through profit or loss and result from the related derivatives(1) 38,648 7,328 Change in own credit risk(2) 1,573 (34,686) Forex activity and exchange differences 16,355 17,401
Total (294,104) (28,264)
(1) Among which trading derivatives included in a fair value option strategy 98,294 (8,070)
(2) See also note 12.2.1. Credit-risk information about financial liabilities designated at fair value through profit or loss.
Result of hedge accounting
(In thousands of eur) 31/12/09 31/12/10 Managementreport Fair value hedges 18,659 34,914 Fair value changes of the hedged item attributable to the hedged risk (60,384) 60,966 Fair value changes of the hedging derivatives 79,043 (26,052)
Cash flow hedges 0 0 Fair value changes of the hedging derivatives – ineffective portion 0 0
Discontinuation of cash flow hedge accounting (cash flows no longer expected to occur) 4,703 3,845 Hedges of net investments in a foreign operation 0 0 Fair value changes of the hedging derivatives – ineffective portion 0 0
statements Portfolio hedge (53,779) 6,457 Fair value changes of the hedged item (332,206) 644,773 Fair value changes of the hedging derivatives 278,427 (638,316) Consolidated financial
Total (30,417) 45,216
(In thousands of eur) 31/12/09 31/12/10 Discontinuation of cash flow hedge accounting (cash flows still expected to occur) – amounts recorded in interest margin 806 (220) statements Non-consolidated financial
150 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 151 Notes to the consolidated financial statements
11.5. Net income on investments
(In thousands of eur) 31/12/09 31/12/10 Gains on loans and advances 59,507 179,966 Gains on financial assets available for sale 399,615 365,620 Gains on investments held to maturity 0 0 Gains on tangible fixed assets 7,101 1,206 Gains on intangible fixed assets 0 0 Gains on assets held for sale 4,858 14,155 Gains on liabilities 0 6,126 Other gains 0 0 Total Gains 471,081 567,073
Losses on loans and advances (77,016) (175,638) Losses on financial assets available for sale (1,042,809) (279,508) Losses on investments held to maturity 0 0 Losses on tangible fixed assets (34) (99) Losses on intangible fixed assets 0 (3) Losses on assets held for sale (70) (225) Losses on liabilities (1,737) (6,874) Other losses 0 (56) Total losses (1,121,666) (462,403) Net impairment 670,897 102,480
Total 20,312 207,150
Net impairment Specific risk Total
Managementreport (In thousands of eur) Allowances Write-backs As at 31 December 2009 Securities held to maturity 0 0 0 Securities available for sale (80,620) 751,517 670,897
Total (80,620) 751,517 670,897
Specific risk Total (In thousands of eur) Allowances Write-backs
statements As at 31 December 2010 Securities held to maturity 0 0 0 Securities available for sale (39,219) 141,699 102,480
Consolidated financial Total (39,219) 141,699 102,480 statements Non-consolidated financial
152 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 153 Notes to the consolidated financial statements
11.6. Fee and commission income and expense
31/12/09 31/12/10 (In thousands of eur) Income Expense Net Income Expense Net Management of unit trusts and mutual funds 102,383 (1,942) 100,441 100,359 (2,433) 97,926 Administration of unit trusts and mutual funds 18,336 (159) 18,177 19,180 (101) 19,079 Insurance activity 10,864 (1,055) 9,809 10,780 (414) 10,366 Credit activity 34,180 (5,758) 28,422 40,453 (5,820) 34,633 Purchase and sale of securities 25,796 (2,955) 22,841 26,671 (3,517) 23,154 Purchase and sale of unit trusts and mutual funds 14,411 (3,674) 10,737 16,493 (2,868) 13,625 Payment services 125,348 (40,359) 84,989 128,825 (40,484) 88,341 Commissions to non-exclusive brokers 23,759 (16,713) 7,046 24,876 (23,194) 1,682 Financial engineering 0 0 0 0 0 0 Services on securities other than safekeeping 3,202 (920) 2,282 3,837 (1,571) 2,266 Custody 14,537 (8,880) 5,657 15,616 (4,444) 11,172 Issues and placements of securities 1,765 (98) 1,667 434 (51) 383 Servicing fees of securitisation 581 0 581 440 0 440 Private banking 6,627 (2,328) 4,299 8,594 (2,997) 5,597 Clearing and settlement 1,233 (8,784) (7,551) 3,659 (11,703) (8,044) Securities lending 6,630 (8,941) (2,311) 9,231 (20,500) (11,269) Other 51,051 (7,609) 43,442 79,988 (963) 79,025
Total 440,703 (110,175) 330,528 489,436 (121,060) 368,376 Managementreport 11.7. Technical margin of insurance activities
1. Premiums and technical income from insurance activities
(In thousands of eur) 31/12/09 31/12/10 Premiums and contributions received(1) 2,198,171 2,883,645 Claims incurred – part of reinsurers(1) 52,951 62,964 Changes in technical reserves – part of reinsurers(1) (5,550) 1,399 Other technical income 415,712 501,466
Income 2,661,284 3,449,474 statements (1) See also note 9.3. Insurance contracts. Consolidated financial 2. Technical expense from insurance activities
(In thousands of eur) 31/12/09 31/12/10 Premiums transferred to reinsurers(1) (122,391) (146,440) Commissions and contributions paid (142,565) (170,089) Claims incurred(1) (1,566,937) (1,127,259) Change in technical reserves(1) (1,109,667) (2,381,903) Other technical expenses (90,749) (4,963)
Expenses (3,032,309) (3,830,654)
(1) See also note 9.3. Insurance contracts. statements
Insurance activities are reported in the Dexia banking scheme. Financial In Life, technical accounts are negative in view of the reservation income is presented under the various headings of the profit and loss mechanism: the premium is placed in a reserve and the reserve is account whilst technical income is to be found in the technical margin capitalised to cover the guaranteed rate (and the profit-sharing obliga- Non-consolidated financial on insurance activities. Technical income is negative in life insurance. tion) due to the client. Financial income generated on life assets offsets the negative technical accounts. The result of the insurance activity Insurance activities consist of receiving premiums which are invested should be assessed taking account of that financial income. in financial assets generating revenues to cover:
●● obligations to life insurance clients: a certain return on invesments in Life or to hedge mortality or inactivity risk; ●● obligations to non-life insurance clients in case of claim; ●● the company’s operating costs.
152 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 153 Notes to the consolidated financial statements
11.8. Other net income
(In thousands of eur) 31/12/09 31/12/10 Changes in inventory 0 0 Write-back of impairment on inventory 0 0 Exploitation taxes 1,104 696 Rental income from investment properties 11,604 10,764 Other rental income 13,735 12,879 Other banking income 0 0 Other income on other activities(1)(2) 187,145 228,838 Other income 213,588 253,177
Changes in inventory (59) (41) Impairment on inventory (6) (1) Exploitation taxes (20,374) (21,523) Repair and maintenance on investment properties that generated income during the current financial year (1) (8) Other banking expenses 0 0 Other expense on other activities(3)(4) (164,769) (154,889) Other expense (185,209) (176,462)
Total 28,379 76,715
(1) “Other income on other activities“ includes other operational income, write-back of provisions for other litigation claims and subsidies. (2) Figures as at 31 December 2009 have been restated. An amount of EUR 7,464 thousands representing write-back for legal litigations is transferred from “Other net income“ to “Provisions for legal litigations“. (3) “Other expenses on other activities“ includes other operational expenses for operating lease (other than rental expenses and contingent rents), depreciation and amortization on office furniture and equipment given in operational lease, other operational expenses, provisions for other litigation claims and depreciation and amortization on investment property. (4) Figures as at 31 December 2009 have been restated. An amount of EUR 4,168 thousands representing provisions for legal litigations is transferred from “Other net income“ to “Provisions for legal litigations“. Managementreport
11.9. Staff expense
(In thousands of eur) 31/12/09 31/12/10 Wages and salaries (506,556) (474,577) Social security and insurance costs (151,668) (145,733) Pension costs – defined benefit plans (43,848) (43,530) Pension costs – defined contribution plans (959) (1,016) Other post-retirement benefits (1,295) (1,487) Stock compensation expense (2,762) (981) Long-term employee benefits (874) 131 statements Restructuring expenses 17,480 (6,174) Other expenses (8,275) 4,200
Consolidated financial Total (698,757) (669,167)
(Average FTE) 31/12/09 31/12/10 Fully Proportionally Total Fully Proportionally Total consolidated consolidated consolidated consolidated Senior Executives 229 1 230 200 1 201 Employees 8,292 0 8,292 7,638 0 7,638 Other 19 0 19 20 0 20
statements Total 8,540 1 8,541 7,858 1 7,859 Non-consolidated financial
154 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 155 Notes to the consolidated financial statements
(Average FTE) As at 31 Dec. 2009 Senior Employees Other Total Executives Belgium 205 7 996 3 8 204 France 7 116 16 139 Luxembourg 5 87 0 92 Switzerland 0 1 0 1 Ireland 4 25 0 29 United Kingdom 4 26 0 30 Other European countries 0 0 0 0 USA 5 41 0 46
Total Dexia Bank 230 8 292 19 8 541
(Average FTE) As at 31 Dec. 2010 Senior Employees Other Total Executives Belgium 187 7 425 1 7 613 France 3 73 19 95 Luxembourg 4 87 0 91 Switzerland 0 0 0 0 Ireland 4 25 0 29 United Kingdom 1 9 0 10 Other European countries 2 19 0 21 USA 0 0 0 0
Total Dexia Bank 201 7 638 20 7 859
11.10. General and administrative expense Managementreport
(In thousands of eur) 31/12/09 31/12/10 Occupancy (39,755) (39,623) Operating leases (except technology and system costs) (20,687) (21,110) Professional fees (27,908) (36,395) Marketing advertising and public relations (42,965) (45,579) Technology and system costs (173,972) (169,819) Software costs and research and development costs (13,691) (18,179) Repair and maintenance expenses (929) (927) Restructuring costs other than staff 0 0 Insurance (except related to pension) (6,360) (7,139) Transportation of mail and valuable (41,892) (37,836) statements Operational taxes (56,306) (52,920) Other general and administrative expense (73,142) (73,455) Consolidated financial
Total (497,607) (502,982)
11.11. Depreciation and amortization
(In thousands of eur) 31/12/09 31/12/10 Depreciation on land and buildings (57,772) (45,795) Depreciation on other tangible assets (27,463) (31,331) Amortization of intangible assets (37,316) (38,642)
statements Total (122,551) (115,768) Non-consolidated financial
154 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 155 Notes to the consolidated financial statements
11.12. Impairment on loans and provisions for credit commitments
1. Collective impairment 31/12/09 31/12/10 (In thousands of eur) Allowances Reversal Total Allowances Reversal Total Loans (198,489) 179,232 (19,257) (118,437) 140,879 22,442
Total (198,489) 179,232 (19,257) (118,437) 140,879 22,442
2. Specific impairment 31/12/09 (In thousands of eur) Allowances Reversal Losses Recoveries Total Loans and advances due from banks 0 93,260 (6,257) 0 87,003 Loans and advances to customers (225,660) 38,746 (61,844) 5,188 (243,570) Assets from insurance companies(1) (180) 8 0 0 (172) Other receivables(1) (1,081) 127 0 0 (954) Other assets 0 0 0 28 28 Commitments (10,397) 3,283 0 0 (7,114)
Total (237,318) 135,424 (68,101) 5,216 (164,779)
(1) Is published in item XII. of the Assets.
31/12/10 (In thousands of eur) Allowances Reversal Losses Recoveries Total Managementreport Loans and advances due from banks (17,500) 650 0 0 (16,850) Loans and advances to customers (151,542) 149,667 (49,721) 4,844 (46,752) Assets from insurance companies(1) (202) 181 0 0 (21) Other receivables(1) (193) 47,106 (33,607) 0 13,306 Other assets 0 0 0 0 0 Commitments (1,082) 2,586 0 0 1,504
Total (170,519) 200,190 (83,328) 4,844 (48,813)
(1) Is published in item XII. of the Assets.
statements 11.13. Impairment on tangible and intangible assets
(In thousands of eur) 31/12/09 31/12/10 Consolidated financial Impairment on investment property (1,454) (646) Impairment on land and buildings 0 0 Impairment on other tangible assets 0 0 Impairment on assets held for sale 201 1,612 Impairment on long-term construction contracts 0 0 Impairment on intangible assets (253) (978)
Total (1,506) (12)
Impairments are recorded when the criteria are met. A review of the market and sales conditions is performed on a regular basis, at least once a year. If the expected loss on sale is lower than the existing impairment, a reversal of impairment is recorded. statements
11.14. Impairment on goodwill Non-consolidated financial Nil
156 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 157 Notes to the consolidated financial statements
11.15. Provisions for legal litigation
The information regarding the provisions for legal litigations is presented in the management report pp XX to XX.
11.16. Tax expense
(In thousands of eur) 31/12/09 31/12/10 Income tax on current year (18,933) (58,085) Deferred taxes on current year (12,945) (38,957) Tax on current year result (A) (31,877) (97,042) Income tax on previous year 23,232 2,345 Deferred taxes on previous year 14,365 (4,288) Provision for tax litigations 13,491 17,384 Other tax expense (B) 51,088 15,441
Total (A)+(B) 19,211 (81,601)
Effective corporate income tax charge
The standard tax rate applicable in Belgium in 2009 and 2010 was 33.99%. Dexia Bank effective tax rate was respectively 9.2% and 13.2% for 2009 and 2010. The difference between these two rates can be analysed as follows.
(In thousands of eur) 31/12/09 31/12/10 Net income before tax 385,165 762,082 Income and losses from companies accounted for by the equity method 38,360 28,672
Managementreport Tax base 346,805 733,410
Statutory tax rate 33.99% 33.99%
Tax expense using statutory rate 117,879 249,286
Tax effect of rates in other jurisdictions (11,922) (39,474) Tax effect of non-taxable revenues(1) (158,601) (114,140) Tax effect of non-tax deductible expenses 129,281 132,917 Tax effect of utilisation of previously unrecognised tax losses 2,523 0 Tax effect on tax benefit not previously recognised in profit or loss 0 0 Tax effect from reassessment of unrecognised deferred tax assets 79,429 (30,239) statements Tax effect of change in tax rates 0 11 Items taxed at a reduced rate (11) (11)
Impairment on goodwill 0 0 Consolidated financial Other increase (decrease) in statutory tax charge (126,701) (101,308)
Tax on current year result 31,877 97,042
Tax base 346,805 733,410 Effective tax rate 9.2% 13.2%
(1) Mainly non-taxable gains on sales of equity shares. statements Non-consolidated financial
156 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 157 Notes to the consolidated financial statements
XII. Notes on risk exposure (some amounts may not add up due to roundings-off)
As requested by IFRS 7 § 34 disclosures are based on information internally provided to key management.
12.1. Fair value
In accordance with our valuation rules, fair value is equal to accounting value for some kinds of items, see Accounting policies.
1. Breakdown of fair value
A. Breakdown of fair value of assets 31/12/09 31/12/10 Carrying Fair value Difference Carrying Fair value Difference (In thousands of eur) value value Cash and balances with central banks 501,637 501,637 0 1,460,908 1,460,908 0 Loans and advances due from banks 63,911,755 63,955,216 43,461 67,936,784 68,200,953 264,169 Loans and advances to customers 103,007,194 103,723,898 716,704 99,472,471 98,943,482 (528,989) Financial assets held for trading 2,961,944 2,961,944 0 2,405,983 2,405,983 0 Financial assets designated at fair value 3,501,056 3,501,056 0 3,914,054 3,914,054 0 Financial assets available for sale 41,456,991 41,456,991 0 36,475,084 36,475,084 0 Investments held to maturity 0 0 0 0 0 0 Derivatives 28,744,619 28,744,619 0 30,313,229 30,313,229 0 Fair value revaluation of portfolio hedge 1,739,298 1,739,298 0 1,812,004 1,812,004 0 Investments in associates 284,014 284,014 0 277,969 277,969 0
Managementreport Other assets(1) 3,304,763 3,304,707 (56) 3,816,985 3,816,985 0 Non-current assets held for sale 4,357,477 4,415,053 57,576 16,664 19,163 2,499
Total 253,770,748 254,588,433 817,685 247,902,135 247,639,814 (262,321)
(1) Includes “Tangible fixed assets”, “Intangible assets and goodwill”, “Tax assets” and ”Other assets”.
The item “Fair value revaluation of portfolio hedge” corresponds to the remeasurement of the interest-rate risk on assets hedged via portfolio hedges. These assets are included in the items “Loans and advances due from banks” and “Loans and advances to customers”.
B. Breakdown of fair value of liabilities
statements 31/12/09 31/12/10 Carrying Fair value Difference Carrying Fair value Difference (In thousands of eur) value value Consolidated financial Due to banks 74,119,120 74,120,904 1,784 62,368,244 62,370,976 2,732 Customer borrowings and deposits 77,798,775 77,645,268 (153,507) 82,876,531 82,903,754 27,223 Financial liabilities held for trading 212,176 212,176 0 701,356 701,356 0 Financial liabilities designated at fair value 10,625,380 10,625,380 0 11,493,311 11,493,311 0 Derivatives 32,311,209 32,311,209 0 34,902,906 34,902,906 0 Fair value revaluation of portfolio hedge 0 0 0 (42,023) (42,023) 0 Debt securities 29,437,038 29,549,325 112,287 28,957,883 28,339,116 (618,767) Subordinated debts 2,943,831 3,061,028 117,197 2,715,641 2,943,824 228,183 Other liabilities(1) 16,312,772 16,312,772 0 18,476,155 18,476,154 (1)
statements Liabilities included in disposal groups held for sale 4,335,466 4,335,466 0 2 2 0
Total 248,095,767 248,173,528 77,761 242,450,006 242,089,376 (360,630) Non-consolidated financial (1) Includes “Technical provisions from insurance companies”, “Provisions and other obligations”, “Tax liabilities” and “Other liabilities”.
Except for liabilities “designated at fair value”, the own credit risk on liabilities is considered as unchanged for the determination of the fair value.
The item “Fair value revaluation of portfolio hedge” corresponds to the remeasurement of the interest-rate risk on liabilities hedged via portfolio hedges. These liabilities are included in the items “Customer borrowings and deposits” and “Debt securities”.
158 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 159 Notes to the consolidated financial statements
2. Analysis of fair value of financial instruments
The following table provides an analysis of financial instruments measured at fair value, grouped in Level 1 to 3 depending on the observability of the fair value.
A. Assets 31/12/09 31/12/10 (In thousands of eur) Level 1(1) Level 2(2) Level 3(3) Total Level 1(1) Level 2(2) Level 3(3) Total Financial assets held for trading 1,242,568 619,629 1,099,747 2,961,944 1,034,937 682,140 688,906 2,405,983 Financial assets designated at fair value – equities 2,533,477 0 0 2,533,477 3,050,819 13,221 0 3,064,040 Financial assets designated at fair value – other instruments 736,844 230,736 0 967,580 458,750 331,177 60,087 850,014 Financial assets available for sale – loans & receivables 0 81,618 0 81,618 0 42,436 0 42,436 Financial assets available for sale – bonds 18,021,516 6,736,958 14,619,891 39,378,365 14,785,702 8,046,473 11,994,731 34,826,906 Financial assets available for sale – equities 1,588,151 72,191 336,665 1,997,007 1,279,388 88,860 237,495 1,605,743 Derivatives 3,848 27,083,365 1,657,406 28,744,619 2,555 28,167,300 2,143,373 30,313,228
Total 24,126,404 34,824,497 17,713,709 76,664,610 20,612,151 37,371,607 15,124,592 73,108,350
(1) Instruments classified in Level 1 are those whose fair value is derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. (2) Instruments classified in Level 2 are those whose fair value is derived from inputs other than quoted prices and that are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices). (3) Instruments classified in Level 3 are those whose fair value is derived from valuation techniques that include inputs not based on observable market data (unobservable inputs).
B. Liabilities Managementreport 31/12/09 31/12/10 (In thousands of eur) Level 1(1) Level 2(2) Level 3(3) Total Level 1(1) Level 2(2) Level 3(3) Total Financial liabilities held for trading 209,259 1,829 1,088 212,176 450,101 251,245 10 701,356 Financial liabilities designated at fair value 0 10,047,407 577,973 10,625,380 217,532 11,019,584 256,195 11,493,311 Derivatives 2,623 30,177,377 2,131,209 32,311,209 1,192 32,179,431 2,722,283 34,902,906
Total 211,882 40,226,613 2,710,270 43,148,765 668,825 43,450,260 2,978,488 47,097,573
(1) Instruments classified in Level 1 are those whose fair value is derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
(2) Instruments classified in Level 2 are those whose fair value is derived from inputs other than quoted prices and that are observable, either directly (i.e. as prices) or indirectly statements (i.e. derived from prices). (3) Instruments classified in Level 3 are those whose fair value is derived from valuation techniques that include inputs not based on observable market data (unobservable
inputs). Consolidated financial
3. Transfer between Level 1 and Level 2 fair value
A. Assets 31/12/09 31/12/10 (In thousands of eur) From 1 to 2 From 2 to 1 From 1 to 2 From 2 to 1 Financial assets held for trading 320,097 1,547 1,858 31,608 Financial assets designated at fair value – equities 0 0 0 27 Financial assets designated at fair value – other instruments 0 0 0 0 Financial assets available for sale – loans and receivables 0 0 0 0 statements Financial assets available for sale – bonds 7,367 604,542 913,293 70,374 Financial assets available for sale – equities 0 0 0 3,438 Derivatives 0 0 0 0 Non-consolidated financial
Total 327,464 606,089 915,151 105,447
In 2010, bonds issued by the Republic of Greece and the Republic of Portugal were transferred from Level 1 to Level 2.
B. Liabilities Nil
158 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 159 Notes to the consolidated financial statements
4. Reconciliation Level 3
A. Assets 31/12/09 Opening Total Total Pur- Sale Settle- Trans- Transfer Changes Conver- Other(1) Closing balance gains/ gains/ chase ment fers to out of in scope sion losses losses Level 3 Level 3 of differ- (In thousands in P&L in OCI consoli- ences of eur) dation Financial assets held for trading 1,229,454 248,500 0 270,460 (595,804) (52,844) 0 (19) 0 0 0 1,099,747 Financial assets designated at fair value – equities 0 0 0 0 0 0 0 0 0 0 0 0 Financial assets designated at fair value – other instruments 115,828 0 0 0 (13,416) 0 0 (102,412) 0 0 0 0 Financial assets available for sale – loans and receivables 0 0 0 0 0 0 0 0 0 0 0 0 Financial assets available for sale – bonds 14,772,435 118,728 164,788 370,081 (434,500) (22,203) 574,523 (889,742) 160 (8,127) (26,252) 14,619,891 Financial assets available for sale – equities 467,595 (1,147) 101 59,039 (65,290) (7) 0 0 985 0 (124,611) 336,665 Derivatives 2,570,656 (913,713) 0 0 0 0 0 0 0 464 0 1,657,407
Managementreport Total 19,155,968 (547,632) 164,889 699,580 (1,109,010) (75,054) 574,523 (992,173) 1,145 (7,663) (150,863) 17,713,710
(1) The assets of Dexia Épargne Pension are transferred to non-current assets held for sale.
31/12/10 Opening Total Total Pur- Sale Settle- Trans- Transfer Changes Conver- Other Closing balance gains/ gains/ chase ment fers in out of in scope sion losses losses Level 3 Level 3 of differ- (In thousands in P&L in OCI consoli- ences of eur) dation
statements Financial assets held for trading 1,099,747 5,625 0 9,510 (558,694) (33) 132,750 0 0 0 0 688,905 Financial assets Consolidated financial designated at fair value – equities 0 0 0 0 0 0 0 0 0 0 0 0 Financial assets designated at fair value – other instruments 0 0 0 0 0 0 60,087 0 0 0 0 60,087 Financial assets available for sale – loans and receivables 0 0 0 0 0 0 0 0 0 0 0 0 Financial assets available for sale statements – bonds 14,619,891 109,606 45,982 701,425 (2,613,467) (522,512) 99,287 (566,777) 0 121,299 (2) 11,994,732 Financial assets available for sale – equities 336,665 (39) 7,514 3,053 (108,000) (366) 0 (1,333) 0 0 0 237,494 Non-consolidated financial Derivatives 1,657,407 473,502 0 0 0 0 0 0 0 12,465 0 2,143,374
Total 17,713,710 588,694 53,496 713,988 (3,280,161) (522,911) 292,124 (568,110) 0 133,764 (2) 15,124,592
160 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 161 Notes to the consolidated financial statements
B. Liabilities 31/12/09 Opening Total Purchase Sale Direct Settle- Transfers Transfer Conver- Closing balance gains/ origina- ment in Level 3 out of sion (In thousands losses tion Level 3 differ- of eur) in P&L ences Financial liabilities held for trading 0 0 1,088 0 0 0 0 0 0 1,088 Financial liabilities designated at fair value 532,472 26,927 0 0 88,294 (69,720) 0 0 0 577,973 Derivatives 2,357,670 (226,461) 0 0 0 0 0 0 0 2,131,209
Total 2,890,142 (199,534) 1,088 0 88,294 (69,720) 0 0 0 2,710,270
31/12/10 Opening Total Purchase Sale Direct Settle- Transfers Transfer Conver- Closing balance gains/ origina- ment in Level 3 out of sion (In thousands losses tion Level 3 differ- of eur) in P&L ences Financial liabilities held for trading 1,088 0 10 (1,088) 0 0 0 0 0 10 Financial liabilities Managementreport designated at fair value 577,973 (1,470) 0 0 108,525 (25,231) 59,908 (463,510) 0 256,195 Derivatives 2,131,209 591,019 0 0 0 0 0 0 55 2,722,283
Total 2,710,270 589,549 10 (1,088) 108,525 (25,231) 59,908 (463,510) 55 2.978.488
Comments Evolution of Level 3 instruments can be explained as follows: ●● During its review of classification in levels, Dexia identified that some senior bank bonds, classified as liquid and therefore Level 2, became ●● The column “Total gains/losses in P&L” cannot be analysed on a illiquid. By consequence, they were transferred to Level 3. stand-alone basis, as some assets/liabilities classified at amortised ●● High sales and low purchases of financial instruments are mainly cost or in Level 1 or 2 may be hedged by derivatives classified in explained by the management’s decision to statements Level 3. We refer to the note 11.4. “Result of hedge accounting” (i) stop proprietary trading activities; and to have an economic view on the P&L impact; (ii) decrease Dexia’s bond portfolio.
●● Some markets recovered during 2009 and 2010, such as for German Consolidated financial and French covered bonds and some bank securities. Those However, the impact in P&L is rather limited due to the fact that instruments moved in the fair value hierarchy from Level 3 to structured financial instruments are fully hedged: not only for the Level 2; interest-rate risk but also the risks attached to the structure via ●● Improvement in internal model as well as an increased back-testing back-to-back derivatives. resulted in a transfer between levels, mainly from Level 3 to Level 2; statements Non-consolidated financial
160 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 161 Notes to the consolidated financial statements
5. Sensitivity of Level 3 valuations to alternative assumptions
For its mark-to-model price, Dexia Bank uses a discounted cash- Tests have been performed on all financial instruments classified flow model. in Level 3. The main impacts are the following:
The sensitivity measures the impact on fair value of alternative ●● For Level 3 bonds classified in AFS, the sensitivity of the AFS assumptions at closing date. reserve to alternative assumptions is estimated between a positive impact on the fair value of EUR +158 million and a When using models based on unobservable parameters, Dexia negative impact on the fair value of EUR -81 million. Bank decided to elaborate alternative assumptions, mainly: ●● Negative Basis Trades are considered as one single product on the market and are therefore considered as a package ●● credit spreads used are based on credit spreads for the same (i.e. bond and CDS together). The main assumption on the counterparty, for similar counterparties, for similar sectors fair value is the correction for the unwind cost (bid- and-ask or credit spreads indexed on liquid CDS-indexes; spread). Based on the important number of unwinds and ●● liquidity premiums are used for the calculation of the fair the stock of remaining NBT transactions, the impact is EUR value of bonds and depend mainly on the eligibility for +3 million (positive scenario) versus EUR -20 million (negative central banks; scenario). ●● illiquidity spreads used are based on the liquidity spread for ●● Dexia Bank tested the impact of different unobservable the same instrument, for similar products and include an parameters for its derivatives, like exotic currencies, interest- analysis of the difference between the bid-and-ask spread rate volatility (unobservable vega and smile) and correlation, for actual transactions. model uncertainties, extrapolation for long-term periods, equities’ sensitivities (unobservable vega, dividend volatility, correlation, etc). The main impacts relate to credit spread on CDS, where the impact is estimated at EUR +4 million (positive scenario) versus EUR -4 million (negative scenario).
6. Disclosure of difference between transaction prices and model values (deferred Managementreport day-one profit)
No significant amounts are recognised as deferred Day-One transactions) that are perfectly backed to back, the day-one Profit (DOP) in 2009 nor in 2010. profit is recognised up-front. Only a few transactions of unsignificant amounts have non-observable parameters. More specifically, as Dexia Bank sells simple products, like Interest-Rate Swaps (IRS), or complex products (like structured Deferred DOP is as a result immaterial. statements Consolidated financial statements Non-consolidated financial
162 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 163 Notes to the consolidated financial statements
12.2. Credit-risk exposure
1. Analysis of total Dexia Bank exposure
Credit-risk exposure is disclosed in the same way as reported Credit-risk exposure is broken down by geographical region to the Management and reports: and by counterparty taking into account the guarantees obtained. This means that when credit-risk exposure is guaran- ●● the net carrying value for balance-sheet assets other than teed by a third party whose weighted risk (for Basel regulations) derivative contracts (i.e. accounting value after deduction is lower than that of the direct borrower, the exposure is based of specific impairment); on the guarantor’s geographical region and activity sector. ●● the fair value of derivatives; ●● the full commitment amount for off-balance-sheet commit- Credit-risk exposure includes the fully-consolidated subsidiaries ments. The full commitment amount is either the undrawn of Dexia Bank. part of liquidity facilities or the maximum amount Dexia Bank is committed to pay for the guarantees it has granted to third parties.
A. Exposure by geographical region
(In thousands of eur) 31/12/09 31/12/10 Belgium 109,294,932 109,476,440 France 34,148,203 38,398,451 Germany 8,131,286 9,140,343 Greece 2,761,227 2,053,548 Ireland 4,469,548 1,308,062 Italy 10,341,506 9,220,827 Luxembourg 3,794,133 7,079,237 Spain 9,352,785 11,393,491 Portugal 2,044,512 1,006,513 Managementreport Other EU countries 16,408,123 14,265,650 Rest of Europe 9,705,960 2,503,972 Turkey 1,309,332 1,750,388 United States and Canada 15,319,053 14,396,563 South and Central America 660,580 600,704 Southeast Asia 1,191,840 722,374 Japan 431,196 388,788 Other(1) 3,915,326 4,086,616
Total 233,279,542 227,791,967
(1) Includes supranational entities, like the European Central Bank. statements
B. Exposure by category of counterparty Consolidated financial
(In thousands of eur) 31/12/09 31/12/10 Central governments 32,334,038 21,664,524 Local public sector 51,988,229 52,799,990 Corporate 26,047,426 25,284,665 Monoline 2,987,643 3,277,133 ABS/MBS 12,388,185 9,218,078 Project finance 933,009 1,158,385 Individuals, SME, self-employed 32,356,772 34,261,224 Financial institutions 74,240,578 80,114,029 Other 3,662 13,939
statements Total 233,279,542 227,791,967 Non-consolidated financial
162 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 163 Notes to the consolidated financial statements
2. Credit-risk exposure by class of financial instruments
(In thousands of eur) 31/12/09 31/12/10 Financial assets available for sale (excluding variable-income securities) 40,077,765 34,016,309 Financial assets designated at fair value (excluding variable-income securities) 124,554 169,202 Financial assets held for trading (excluding variable-income securities) 2,817,108 2,105,523 Loans and advances (at amortised cost) 132,727,106 132,872,142 Investments held to maturity 0 0 Derivatives 4,168,591 4,755,991 Other financial instruments – at cost 764,678 1,490,064 Loan commitments granted 23,969,834 22,282,040 Guarantee commitments granted 28,629,906 30,100,696
Total 233,279,542 227,791,967
Dexia Bank holds financial collateral as well as physical collateral. Only financial collateral eligible under Basel II and directly held by Dexia Bank are considered. The majority of the financial collateral is composed of cash and term deposits, and to a lesser extent, of investment-grade bonds For this reason, collateral mainly covers Loans and advances and (mainly AAA-AA sovereigns or financial institutions). Off-balance-sheet commitments.
Physical collateral mainly consists of mortgages on residential or small commercial real estate and pledges on various other assets (receivables, business goodwill).
3. Credit quality of financial assets neither past due nor impaired 31/12/09
Managementreport AAA to AA- A+ to BBB- Non-invest- Unrated Total (In thousands of eur) ment grade Financial assets available for sale (excluding variable-income securities) 21,719,398 16,355,235 1,607,487 355,672 40,037,792 Financial assets designated at fair value (excluding variable-income securities) 80,541 6,902 0 37,110 124,553 Financial assets held for trading (excluding variable-income securities) 1,807,145 950,758 30,504 28,702 2,817,109 Loans and advances (at amortised cost) 55,328,520 61,508,677 12,298,000 2,187,289 131,322,486 Investments held to maturity 0 0 0 0 0 Derivatives 1,544,851 2,281,142 145,689 195,764 4,167,446 Other financial instruments – at cost 11,028 15,417 20,126 712,173 758,744
statements Loan commitments granted 12,253,927 8,786,711 2,297,866 489,274 23,827,778 Guarantee commitments granted 10,623,443 16,042,073 1,618,858 275,227 28,559,601
Consolidated financial Total 103,368,853 105,946,915 18,018,530 4,281,211 231,615,509
31/12/10 AAA to AA- A+ to BBB- Non-invest- Unrated Total (In thousands of eur) ment grade Financial assets available for sale (excluding variable-income securities) 17,386,460 15,099,283 1,436,401 41,219 33,963,363 Financial assets designated at fair value (excluding variable-income securities) 59,303 109,876 0 23 169,202 Financial assets held for trading statements (excluding variable-income securities) 1,171,839 875,486 48,801 9,398 2,105,524 Loans and advances (at amortised cost) 48,050,129 68,958,812 13,232,038 1,502,756 131,743,735 Investments held to maturity 0 0 0 0 0 Derivatives 1,929,330 2,638,638 166,832 20,127 4,754,927 Non-consolidated financial Other financial instruments – at cost 9,814 33,813 74,336 1,372,089 1,490,052 Loan commitments granted 12,041,428 7,254,622 2,593,421 346,762 22,236,233 Guarantee commitments granted 8,049,964 19,617,638 2,088,920 264,178 30,020,700
Total 88,698,267 114,588,168 19,640,749 3,556,552 226,483,736
The indicated ratings are either internal or external based. In for credit risk within the context of Pillar I of Basel II, except for fact, Dexia Bank applies the AIRBA (Advanced Internal Ratings ABS positions for which the credit-risk calculation is based on Based Approach) for the calculation of capital requirements external ratings (Fitch, Standard & Poors or Moody’s).
164 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 165 Notes to the consolidated financial statements
4. Carrying value of financial assets with renegociated terms that otherwise should be past due or impaired
Exposure by class of financial instruments
(In thousands of eur) 31/12/09 31/12/10 Loans and advances 79,584 53,160 Loan commitments granted 13,228 23,578 Guarantee commitments granted 4,814 547
Total 97,626 77,285
The decline of activity resulted in liquidity pressures with some counter These plans rely on a recapitalisation effort on the part of shareholders parties in sectors sensitive to the economy. and on business plans revised in relation to the current economic situation. The restructuring of bank credits or deferment of maturities nego- tiated with these companies are part of wider plans to ensure the durability of their activity.
5. Information on past-due or impaired financial assets
A financial asset is past due when the counterparty has failed to make As an example, if a counterparty fails to pay the required interests at a payment when contractually due. This is considered by contract. due date, the entire loan is considered as past due.
31/12/09 Past-due but not impaired financial assets Carrying value of individually Collateral received on impaired financial assets, past-due or impaired loans ≤ 90 days > 90 days > 180 days before deducting any and debt instruments Managementreport (In thousands of eur) impairment loss Financial assets available for sale (excluding variable- income securities) 0 0 0 476,138 0 Loans and advances (at amortised cost) 459,150 57,441 107,416 1,235,334 981,683 Investments held to maturity 0 0 0 0 0 Other financial instruments – at cost 0 0 0 89,018 0
statements Total 459,150 57,441 107,416 1,800,490 981,683 Consolidated financial
31/12/10 Past-due but not impaired financial assets Carrying value of individually Collateral received on impaired financial assets, past-due or impaired loans ≤ 90 days > 90 days > 180 days before deducting any and debt instruments (In thousands of eur) impairment loss Financial assets available for sale (excluding variable- income securities) 0 0 0 430,813 0 Loans and advances (at amortised cost) 463,069 50,675 36,730 1,065,055 815,396 statements Investments held to maturity 0 0 0 0 0 Other financial Non-consolidated financial instruments – at cost 0 0 0 38,280 0
Total 463,069 50,675 36,730 1,534,148 815,396
Collateral held is mainly composed of mortgages on residential or Past-due outstandings mainly relate to retail and corporate assets. small commercial real estate and pledges on various other assets Financial assets are considered as impaired according to the valuation (receivables, business goodwill). rules “Impairments on financial assets”.
164 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 165 Notes to the consolidated financial statements
6. Collateral and other credit enhancements obtained by taking possession of collateral
Nature of the assets obtained during the period by taking possession of a collateral Carrying value (In thousands of eur) 31/12/09 31/12/10 Cash 424 954 Equity instrument 0 0 Debt instruments 127 42 Loans and advances 0 0 Property plant and equipment 26,894 4,729 Other 0 0
Total 27,445 5,725
Concerning collateral taken into possession, the adopted methodology is based upon the Judicial Code (seizure of property) and the Financial Guarantees Code (seizure of securities).
7. Movements in allowances for credit losses As at Utilisation Amounts set Amounts Other As at Recoveries Charges-offs 1 Jan. 2009 aside for reversed for 31 Dec. 2009 directly directly estimated estimated recognised recognised probable probable in profit in profit (In thousands of eur) loan losses loan losses or loss or loss Specific allowances for individually and collectively Managementreport assessed financial assets (1,739,748) 701,288 (305,261) 252,634 26,437 (1,064,650) 5,188 (68,101) Loans and advances due from banks (97,499) 0 0 93,260 (4,856) (9,095) 0 (6,257) Loans and advances to customers (477,121) 70,399 (224,641) 38,746 2,938 (589,679) 5,188 (61,844) Investments held to maturity 0 0 0 0 0 0 0 0 Financial assets available for sale (1,165,128) 630,889 (80,620) 120,628 28,355 (465,876) 0 0 of which fixed- income instruments (511,474) 12,011 (2,016) 120,628 26,169 (354,682) 0 0
statements of which equity instruments (653,654) 618,878 (78,604) 0 2,186 (111,194) 0 0
Consolidated financial Allowances for incurred but not reported losses on financial assets (428,636) 0 (125,363) 106,107 1,984 (445,908) 0 0 Loans and advances due from banks (48,954) 0 (44,826) 51,694 482 (41,604) 0 0 Loans and advances to customers (379,682) 0 (80,537) 54,413 1,502 (404,304) 0 0 Investments held to maturity 0 0 0 0 0 0 0 0
Total (2,168,384) 701,288 (430,624) 358,741 28,421 (1,510,558) 5,188 (68,101) statements Non-consolidated financial
166 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 167 Notes to the consolidated financial statements
As at Utilisation Amounts set Amounts Other As at Recoveries Charges-offs 1 Jan. 2010 aside for reversed for 31 Dec. 2010 directly directly estimated estimated recognised recognised probable probable in profit in profit (In thousands of eur) loan losses loan losses or loss or loss Specific allowances for individually and collectively assessed financial assets (1,064,650) 130,836 (204,034) 163,348 (2,952) (977,452) 4,844 (19,265) Loans and advances due from banks (9,095) 0 (15,094) 650 (1,583) (25,122) 0 0 Loans and advances to customers (589,679) 30,455 (149,914) 121,381 1,607 (586,150) 4,844 (19,265) Investments held to maturity 0 0 0 0 0 0 0 0 Financial assets available for sale (465,876) 100,381 (39,026) 41,317 (2,976) (366,180) 0 0 of which fixed- income instruments (354,682) 26,171 (2,608) 41,317 (2,846) (292,648) 0 0 of which equity instruments (111,194) 74,210 (36,418) 0 (130) (73,532) 0 0
Allowances for incurred but not reported losses on financial assets (445,908) 0 (118,411) 140,880 13,246 (410,193) 0 0 Loans and advances due from banks (41,604) 0 (3,897) 31,939 0 (13,562) 0 0
Loans and advances Managementreport to customers (404,304) 0 (114,514) 108,941 13,246 (396,631) 0 0 Investments held to maturity 0 0 0 0 0 0 0 0
Total (1,510,558) 130,836 (322,445) 304,228 10,294 (1,387,645) 4,844 (19,265)
8. Credit-risk information for loans designated at fair value through profit or loss As at 31 Dec. 2009 Maximum Amount by which any related Amount of change Amount of change in the fair exposure to credit derivatives mitigate the in the loans at fair value value of any related credit credit risk maximum exposure to credit through profit or loss derivative or similar instrument risk declared in Maximum attributable to changes which mitigate the maximum statements exposure to credit risk in the credit risk credit-risk exposure
Change Cumulative Change Cumulative Consolidated financial (In thousands of eur) of the period amount of the period amount 230,522 0 1,085 1,085 0 0
As at 31 Dec. 2010 Maximum Amount by which any related Amount of change Amount of change in the fair exposure to credit derivatives mitigate the in the loans at fair value value of any related credit credit risk maximum exposure to credit through profit or loss derivative or similar instrument risk declared in Maximum attributable to changes which mitigate the maximum exposure to credit risk in the credit risk credit-risk exposure Change Cumulative Change Cumulative (In thousands of eur) of the period amount of the period amount statements 330,863 0 (1,085) 0 0 0
No credit derivative is held to mitigate the maximum exposure to Dexia Bank estimates the fair value of the loans by calculating the Non-consolidated financial credit risk. In fact, the change in credit spread is not significant, so that amount of future cash flows from the assets and discounting the the credit risk is not hedged. payments to a present value at a discount rate that reflects the uncertainty associated with these payments.
166 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 167 Notes to the consolidated financial statements
9. Credit-risk information about financial liabilities designated at fair value through profit or loss As at 31 Dec. 2009 Carrying value Amount of change in the fair Difference between value attributable to changes carrying value and the in the credit risk of the liability contractual value required to be paid at maturity(1) Change Cumulative (In thousands of eur) of the period amount 10,625,380 (1,573) (61,370) 147,975
(1) This amount includes the premium/discount and the change in the market value.
As at 31 Dec. 2010 Carrying value Amount of change in the fair Difference between value attributable to changes carrying value and the in the credit risk of the liability contractual value required to be paid at maturity(1) Change Cumulative (In thousands of eur) of the period amount 11,943,311 34,686 (26,684) 165,658
(1) This amount includes the premium/discount and the change in the market value.
12.3. Information about collateral
1. Assets received as collateral which can be sold or repledged Collateral received as at 31 Dec. 2009 Collateral received as at 31 Dec. 2010 Fair value of collateral Fair value of collateral Fair value of collateral Fair value of collateral (In thousands of eur) held sold/repledged held sold/repledged Managementreport Equity instruments 795,090 0 595,748 0 Debt instruments 23,366,243 22,241,762 23,798,125 22,532,288 Loans and advances 173,357 173,357 178,604 178,604 Cash collaterals 6,422,615 6,422,615 7,426,373 7,426,373
Total 30,757,305 28,837,734 31,998,850 30,137,265
Collateral is obtained within the framework of repurchase-agreement Contracts determining the conditions of repledge are based on the activities and bond lending activities. Overseas Securities Lending Agreement (OSLA) – possibly amended by the legal department – or are written by the legal department. Cash is obtained as collateral within the framework of the Credit
statements Support Annex (CSA). Repledge is a usual market practice.
Figures as at 31 December 2009 have been restated. Consolidated financial
2. Information on financial assets pledged as collateral Carrying value of financial assets pledged Carrying value of financial assets pledged as collateral as at 31 Dec. 2009 as collateral as at 31 Dec. 2010 For liabilities For contingent For liabilities For contingent (In thousands of eur) liabilities liabilities 108,094,316 0 108,013,098 0
Assets are mainly pledged to collateralise repurchase-agreements and Cash is given as collateral within the framework of the Credit Support statements debts to central banks and to the European Central Bank. Annex (CSA).
The carrying value is not limited to the amount effectively borrowed. Repurchase-agreements reimbursement amount adds up to EUR 44,5 bil
Non-consolidated financial lion as at 31 December 2009 and EUR 50,3 billion as at 31 December 2010.
168 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 169 Notes to the consolidated financial statements
12.4. Interest-rate repricing risk: breakdown by remaining maturity until next interest-rate refixing date
Current accounts and savings deposits are presented in the column “At rates are reset from an accounting point of view, rather than on sight and on demand” as the information presented below takes into assumptions based on observed behavioural data. These latter assump- account the remaining maturity until the next date at which interest tions are used in the BSM sensitivity (see note 12.5.).
1. 2009
A. Assets 31/12/09 At sight Up to More More Over Undeter- Accrued Fair value Impair- Total and on 3 months than 3 than 5 years mined interest adjust– ment demand months 1 year maturity ment (In thousands of eur) to 1 year to 5 years Cash and balances with central banks 467,963 31,208 0 0 0 0 2,466 0 0 501,637 Loans and advances due from banks 13,181,463 27,804,069 20,714,109 1,872,866 257,144 6,451 113,392 12,959 (50,698) 63,911,755 Loans and advances to customers 13,700,540 26,492,563 11,838,164 22,449,394 28,346,939 735,195 420,169 18,214 (993,984) 103,007,194 Financial assets held for trading 2,716 1,579,856 679,250 425,534 384,662 33,634 14,175 (157,883) 0 2,961,944 Financial assets designated at fair value 0 74,894 88,182 24,666 228,570 3,105,615 367 (21,238) 0 3,501,056 Financial assets available for sale 287,461 5,711,857 3,039,989 7,831,165 21,639,355 2,006,634 672,255 734,150 (465,875) 41,456,991 Managementreport Investments held to maturity 0 0 0 0 0 0 0 0 0 0 Derivatives 4,293,250 24,451,369 0 28,744,619 Fair value revaluation of portfolio hedge 1,739,298 0 1,739,298 Investments in associates 284,014 284,014 Tangible fixed assets 1,334,211 1,334,211 Intangible assets and goodwill 228,507 228,507 Tax assets 683,063 0 683,063 Other assets 93,182 132,600 78,958 25,106 21,696 778,889 0 9,213 (80,662) 1,058,982 statements Non-current assets held for sale 4,402,914 0 34,479 (79,916) 4,357,477
Consolidated financial Total 27,733,325 61,827,047 36,438,652 32,628,731 50,878,366 13,599,127 5,516,074 26,820,561 (1,671,135) 253,770,748 statements Non-consolidated financial
168 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 169 Notes to the consolidated financial statements
B. Liabilities 31/12/09 At sight Up to More than More than Over Undeter- Accrued Fair value Total and on 3 months 3 months 1 year to 5 years mined interest adjustment (In thousands of eur) demand to 1 year 5 years maturity Due to banks 23,457,448 28,059,035 22,086,149 359,856 40,701 1,992 112,609 1,330 74,119,120 Customer borrowings and deposits 53,761,731 18,073,970 2,142,056 2,453,690 683,710 40,995 642,623 0 77,798,775 Financial liabilities held for trading 0 101,730 4,619 52,248 39,362 12,651 1,452 114 212,176 Financial liabilities designated at fair value 34,197 230,887 678,603 5,334,828 856,076 3,191,910 149,865 149,014 10,625,380 Derivatives 6,053,585 26,257,624 32,311,209 Fair value revaluation of portfolio hedge 0 0 Debt securities 2,301,212 8,375,378 3,177,288 10,368,834 4,954,577 0 298,588 (38,839) 29,437,038 Subordinated debts 953 315,953 364,810 750,737 758,617 635,777 64,345 52,639 2,943,831 Technical provision of insurance companies 13,384,676 13,384,676 Provisions and other obligations 911,551 911,551 Tax liabilities 39,035 39,035 Other liabilities 1,231,848 192,389 62,525 6,923 3,296 479,030 1,499 0 1,977,510 Liabilities included in disposal groups held for sale 4,335,466 0 0 4,335,466
Total 80,787,389 55,349,342 28,516,050 19,327,116 7,336,339 23,033,083 7,324,566 26,421,882 248,095,767 Managementreport
C. Net position 31/12/09 At sight Up to More than More than Over Undetermined and on 3 months 3 months 1 year to 5 years maturity (In thousands of eur) demand to 1 year 5 years On-balance-sheet sensitivity gap (53,054,064) 6,477,705 7,922,602 13,301,615 43,542,027 (9,433,956)
The balance-sheet sensitivity gap is hedged through derivatives. statements Consolidated financial statements Non-consolidated financial
170 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 171 Notes to the consolidated financial statements
1. 2010
A. Assets 31/12/10 At sight Up to More More Over Undeter- Accrued Fair value Impair- Total and on 3 months than 3 than 5 years mined interest adjust– ment demand months 1 year maturity ment (In thousands of eur) to 1 year to 5 years Cash and balances with central banks 1,459,314 0 0 0 0 0 1,594 0 0 1,460,908 Loans and advances due from banks 19,022,025 38,884,527 5,525,038 3,820,218 550,681 37,356 108,576 27,047 (38,684) 67,936,784 Loans and advances to customers 12,908,841 24,007,244 13,511,167 22,271,345 26,347,339 1,018,313 367,712 23,292 (982,782) 99,472,471 Financial assets held for trading 708 1,233,637 48,863 695,120 391,926 29,493 18,840 (12,604) 0 2,405,983 Financial assets designated at fair value 20,527 126,316 17,496 6,000 222,310 3,522,790 257 (1,642) 0 3,914,054 Financial assets available for sale 142,202 4,111,458 1,552,753 6,293,210 22,799,126 1,704,085 676,916 (438,486) (366,179) 36,475,085 Investments held to maturity 0 0 0 0 0 0 0 0 0 0 Derivatives 3,624,878 26,688,351 0 30,313,229 Fair value revaluation of portfolio hedge 1,812,004 0 1,812,004 Investments in associates 277,969 277,969 Tangible fixed assets 1,241,293 1,241,293
Intangible assets and Managementreport goodwill 229,234 229,234 Tax assets 953,365 0 953,365 Other assets 129,119 103,710 38,900 33,476 9,531 1,105,695 7 6,152 (33,498) 1,393,092 Non-current assets held for sale 57,866 0 0 (41,202) 16,664
Total 33,682,736 68,466,892 20,694,217 33,119,369 50,320,913 10,177,459 4,798,780 28,104,114 (1,462,345) 247,902,135 statements Consolidated financial statements Non-consolidated financial
170 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 171 Notes to the consolidated financial statements
B. Liabilities 31/12/10 At sight Up to More than More than Over Undeter- Accrued Fair value Total and on 3 months 3 months 1 year to 5 years mined interest adjustment (In thousands of eur) demand to 1 year 5 years maturity Due to banks 23,757,481 35,634,049 2,148,572 733,586 55,224 2,947 34,698 1,687 62,368,244 Customer borrowings and deposits 61,436,155 14,572,591 3,220,324 2,453,272 569,587 72,259 552,343 0 82,876,531 Financial liabilities held for trading 0 2,600 6,844 427,654 251,419 12,694 7,961 (7,816) 701,356 Financial liabilities designated at fair value 8,954 268,139 300,228 4,259,286 2,809,126 3,523,284 156,506 167,788 11,493,311 Derivatives 4,570,234 30,332,672 34,902,906 Fair value revaluation of portfolio hedge (42,023) (42,023) Debt securities 143,359 4,029,287 1,701,198 15,051,078 7,757,363 0 295,541 (19,943) 28,957,883 Subordinated debts 337 133,216 340,969 167,376 1,410,934 554,410 55,205 53,194 2,715,641 Technical provision of insurance companies 15,619,891 15,619,891 Provisions and other obligations 900,859 900,859 Tax liabilities 34,936 34,936 Other liabilities 1,203,548 147,496 77,004 16,999 1,936 471,951 1,535 0 1,920,469 Liabilities included in disposal groups held for sale 2 0 0 2
Total 86,549,834 54,787,378 7,795,139 23,109,251 12,855,589 21,193,233 5,674,023 30,485,559 242,450,006 Managementreport
C. Net position 31/12/10 At sight Up to More than More than Over Undetermined and on 3 months 3 months 1 year to 5 years maturity (In thousands of eur) demand to 1 year 5 years On-balance-sheet sensitivity gap (52,867,098) 13,679,514 12,899,078 10,010,118 37,465,324 (11,015,774)
The balance-sheet sensitivity gap is hedged through derivatives. statements Consolidated financial statements Non-consolidated financial
172 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 173 Notes to the consolidated financial statements
12.5. Market risk and BSM
Market risk measures:
●● Treasury and Financial Markets:
■■ risk on trading activities: general interest rate, foreign exchange, equity, credit spread and other risks (inflation, CO2) which are managed within Value at Risk limits and other adequate risk limits; ■■ Cash and Liquidity Management (CLM) – only banking – is followed by means of Value at Risk (VaR) and interest-rate sensitivity limits; ■■ Spread risk of the bond portfolio is managed through credit-spread sensitivities. ●● Balance-Sheet Management (BSM): ■■ Interest-rate risk is followed within sensitivity limits and indicative Value at Risk (VaR); ■■ Credit-spread risk is followed through spread sensitivities; ■■ Equity exposure is followed within Value at Risk (VaR) limits.
1. Treasury and Financial Markets activities
Treasury and Financial Markets (TFM) activities of Dexia Bank are oriented as a support function for the Group. TFM assumes trading as well as non-trading positions arising from cash and liquidity management activities. Since end 2008, the Global TFM limit has been reduced from EUR 89 to 85 million. TFM also manages Bond Portfolio securities on banking books which have been largely put in run-off.
A. Trading book and CLM Dexia Bank calculated:
●● an Interest Rate (IR) and Foreign Exchange (FX) VaR mainly based on parametrical method (99% 10 days), complemented by an historical full valuation VaR to measure the FX derivatives and IR volatility risk; ●● an Equity VaR based on a full valuation historical method; ●● a historical credit-spread VaR based on sensitivities; Managementreport ●● a historical VaR on inflation based on sensitivities and an historical VaR in full valuation on carbon (C02) risks.
The detailed VaR usage of Dexia Bank is disclosed in the table below.
Note that the Bond Portfolio exposure on banking books is not included in the table below as it is followed through spread sensitivity and not in VaR (see further).
Value at Risk VaR (99% 10 days) 2009 IR(1)&FX(2) EQT(4) Spread Trading Other risks statements (Trading and Banking)(3) Trading (in millions of EUR) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Consolidated financial By risk factor Average 15.6 13.2 13.4 14.2 1.3 1.7 2.8 2.2 12.6 13.2 13.2 12.1 4.9 4.5 4.6 4.4 Maximum 22.7 15.9 18.3 21.2 3.5 4.8 8.3 3.7 14.2 15.3 19.1 16.6 7.8 5.3 4.8 4.7
Global Average 33.5 Maximum 45.9 End period 33.8 Limit 86.5
(1) IR: interest rate. (2) FX: forex.
(3) IR & FX: without BSM. statements (4) EQT: equities. Non-consolidated financial
172 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 173 Notes to the consolidated financial statements
Value at Risk VaR (99% 10 days) 2010 IR(1)&FX(2) EQT(4) Spread Trading Other risks (Trading and Banking)(3) Trading (in millions of EUR) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q By risk factor Average 12.6 14.1 17.1 13.2 1.7 2.0 2.5 1.9 15.7 14.8 17.0 14.2 3.3 3.6 3.4 3.7 Maximum 18.1 25.7 22.1 17.5 2.9 3.8 4.5 4.2 23.7 22.8 22.5 17.8 3.9 3.4 3.8 4.2
Global Average 35.2 Maximum 47.3 End period 32.0 Limit 85
(1) IR: interest rate. (2) FX: forex. (3) IR & FX: without BSM. (4) EQT: equities.
The CLM and trading risks are also followed via sensitivity limits. As at 31 December 2010 the CLM sensitivity was of EUR 12 million/% against a limit of EUR 90 million/%.
B. Dexia bond-portfolio exposure (banking book only – portfolio largely in run-off – excluding BSM)
Outstanding
(in billions of EUR) 2009 2010
Managementreport Total TFM credit spread banking 33 26
Interest-rate sensitivity The interest-rate risk of the bond portfolio is systematically hedged, as its purpose is the credit spread; therefore it has a very limited sensitivity to change of interest rate.
Credit-spread sensitivity This calculation estimates the sensitivity of the AFS reserve after a basis point spread increase, in millions of EUR. The table below shows the credit-spread sensitivity of this bond portfolio excluding BSM scope.
(in millions of EUR) 2009 2010 statements Total TFM credit spread banking (8) (7) Consolidated financial statements Non-consolidated financial
174 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 175 Notes to the consolidated financial statements
2. BSM interest rate, equity and credit-spread risk
BSM falls under the direct decision and control authority of the ALCO Group and of the Funding and Liquidity Committee.
The sensitivity measures the change in the balance-sheet net economic value if interest rates rise by 1% across the entire interest- rate curve.
For the sensitivity calculation, residual maturity of the portfolio until next interest-rate refixing date is defined using assumptions on the observed behaviour of the customers and not on legal repayment date (see note 12.4.).
Banking and insurance companies 2009 Interest rate(2) Equity(3) Credit spread(4) (in millions of EUR) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Banking companies BSM(1) Sensitivity (68) (109) 6 (29) (9) (9) (9) (9) VaR 99% 10d. 150 161 176 149 41 37 23 10 Insurance Mitigated (48) (53) (77) (99) (11) (10) (12) (11) VaR 99% 10d. 85 97 151 149
(1) CLM excluded. (2) Sensitivities to 1% shift. (3) Equity risks are more detailed below. (4) Sensitivities to 1 bp shift on AFS reserve.
2010 Managementreport Interest rate(2)(3) Equity(4) Credit spread(5) (in millions of EUR) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Banking companies BSM(1) Sensitivity (17) (44) 59 (148) (9) (8) (9) (8) VaR 99% 10d. 34 34 14 94 2,0 0,4 0,4 0,4 Insurance Mitigated 22 45 168 84 (12) (10) (11) (10) VaR 99% 10d. 102 89 101 116
(1) CLM excluded. (2) Sensitivities to 1% shift. statements (3) As at 31 December 2010 the interest-rate sensitivity limit for BSM amounted to EUR 160 million/%. (4) Equity risks are more detailed below.
(5) Sensitivities to 1 bp shift on AFS reserve. Consolidated financial statements Non-consolidated financial
174 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 175 Notes to the consolidated financial statements
Focus on BSM equity exposure – Listed shares sensitivity The Equity Value at Risk (VaR) measures the potential change in market value, whereas the Equity Earnings at Risk (EaR) measures the impact in the accounting result if the VaR materialises.
The Equity VaR calculated by Dexia is a measure of the potential loss that can be experienced with a level of confidence of 99% over a holding period of 10 days.
Banking companies (BSM portfolio) Market value VaR % VaR EaR Acquisition (in millions of EUR) value 31 December 2009 97 10 10.3% 0 101 31 March 2010 17 2 12.0% 0 24 30 June 2010 3 0 13.2% 0 9 30 September 2010 3 0 15.4% 0 9 31 December 2010 3 0 14.0% 0 9
Insurance companies Market value VaR Mitigated % VaR EaR Acquisition portfolio(1)(2) VaR(3) value (in millions of EUR) 31 December 2009 1,435 149 119 10.4% (52) 1,541 31 March 2010 1,388 96 102 7.0% (46) 1,464 30 June 2010 1,063 99 89 9.3% (85) 1,232 30 September 2010 1,180 111 101 9.4% (42) 1,267 31 December 2010 1,359 127 116 9.3% (32) 1,392
(1) The VaR limit for BSM insurance portfolio amounted to EUR 160 million as at 31 December 2010. The limit is applied to the mitigated VaR as the gross VaR captures additionally the risk which is not born by Dexia (the risk is supported by the policyholders). The Equity VaR limit for the insurance unit remained unchanged compared to 2009.
Managementreport (2) The VaR limit of EUR 160 million is composed of EUR 130 million for the insurance company (DIS) itself and EUR 30 million on pension funds, that are considered to be at full risk (defined benefit plans for Dexia employees). (3) Mitigated VaR takes into consideration the repartition of risks between the insurance policyholder and the insurer. statements Consolidated financial statements Non-consolidated financial
176 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 177 Notes to the consolidated financial statements
12.6. Liquidity risk
Dexia Bank’s approach to liquidity-risk management has been reviewed in the light of the financial and liquidity crisis.
Overall policy is that its future funding needs should never exceed its proven secured funding capacity.
Since 2009, Dexia Bank is subject to reporting liquidity to the Belgian regulator (CBFA).
Breakdown residual maturity
Current accounts and savings deposits are included in the column “At sight and on demand” even though they have no fixed repayment date.
A. 2009 Assets 31/12/09 Breakdown of gross amount and premium/discount Accrued Fair Impair- Total interest value ment At sight Up to More More Over Undeter- adjust- and on 3 months than than 5 years mined ment demand 3 months 1 year maturity (In thousands of eur) to 1 year to 5 years Cash and balances with central banks 467,963 31,208 0 0 0 0 2,466 0 0 501,637 Loans and advances due from banks 13,134,835 24,760,320 20,824,901 3,478,710 1,630,885 6,451 113,392 12,959 (50,698) 63,911,755 Loans and advances to customers 13,014,581 10,333,550 4,960,622 18,381,030 56,137,817 735,195 420,169 18,214 (993,984) 103,007,194 Financial assets held for trading 678 71,919 685,302 598,555 1,715,564 33,634 14,175 (157,883) 0 2,961,944 Financial assets Managementreport designated at fair value 0 2,077 88,182 24,666 301,387 3,105,615 367 (21,238) 0 3,501,056 Financial assets available for sale 0 855,227 2,695,822 10,546,194 24,085,865 2,333,354 672,255 734,149 (465,875) 41,456,991 Investments held to maturity 0 0 0 0 0 0 0 0 0 0 Derivatives 4,293,250 24,451,369 0 28,744,619 Fair value revaluation of portfolio hedge 1,739,298 0 1,739,298 Investments in associates 284,014 284,014
Tangible fixed assets 1,334,211 1,334,211 statements Intangible assets and goodwill 228,507 228,507
Tax assets 683,063 0 683,063 Consolidated financial Other assets 91,655 134,115 78,969 25,106 21,696 778,889 0 9,213 (80,661) 1,058,982 Non-current assets held for sale 4,402,914 0 34,480 (79,917) 4,357,477
Total 26,709,712 36,188,416 29,333,798 33,054,261 83,893,214 13,925,847 5,516,074 26,820,561 (1,671,135) 253,770,748 statements Non-consolidated financial
176 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 177 Notes to the consolidated financial statements
Liabilities 31/12/09 Breakdown of gross amount and premium/discount Accrued Fair Total interest value At sight Up to More More Over Undeter- adjustment and on 3 months than than 5 years mined demand 3 months 1 year maturity (In thousands of eur) to 1 year to 5 years Due to banks 23,407,448 28,055,701 21,196,329 407,670 936,041 1,992 112,609 1,330 74,119,120 Customer borrowings and deposits 53,735,031 17,315,113 2,325,914 3,045,389 693,710 40,995 642,623 0 77,798,775 Financial liabilities held for trading 0 101,400 4,432 52,329 39,798 12,651 1,452 114 212,176 Financial liabilities designated at fair value 0 51,548 75,069 3,437,221 3,570,753 3,191,910 149,865 149,014 10,625,380 Derivatives 6,053,585 26,257,624 32,311,209 Fair value revaluation of portfolio hedge 0 0 0 Debt securities 282,717 4,340,640 3,719,298 12,709,794 8,124,840 0 298,588 (38,839) 29,437,038 Subordinated debts 953 315,953 32,282 149,685 934,697 1,393,277 64,345 52,639 2,943,831 Technical provision of insurance companies 6,531 148,241 399,430 4,863,103 7,925,249 42,122 13,384,676 Provisions and other obligations 911,551 911,551 Tax liabilities 39,035 39,035 Other liabilities 1,137,174 284,866 64,399 7,246 3,296 479,030 1,499 0 1,977,510 Liabilities included in disposal groups held for sale 4,335,466 0 0 4,335,466 Managementreport Total 78,569,854 50,613,462 27,817,153 24,672,437 22,228,384 10,448,029 7,324,566 26,421,882 248,095,767
Net liquidity gap 31/12/09 At sight Up to More than More than Over Undetermined and on 3 months 3 months 1 year to 5 years maturity (In thousands of eur) demand to 1 year 5 years Net liquidity gap (51,860,142) (14,425,046) 1,516,645 8,381,824 61,664,830 3,477,818 statements This table does not take into account the liquidity nor the eligibility to Dexia Bank uses derivatives to hedge its risks. The market value of refinancing the asset; some listed long-term assets may be sold or derivatives is reported in the column ‘Fair value adjustment” as the Consolidated financial refinanced with central banks in case of need of liquidity. expected cash flows can significantly change due to the evolution of the underlying index (interest rate, exchange rate, credit spreads, etc.). The liquidity position of a bank results from the difference between contractual maturities of assets and liabilities. This allows the presenta- tion of the liquidity gap. statements Non-consolidated financial
178 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 179 Notes to the consolidated financial statements
B. 2010 Assets 31/12/10 Breakdown of gross amount and premium/discount Accrued Fair Impair- Total interest value ment At sight Up to More More Over Undeter- adjust- and on 3 months than than 5 years mined ment demand 3 months 1 year maturity (In thousands of eur) to 1 year to 5 years Cash and balances with central banks 1,459,314 0 0 0 0 0 1,594 0 0 1,460,908 Loans and advances due from banks 17,383,461 31,469,470 5,540,511 11,585,651 1,823,396 37,356 108,576 27,047 (38,684) 67,936,784 Loans and advances to customers 12,088,567 10,910,642 5,641,361 21,271,570 49,055,145 1,096,964 367,712 23,292 (982,782) 99,472,471 Financial assets held for trading 658 45,974 59,230 748,257 1,516,134 29,493 18,841 (12,604) 0 2,405,983 Financial assets designated at fair value 0 14,764 78,788 15,331 283,766 3,522,791 256 (1,642) 0 3,914,054 Financial assets available for sale 12,502 303,142 859,013 9,360,309 24,363,783 1,704,084 676,916 (438,486) (366,179) 36,475,084 Investments held to maturity 0 0 0 0 0 0 0 0 0 0 Derivatives 3,624,878 26,688,351 0 30,313,229 Fair value revaluation of portfolio hedge 1,812,004 0 1,812,004 Investments in associates 277,969 277,969 Tangible fixed assets 1,241,293 1,241,293 Intangible assets and Managementreport goodwill 229,235 229,235 Tax assets 953,365 0 953,365 Other assets 129,119 102,790 38,895 34,401 9,531 1,105,695 7 6,152 (33,498) 1,393,092 Non-current assets held for sale 57,866 0 0 (41,202) 16,664
Total 31,073,621 42,846,782 12,217,798 43,015,519 77,051,755 10,256,111 4,798,780 28,104,114 (1,462,345) 247,902,135 statements Consolidated financial statements Non-consolidated financial
178 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 179 Notes to the consolidated financial statements
Liabilities 31/12/10 Breakdown of gross amount and premium/discount Accrued Fair Total interest value At sight Up to More More Over Undeter- adjustment and on 3 months than than 5 years mined demand 3 months 1 year maturity (In thousands of eur) to 1 year to 5 years Due to banks 23,757,480 35,634,049 1,332,651 731,907 872,825 2,947 34,698 1,687 62,368,244 Customer borrowings and deposits 61,379,456 14,011,591 3,386,323 2,894,972 579,587 72,259 552,343 0 82,876,531 Financial liabilities held for trading 0 2,411 6,814 427,843 251,448 12,694 7,961 (7,815) 701,356 Financial liabilities designated at fair value 0 14,210 270,157 4,459,852 2,901,515 3,523,284 156,506 167,787 11,493,311 Derivatives 4,570,234 30,332,672 34,902,906 Fair value revaluation of portfolio hedge (42,023) (42,023) Debt securities 123,359 1,913,011 3,224,885 15,486,939 7,934,091 0 295,541 (19,943) 28,957,883 Subordinated debts 337 103,310 4,795 55,428 964,784 1,478,588 55,205 53,194 2,715,641 Technical provision of insurance companies 4,859 267,143 792,590 6,279,772 7,793,047 482,480 15,619,891 Provisions and other obligations 900,859 900,859 Tax liabilities 34,936 34,936 Other liabilities 1,145,623 205,009 77,009 17,406 1,936 471,951 1,535 0 1,920,469 Liabilities included in disposal groups held for sale 2 0 0 2 Managementreport Total 86,411,114 52,150,734 9,095,224 30,354,119 21,299,233 6,980,000 5,674,023 30,485,559 242,450,006
Net liquidity gap 31/12/10 At sight Up to More than More than Over Undetermined and on 3 months 3 months 1 year to 5 years maturity (In thousands of eur) demand to 1 year 5 years Net liquidity gap (55,337,493) (9,303,952) 3,122,574 12,661,400 55,752,522 3,276,111 statements This table does not take into account the liquidity nor the eligibility to Dexia Bank uses derivatives to hedge its risks. The market value of refinancing the asset; some listed long-term assets may be sold or derivatives is reported in the column “Fair value adjusment” as the Consolidated financial refinanced with central banks in case of need of liquidity. expected cash flows can significantly change due to the evolution of the underlying index (interest rate, exchange rate, credit spreads, etc.). The liquidity position of a bank results from the difference between contractual maturities of assets and of liabilities. This allows the pres- entation of the liquidity gap. statements Non-consolidated financial
180 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 181 Notes to the consolidated financial statements
12.7. Currency risk
31/12/09 EUR Other USD Other Total (In thousands of eur) EU currencies Total assets 216,951,889 14,017,924 19,240,870 3,560,065 253,770,748 Total liabilities and equity 217,850,936 10,037,918 23,312,894 2,569,000 253,770,748 Net on-balance position (899,047) 3,980,006 (4,072,024) 991,065 0
Off-balance sheet – to receive 13,494,288 4,945,845 17,206,689 4,484,968 40,131,790 Off-balance sheet – to deliver 13,704,587 8,629,996 13,020,809 5,318,570 40,673,962 Off-balance sheet – Net position (210,299) (3,684,151) 4,185,880 (833,602) (542,172)
NET POSITION (1,109,346) 295,855 113,856 157,463
31/12/10 EUR Other USD Other Total (In thousands of eur) EU currencies Total assets 210,894,170 289,202 19,511,070 17,207,693 247,902,135 Total liabilities and equity 213,098,553 150,260 22,948,037 11,705,285 247,902,135 Net on-balance position (2,204,383) 138,942 (3,436,967) 5,502,408 0
Off-balance sheet – to receive 13,909,806 1,305,863 18,409,283 8,852,836 42,477,788 Off-balance sheet – to deliver 13,143,685 1,444,609 14,706,298 13,642,001 42,936,593 Off-balance sheet – Net position 766,121 (,138,746) 3,702,985 (4,789,165) (,458,805)
NET POSITION (1,438,262) 196 266,018 713,243 Managementreport
12.8. Insurance risks
Insurance activities are performed in Dexia Bank by Dexia Insur- Some of the risks are reinsured (see note 9.3.). Because of its ance Services group (DIS) (see Accounting principles “Insurance activities, the reinsurance of a part of the risks and the size of and reinsurance activities” and Management report “Risk DIS activities in comparison with total activities and risks of management”). Dexia Bank, change of insurance-technical variables will not have a significant impact on the financial position of Dexia Bank. DIS is active in life (84% of gross premium written) and non-life activities and has no major concentration of risks. Regarding
the activities of Dexia Bank group, non-life insurance activities statements are not significant. Consolidated financial statements Non-consolidated financial
180 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 181 Report of the Auditor
Dexia Bank Belgium SA
Statutory auditor’s report on the consolidated financial statements for the year ended 31 December 2010 The original text of this report is in Dutch and French
Dexia Bank Belgium SA Statutory auditor’s report on the consolidated financial statements for the year ended 31 December 2010 to the Shareholders’ Meeting
To the shareholders
As required by law and the company’s articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. This report includes our opinion on the consolidated financial statements together with the required additional comment.
Unqualified audit opinion on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Dexia Bank Belgium SA (“the company”) and its subsidiaries (jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the Managementreport European Union and with the legal and regulatory requirements applicable in Belgium. Those consolidated financial statements comprise the consolidated balance sheet as at 31 December 2010, the consolidated statement of income, the consolidated statement of changes in equity, the consolidated statement of comprehensive income and the consolidated cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of 247,902,135 (000) EUR and the consolidated income statement shows a consolidated profit (group share) for the year then ended of 678,322 (000) EUR.
The Board of Directors of the company is responsible for the preparation of the consolidated financial statements. This responsi- bility includes among other things: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. statements Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Réviseurs Consolidated financial d’Entreprises/Instituut van de Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. We have assessed the basis of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the consolidated financial statements, taken as a whole. Finally, the Board of Directors and responsible officers of the company have replied to all our requests for statements explanations and information. We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements give a true and fair view of the group’s financial position as at 31 December
Non-consolidated financial 2010, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium.
182 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 183 Report of the Auditor
Additional comment
The preparation and the assessment of the information that should be included in the directors’ report on the consolidated fi- nancial statements are the responsibility of the Board of Directors.
Our responsibility is to include in our report the following additional comment which does not change the scope of our audit opinion on the consolidated financial statements:
●● The directors’ report on the consolidated financial statements includes the information required by law and is in agreement with the consolidated financial statements. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the group, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not in obvious contradiction with any information obtained in the context of our appointment.
Diegem, 24 March 2011
The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by
Frank Verhaegen Bernard De Meulemeester Partner Partner Managementreport statements Consolidated financial statements Non-consolidated financial
182 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 183 184 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 185 Non-consolidated financial statements ( be gaap )
as at 31 december 2010
186 Balance sheet 188 Off-balance sheet 189 Statement of income 190 Approbation account 191 Accounting principles 195 Notes to the non-consolidated financial statements 231 Social report 234 Report of the Auditor
184 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 185 Balance sheet (after appropriation)
Assets (in thousands of EUR) 31/12/09 31/12/10
I. Cash in hand, balances with central banks and Post Office banks 420,456 454,055 II. Treasury bills eligible for refinancing with central banks 1,964,624 24,098 III. Loans and advances to credit institutions 56,836,606 66,671,567 A. Repayable on demand 9,343,663 2,009,512 B. Other loans and advances (with agreed maturity dates) 47,492,943 64,662,055 IV. Loans and advances to customers 85,323,882 77,609,157 V. Debt securities and other fixed-income securities 42,702,023 34,781,689 A. Issued by public bodies 789,250 702,636 B. Issued by other borrowers 41,912,773 34,079,053 VI. Shares and other variable-yield securities 75,553 55,212 VII. Financial fixed assets 8,821,387 8,754,610 A. Participating interests in affiliated enterprises 8,080,419 8,041,827 B. Participating interests in other enterprises linked by participating interests 190,988 161,051 C. Other shares held as financial fixed assets 26,140 27,155 D. Subordinated loans to affiliated enterprises and to other enterprises linked by participating interests 523,840 524,577 VIII. Formation expenses and intangible fixed assets 12,671 10,893 Managementreport IX. Tangible fixed assets 800,872 807,259 X. Own shares 0 0 XI. Other assets 1,309,193 1,895,546 XII. Deferred charges and accrued income 18,740,456 21,360,135
TOTAL ASSETS 217,007,722 212,424,221 statements Consolidated financial statements Non-consolidated financial
186 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 187 Balance sheet (after appropriation)
Liabilities (in thousands of EUR) 31/12/09 31/12/10
I. Amounts owed to credit institutions 73,417,923 62,046,700 A. Repayable on demand 10,815,398 11,349,231 B. Amounts owed as a result of the rediscounting of trade bills 0 0 C. Other debts with agreed maturity dates or periods of notice 62,602,526 50,697,469 II. Amounts owed to customers 91,789,035 99,042,611 A. Savings deposits 25,223,726 27,900,856 B. Other debts 66,565,309 71,141,755 1. Repayable on demand 22,201,304 18,721,405 2. With agreed maturity dates or periods of notice 44,364,004 52,420,350 3. As a result of the rediscounting of trade bills 0 0 III. Debts evidenced by certificates 20,672,370 16,080,443 A. Debt securities and other fixed-income securities in circulation 17,381,013 14,491,292 B. Other 3,291,357 1,589,151 IV. Other liabilities 1,386,210 2,081,539 V. Accrued charges and deferred income 19,552,183 22,541,282 VI. A. Provisions for liabilities and charges 257,956 227,385 1. Pensions and similar obligations 58,247 67,136 2. Taxation 19,000 1,607 3. Other liabilities and charges 180,709 158,642 B. Deferred taxes 78,169 81,214 VII. Fund for General Banking Risks 988,737 988,737 VIII. Subordinated liabilities 2,809,530 2,595,674
CAPITAL AND RESERVES 6,055,609 6,738,636 IX. Capital 3,458,066 3,458,066 A. Subscribed capital 3,458,066 3,458,066 B. Uncalled capital (-) 0 0 X. Share premium account 209,232 209,232 XI. Revaluation surpluses 233 231 Managementreport XII. Reserves 2,384,423 3,069,948 A. Legal reserve 260,659 295,264 B. Reserves not available for distribution 2,344 2,344 1. In respect of own shares held 0 0 2. Other 2,344 2,344 C. Untaxed reserves 177,974 183,892 D. Reserves available for distribution 1,943,446 2,588,448 XIII. Profits (losses (-)) brought forward 3,655 1,159
TOTAL LIABILITIES 217,007,722 212,424,221 statements Consolidated financial statements Non-consolidated financial
186 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 187 Off-balance sheet
(in thousands of EUR) 31/12/09 31/12/10
I. Contingent liabilities 22,935,281 23,735,861 A. Non-negotiated acceptances 0 0 B. Guarantees serving as direct credit substitutes 20,915,357 21,913,271 C. Other guarantees 1,898,294 1,660,037 D. Documentary credits 88,981 127,317 E. Assets charged as collateral security on behalf of third parties 32,650 35,236 II. Commitments which could give rise to a risk 32,646,619 31,188,370 A. Firm credit commitments 2,378,964 1,929,779 B. Commitments as a result of spot purchases of transferable or other securities 500,497 712,884 C. Undrawn margin on confirmed credit lines 29,477,158 28,330,707 D. Underwriting and placing commitments 290,000 215,000 E. Commitments as a result of open-ended sale and repurchase agreements 0 0 III. Assets lodged with the credit institution 100,186,069 103,724,440 A. Assets held by the credit institution for fiduciary purposes 0 0 B. Safe custody and equivalent items 100,186,069 103,724,440 IV. Uncalled amounts of share capital 52,720 37,795 Managementreport statements Consolidated financial statements Non-consolidated financial
188 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 189 Statement of income (presentation in list form)
(in thousands of EUR) 31/12/09 31/12/10
I. Interest receivable and similar income 4,885,631 3,680,124 of which: from fixed-income securities 1,245,441 821,374 II. Interest payable and similar charges (-) (3,789,459) (2,601,887) III. Income from variable-yield securities 439,379 642,894 A. From shares and other variable-yield securities 9,660 2,036 B. From participating interests in affiliated enterprises 391,204 626,605 C. From participating interests in other enterprises linked by participating interests 33,564 11,777 D. From other shares held as financial fixed assets 4,950 2,476 IV. Commissions receivable 429,660 465,109 V. Commissions payable (-) (453,735) (452,118) VI. Profit (Loss (-)) on financial transactions (200,276) (51,036) A. On trading of securities and other financial instruments (130,228) (206,224) B. On disposal of investment securities (70,047) 155,188 VII. General administrative expenses (-) (1,022,303) (1,082,546) A. Remuneration, social security costs and pensions (619,401) (618,967) B. Other administrative expenses (402,901) (463,579) VIII. Depreciation/Amortization of and other write-downs on (-) formation expenses, intangible and tangible fixed assets (78,470) (81,822)
IX. Decrease/(Increase (-)) in write-downs on receivables and in provisions for off-balance-sheet Managementreport items “I. Contingent liabilities” and “II. Commitments which could give rise to a risk” (50,767) (38,717) X. Decrease/(Increase (-)) in write-downs on the investment portfolio of debt securities, shares and other fixed-income or variable-yield securities 51,242 (9,603) XI. Utilisation and write-backs of provisions for liabilities and charges other than those included in the off-balance-sheet items “I. Contingent liabilities” and “II. Commitments which could give rise to a risk” 69,544 54,261 XII. Provisions for liabilities and charges other than those included in the off-balance-sheet items “I. Contingent liabilities” and “II. Commitments which could give rise to a risk” (51,553) (40,457) XIII. Transfer from (Transfer to) the Fund for General Banking Risks 0 0 XIV. Other operating income 170,079 204,015 XV. Other operating charges (120,442) (133,521) XVI. Profits (Losses (-)) on ordinary activities before taxes 278,531 554,696 XVII. Extraordinary income 179,116 157,138 statements A. Adjustments to depreciation/amortization of and to other write-downs on intangible and tangible fixed assets 1,612 1,277 Consolidated financial B. Adjustments to write-downs on financial fixed assets 2,049 1 C. Adjustments to provisions for extraordinary liabilities and charges 0 0 D. Gain on disposal of fixed assets 175,455 155,860 E. Other extraordinary income 0 0 XVIII. Extraordinary charges (-) (38,967) (5,390) A. Extraordinary depreciation/amortization of and extraordinary write-downs on formation expenses and intangible and tangible fixed assets (9,864) (1,294) B. Write-downs on financial fixed assets (3,372) (3,349) C. Provisions for extraordinary liabilities and charges 0 0 D. Loss on disposal of fixed assets (25,718) (374) E. Other extraordinary charges (12) (373) XIX. Profits (Losses (-)) for the period before taxes 418,680 706,444 statements XIXbis. A. Transfer to deferred taxes (-) (5,035) (6,163) B. Transfer from deferred taxes 2,331 3,118 XX. Income taxes 24,693 (5,381) A. Income taxes (-) (20,882) (24,120) Non-consolidated financial B. Adjustment of income taxes and write-back of tax provisions 45,575 18,739 XXI. Profits (Losses (-)) for the period 440,669 698,018 XXII. Transfer to untaxed reserves (-) (9,778) (11,969) Transfer from untaxed reserves 4,527 6,051 XXIII. Profits (Losses (-)) for the period available for approbation 435,418 692,100
188 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 189 Approbation account
(in thousands of EUR) 31/12/09 31/12/10
A. Profits (Losses (-)) to be appropriated 439,857 695,755 1. Profits (Losses (-)) for the period available for approbation 435,418 692,100 2. Profits (Losses (-)) brought forward 4,439 3,655 B. Transfers from capital and reserves 0 0 1. From capital and share premium account 0 0 2. From reserves 0 0 C. Appropriations to capital and reserves (-) (426,771) (679,605) 1. To capital and share premium account 0 0 2. To legal reserve (21,771) (34,605) 3. To other reserves (405,000) (645,000) D. Result to be carried forward (3,655) (1,159) 1. Profits to be carried forward (-) (3,655) (1,159) 2. Losses to be carried forward 0 0 E. Shareholders’ contribution in respect of losses 0 0 F. Distribution of profits (-) (9,431) (14,991) 1. Dividends(1) 0 0 2. Director’s entitlements(1) 0 0 3. Other allocations(1) (9,431) (14,991)
Managementreport (1) Only applicable to Belgian limited liability companies. statements Consolidated financial statements Non-consolidated financial
190 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 191 Accounting principles
General rules 1.3. Internal security fund The internal security fund constitutes a precautionary fund for 1. Legislation possible future extraordinary risks, the extent of which is established annually on the basis of the risk volume of the bank. The valuation rules applicable to the financial statements of Dexia Bank were drawn up in accordance with the Royal The internal security fund is established within the limits Decree on the financial statements of credit institutions of laid down in Article 35bis of the Royal Decree on the financial 23 September 1992, published in the Belgian Official Gazette statements of credit institutions. These amounts are not of 6 October 1992. indicated separately, but deducted from the items in the assets concerned. Unless express mention is made of specific valuation rules, the provisions laid down in the aforementioned Royal Decree apply. 2. Stocks and shares and other securities Should the legislation provide for a choice to be made or an exception allowed, the option or exception in question is 2.1. Acquisition value expressly indicated. Depending on the nature of the subportfolio, the acquisition value is determined in accordance with the principle of the 2. Conversion of foreign currencies into individualised price or the average acquisition price. The addi- eur tional costs are also charged immediately. Managementreport
Monetary debts, assets, rights and obligations expressed in 2.2. Valuation rules foreign currencies are converted into EUR at the average rate 2.2.1. Trade portfolio on the balance-sheet date. Securities to be invested and securities to be realised for which there is a liquid market are valued at their market value on the Non-monetary components are converted into EUR at the ex- balance-sheet date. If there is no liquid market, they are valued change rate on the date of the transaction. If non-monetary at their acquisition value, or at their market value on the balance- components are financed by means of long-term funding in the sheet date if this is lower. corresponding currency, then a valuation method may be applied whereby the conversion variances relating to the 2.2.2. Investment portfolio aforementioned borrowings are not systematically taken into The securities in the investment portfolio are subdivided into
account when calculating the balance of the conversion vari- the following subportfolios on the basis of their intended use: statements ances, but are booked in the accruals and deferrals. ●● the subportfolio for liquidity support Consolidated financial Income and costs in foreign currencies are converted into ●● the investment portfolio itself EUR at the rate on the day on which the results are acknowl- edged. The securities used as liquidity support are valued at their acquisition value or their market value on the balance-sheet date if this is lower. Specific rules – assets Non-fixed-income securities in the investment portfolio are valued at their acquisition value or their market value on the 1. Amounts receivable from banks and balance-sheet date if this is lower. customers Fixed-income securities in the investment portfolio are valued Receivables are included in the balance sheet at the amounts on the basis of their actuarial return, calculated upon purchase statements made available, less any reimbursements made in the meantime and taking account of their reimbursement value upon maturity. and plus the interest due.
Arbitrage transactions as defined in Article 35ter, §5 may be Non-consolidated financial 1.1. Amounts written off carried out on the fixed-income securities in the investment Amounts written off are booked on uncertain receivables and portfolio: each combined purchase and sale of fixed-income on non-collectable and doubtful receivables. securities within a relatively short period of time that results in a real improvement in return on these investment securities. 1.2. Reserved income Interest on receivables considered a problem risk is calculated Should they be carried out, the results of these arbitrage and booked as an actual amount receivable. Given the principle transactions are processed in accordance with the provisions of caution, this interest is not included in the profits, but is of Article 35ter, §5, whereby losses and gains from the sale of booked in an adjustment account in the assets. fixed-income securities are included in the result together with the future income from the arbitrage.
190 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 191 Accounting principles
2.2.3. Amounts written off The depreciation on investments acquired as of 1 January 2003 For securities in the investment portfolio section, amounts is prorated. These assets may therefore no longer be written written off are booked if a long-term loss is observed. The off during the year of acquisition for a full annuity. The pro amounts written off are deducted from the assets concerned. rata of the depreciation can only be taken into account at the On fixed-income securities in the investment portfolio which earliest as of the invoicing date. are difficult to value on the basis of their actuarial return due to their nature, amounts written off are booked in the event This rule also applies for new investments starting 1 January of a long-term reduction in or loss of value. Loans contracted 2008 in branches of the bank, safe-deposit boxes, courier safes, in perpetuity and other similar instruments are valued in safes, protected furniture, time-lock furniture and branches accordance with the “lower of cost or market” principle. under construction.
3. Financial fixed assets The following useful lifespans are assumed:
Financial fixed assets are included in the balance sheet at their ●● buildings – head office and other major buildings: 24 to acquisition value. The additional procurement costs are charged 34 years to the financial year of acquisition. ●● buildings – outbuildings: 28 to 34 years ●● buildings – branches and provincial head offices: 24 to For shares and participating interests that fall under this item, 34 years amounts written off are booked if a long-term reduction in or ●● buildings – revaluation surpluses: 20 years loss of value is observed. ●● telephone exchange, telephony and telephone installation: 4 to 34 years Shares and participating interest may be revalued if their value, ●● safe-deposit boxes, courier safes, safes, protected furniture, as established on the basis of the usefulness for the institution, time-lock furniture: 9 to 33 years definitely and lastingly exceeds their book value. ●● air conditioning installations: 9 to 10 years ●● heating installations: 9 to 20 years When selling shares and participating interests, the acquisition ●● installations, machines, equipment, furniture and rolling price to be taken into account when booking out is determined stock: 3 to 9 years on the basis of the principle of the individualised price (item by ●● leasing and similar rights: 5 to 68 years Managementreport item). ●● other tangible fixed assets – costs of fitting out rented buildings: 4 to 9 years As regards receivables and fixed-income securities in the financial ●● other tangible fixed assets – real estate leased out: 10 to fixed assets, amounts written off are booked when their 33 years collection is entirely or partially uncertain. ●● other tangible fixed assets – buildings and that are not related to the company: 9 to 34 years 4. Tangible fixed assets ●● assets under construction: 24 to 34 years
Tangible fixed assets are valued at their acquisition value less 5. Formation expenses and intangible depreciation. fixed assets
statements If the assets display a definite and lasting increase in value Formation expenses are included under the assets and depre compared with their book value, these assets may be revalued. ciated in full in the financial year to which they relate.
Consolidated financial 4.1. Additional costs and non-reclaimable taxes Costs related to the issue of loans are charged to the financial As regards assets with a limited useful life, additional costs year in which the loans are granted. consisting of installation costs, other additional costs and non-reclaimable taxes are written off in accordance with the Costs incurred as part of the restructuring of the branch network depreciation system of the main component to which they are included in the assets and subject to straight-line depreciation relate (pro rata basis). over five years.
As regards assets with an unlimited useful life, additional costs Licence purchases are included in the assets as intangible fixed such as non-reclaimable taxes are charged in full to the year of assets as of an amount in excess of or equal to EUR 500 as the acquisition by means of a write-off. acquisition value per operating resource or if the delivery is made in several parts that represent less than EUR 500 but statements 4.2. Intercalary interest altogether are equal to at least the EUR 500 criterion. Software Intercalary interest is not included in the assets and is not in- included in the assets is depreciated over a maximum of five cluded in the valuation principles of the tangible fixed assets. years. Non-consolidated financial 4.3. Depreciation rules Research and development costs for own software are charged The depreciation rules are determined on the basis of the in full to the financial years in which they are incurred. expected economic life and depreciation is straight-line or degressive. To maintain fiscal neutrality, the depreciation rules Fees for bringing in transactions with customers are processed of Artesia Banking Corporation remain applicable to investments entirely as costs for the financial year in which they are undertaken before 1 January 2002. incurred.
192 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 193 Accounting principles
Specific rules – liabilities Specific rules – off balance-sheet items
1. Amounts payable to banks and 1. Financial instruments customers The valuation of forward transactions on value dates, interest, Amounts payable to banks and customers are included in the shares and indexes varies depending on whether it involves balance sheet at the sum of money made available after deduc- hedging transactions or trading transactions. Forward trans- tion of any repayments made in the interim. actions on interest may be the subject of an exemption from Article 36bis § 2 of the Royal Decree of 23 September 1992 on 2. Amounts payable represented by the financial statements of credit institutions. promissory notes 1.1. Hedging transactions Amounts payable represented by promissory notes without Hedging transactions are concluded to hedge entirely or share premium are included in the balance sheet at their partially against the risk of value date, interest-rate or price nominal value. fluctuations. Processing of profits and losses on hedging transactions in the statement of income is symmetrical to the Amounts payable represented by promissory notes for which allocation of income and costs of the hedged component. The the repayment value differs from the issue price are included hedging transaction must, among other things, be document- in the balance sheet at the amount made available to the ed and tested for its effectiveness. Transactions that are credit institution. intended to cover trading transactions are themselves processed as trading transactions. These promissory notes are revalued periodically on the basis of the actuarial return calculated upon sale and taking account 1.2. Trading transactions of the repayment value on the due date. Trading transactions are concluded with a view to making a short-term profit on investment. The transactions are valued at The circulation of bank saving certificates is increased by their market value on the balance-sheet date. If the transactions registrations before the effective date and reduced by repay- are traded on a liquid market, both the positive and the negative ments before maturity. valuation variances are included in the result. If the transactions are traded on a non-liquid market, only negative valuation vari- Managementreport For bank savings certificates with compulsory capitalisation, ances are included in the results; positive valuation vari- the circulation is increased by the capitalised interest. With ances are included in the accruals and deferrals. optional capitalisation, interest due but not claimed is also added to the circulation. 1.3. Management transactions As an exemption to Article 36 bis § 2 of the Royal Decree of 3. Provisions, Fund for General Bank Risks 23 September 1992 on the financial statements of credit and deferred taxes institutions the CBFA (Belgian Banking, Finance and Insurance Commission), in a letter dated 18 January 2002, in accordance The provisions for risks and charges are established to cover with Article 38 of the aforementioned Royal Decree and its losses and costs, the nature of which is clearly described, that framework decision of 14 June 1994, granted Dexia Bank the
are probable or certain on the balance-sheet date but the following exemption: statements amount of which has not been determined. ●● Forward interest-rate transactions concluded in the context The Fund for General Banking Risks is a precautionary fund of treasury management. These are transactions with a Consolidated financial to protect the bank against future risks which, although they duration of less than or equal to one year. The results are have not yet materialised, are latently linked to the business prorated over the relevant duration of the transaction and undertaken by credit institutions. The minimum threshold is processed under the item “Interest rate and similar currently set at 1% of the weighted risk volume. results”. ●● Forward interest-rate transactions in EUR concluded in the 4. Capital and reserves context of overall balance-sheet management (ALM manage- ment) likely to reduce the interest-rate risk or not likely to 4.1. Revaluation surpluses reduce the interest-rate risk but within a limit depending on Tangible fixed assets and participating interests and shares that the profitability and solvency of the bank. All transactions are part of the financial fixed assets can be revalued when their must be validated by the ALCO. In addition, the transactions value, as determined on the basis of the usefulness for the must be documented. The results are prorated over the statements institution, definitely and lastingly exceeds their book value. relevant duration of the transaction and processed under They are kept under this item until the assets concerned are the item “Interest rate and similar results”.
realised or until they are incorporated into the capital. ●● Forward interest-rate transactions in foreign currencies Non-consolidated financial likely to reduce the interest-rate risk. All transactions must The amount of these revaluation surpluses is reduced annually be validated by the ALCO and documented. The results are by means of a transfer to the available reserve in proportion to prorated over the relevant duration of the transaction and the amount of the depreciation booked on the revalued processed in the item “Interest rate and similar results”. assets.
192 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 193 Accounting principles
1.4. Strategic transactions The purpose of forward interest-rate transactions concluded in this context is to generate additional return on the basis of strategic positions. By means of the exemptions to Article 36bis § 2 of the Royal Decree of 23 September 1992 on the financial statements of credit institutions granted by the CBFA, strategic transactions are accepted as a specific category of ALM transactions in the sense that these transactions have to be validated by an ALCO.
With a multi-currency or EUR strategy, the results are prorated over the relevant duration of the transaction, along with a valuation – either at the cost price or at the market price, which- ever is lower (“lower of cost or market” basis) – of the forward transaction only.
In the event of a single-currency strategy (except for EUR), the results are prorated over the relevant duration of the transaction, along with a valuation - either at the cost price or at the market price, whichever is lower (“lower of cost or market” basis) of the forward transaction taking account of any latent capital gains on jointly managed components of the assets and the liabilities further to the (non-booked) market valuation of the latter.
The sum of the latent losses is booked under the item “Results of financial transactions”.
Managementreport 2. Internal contracts, exemption: CBFA circular dated 8 july 1996
Internal contracts are transactions between two services within the same entity or between two entities (subbranch/main branch) within the same institution. A distinction is made between symmetrical and asymmetrical contracts. The first form concerns internal contracts between departments that apply the same valuation rule.
Asymmetric internal contracts are internal contracts concluded
statements between two services or entities that use different valuation methods. Only asymmetric internal contracts give rise to the registration of autonomous results, that is, results that impact Consolidated financial on the results of the institution “in themselves”. The accounting processing of asymmetric internal contracts in the context of off-balance-sheet transactions is undertaken in accordance with the circular from the Banking, Finance and Insurance Commission of 8 July 1996. statements Non-consolidated financial
194 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 195 Notes to the non-consolidated financial statements
I. Statement of loans and advances to credit institutions (Assets item III.)
1. For the item as a whole
(in thousands of EUR) 31/12/09 31/12/10 a) Loans and advances to affiliated enterprises 43,888,961 50,135,787 Loans and advances to other enterprises linked by participating interests 228,938 162,244
b) Subordinated loans and advances Nil
2. Other loans and advances to credit institutions (with agreed maturity dates or periods of notice) (Assets item III.B.)
a) Trade bills eligible for refinancing with the central bank of the country or countries where the credit institution is established
Nil Managementreport
(in thousands of EUR) 31/12/10 b) Analysis according to the remaining maturity Up to 3 months 46,747,464 Over 3 months up to 1 year 5,434,676 Over 1 year up to 5 years 10,252,214 Over 5 years 1,220,522 Undated 1,007,179 statements II. Statement of loans and advances to customers (Assets item IV.) Consolidated financial
1. Loans and advances
(in thousands of EUR) 31/12/09 31/12/10 To affiliated enterprises 27,517,800 17,981,514 To other enterprises linked by participating interests 2,539,854 2,271,821
2. Subordinated loans Nil statements
3. Trade bills eligible for refinancing with the central bank of the country or countries where the credit institution is established
Nil Non-consolidated financial
194 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 195 Notes to the non-consolidated financial statements
4. Analysis according to the remaining maturity
(in thousands of EUR) 31/12/09 31/12/10 Up to 3 months 26,983,841 25,246,902 Over 3 months up to 1 year 8,568,341 4,547,702 Over 1 year up to 5 years 12,310,427 15,363,872 Over 5 years 32,971,034 27,447,186 Undated 4,490,239 5,003,495
5. Analysis by type
(in thousands of EUR) 31/12/09 31/12/10 Trade bills (including own acceptance) 19,642 27,164 Loans and advances as a result of leasing and similar agreements 554,759 582,382 Fixed-rate loans 1,403,978 1,427,152 Mortgage loans 10,642,824 10,516,330 Other term loans with a maturity over 1 year 35,804,138 35,148,396 Other loans and advances 36,898,542 29,907,733
6. Country analysis(1)
(in thousands of EUR) 31/12/09 31/12/10 To Belgium 62,427,925 62,055,219 Foreign countries 22,895,957 15,553,938
(1) Trade bills should be analysed by reference to the beneficiary of the credit. Managementreport 7. Details of mortgage loans with reconstitution of capital or linked to life insurance and capitalisation contracts Nil
III. Statement of debt securities and other fixed-income securities (Assets item V.)
statements 1. Securities issued by
(in thousands of EUR) 31/12/09 31/12/10 Consolidated financial Affiliated enterprises 1,203,304 1,328,789 Other enterprises linked by participating interests 551 500
2. Securities representing subordinated loans
(in thousands of EUR) 31/12/09 31/12/10 Securities representing subordinated loans 311,967 330,947
3. Country analysis of the securities issued statements Belgium Foreign (in thousands of EUR) countries
Non-consolidated financial By public bodies (V.A.) 177,414 525,222 By other borrowers (V.B.) 12,599,728 21,479,325
196 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 197 Notes to the non-consolidated financial statements
4. Listing and maturity
(in thousands of EUR) Carrying value Market value a) Listed securities 34,343,985 33,033,776 Unlisted securities 437,704
(in thousands of EUR) 31/12/10 b) Remaining maturity of up to 1 year 749,670 Remaining maturity of over 1 year 34,032,019
5. Analysis by portfolio
(in thousands of EUR) 31/12/10 a) Trading portfolio 2,893,715 b) Investment portfolio 31,887,974
6. Trading portfolio
(in thousands of EUR) 31/12/10 Difference between market value (if higher) and acquisition cost (for securities mark-to-market) 140,097
7. Investment portfolio
(in thousands of EUR) 31/12/10 Managementreport Difference between redemption value (if higher) and carrying value 238,715 Difference between redemption value (if lower) and carrying value 29,996
8. Analysis of the carrying value of investment securities
(in thousands of EUR) 31/12/10 a. ACQUISITION COST As at end of preceding period 39,773,420 Movements during the period Acquisitions 7,023,851
Sales (-) (15,148,271) statements Realised exchange gains/losses (+/-) 330,395 As at end of period (A) 31,979,395 Consolidated financial b. tRANSFERS BETWEEN PORTFOLIOS (B) Nil
c. WRITE-DOWNS As at end of preceding period 17,992 Movements during the period Recorded 88,578 Excess written back (-) (15,149) As at end of period (C) 91,421
d. CARRYING VALUE AS AT END OF PERIOD (A)+(B)-(C) 31,887,974 statements Non-consolidated financial
196 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 197 Notes to the non-consolidated financial statements
IV. Statement of shares and other variable-yield securities (Assets item VI.)
1. Country analysis of the issuers of securities
(in thousands of EUR) 31/12/09 31/12/10 Belgian issuers 30,174 23,789 Foreign issuers 45,379 31,423
2. Listing
(in thousands of EUR) Carrying value Market value Listed securities 32,475 34,830 Unlisted securities 22,737
3. Analysis by portfolio
(in thousands of EUR) 31/12/09 31/12/10 Trading portfolio 31,942 27,421 Investment portfolio 43,611 27,791
4. Trading portfolio
(in thousands of EUR) 31/12/10 Difference between market value (if higher) and acquisition cost (for securities mark-to-market) 228 Managementreport
5. Analysis of the carrying value of investment securities
(in thousands of EUR) 31/12/10 A. ACQUISITION COST As at end of preceding period 69,427 Movements during the period Acquisitions 4,723 Sales (-) (36,809) As at end of period (A) 37,341
statements B. tRANSFERS BETWEEN PORTFOLIOS (B) Nil
Consolidated financial c. WRITE-DOWNS As at end of preceding period 25,816 Movements during the period Recorded 2 Excess written back (-) (16,268) As at end of period (C) 9,550
d. CARRYING VALUE AS AT END OF PERIOD (A)+(B)-(C) 27,791 statements Non-consolidated financial
198 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 199 Notes to the non-consolidated financial statements
V. Statement of financial fixed assets (Assets item VII.)
1. Analysis of assets items VII.A., B., C.
A. Economic sector of items Credit institutions Other (in thousands of EUR) 31/12/09 31/12/10 31/12/09 31/12/10 Participating interests in affiliated enterprises 0 0 8,080,419 8,041,827 Participating interests in other enterprises linked by participating interests 23,939 23,939 167,049 137,112 Other shares held as financial fixed assets 124 124 26,016 27,031
B. Listing Listed Unlisted (in thousands of EUR) 31/12/09 31/12/10 31/12/09 31/12/10 Participating interests in affiliated enterprises 38,155 37,489 8,042,264 8,004,338 Participating interests in other enterprises linked by participating interests 44,591 39,363 146,397 121,688 Other shares held as financial fixed assets 7,262 7,262 18,878 19,893
2. Analysis of the carrying value, as at end of period, of assets items VII.A., B. and C Enterprises Affiliated Linked by Other (VII.A.) participating (VII.C.) Managementreport interests (in thousands of EUR) (VII.B.) A. ACQUISITION COST As at end of preceding period 8,101,359 193,091 27,584 Movements during the period Acquisitions 1,361 1,064 1,316 Sales and disposals (-) (39,953) (27,652) (302) As at end of period (A) 8,062,767 166,503 28,598
B. REVALUATION SURPLUSES (B) Nil statements C. WRITE-DOWNS As at end of preceding period 20,940 2,103 1,444 Consolidated financial Movements during the period Recorded 0 3,349 0 Excess written back (-) 0 0 (1) As at end of period (C) 20,940 5,452 1,443
D. NET CARRYING VALUE AS AT END OF PERIOD (A)+(B)-(C) 8,041,827 161,051 27,155 statements Non-consolidated financial
198 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 199 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
3. Analysis of assets item VII.D.
A. Subordinated loans to Credit institutions Other (in thousands of EUR) 31/12/09 31/12/10 31/12/09 31/12/10 Affiliated enterprises 521,214 524,338 0 0 Other enterprises linked by participating interests 0 0 2,626 239
B. Amount of subordinated loans evidenced by listed securities Nil
C. Details of subordinated loans Affiliated Enterprises linked by (in thousands of EUR) enterprises participating interests NET CARRYING VALUE AS AT END OF PRECEDING PERIOD 521,214 2,626 Movements during the period Additional 0 239 Reimbursements (-) (6,200) (2,626) Realised exchange gains/losses (+/-) 9,324 0 NET CARRYING VALUE AS AT END OF PERIOD 524,338 239
4. Declaration on consolidated financial statements
Managementreport A. To be completed by all credit institutions The credit institution prepares and publishes consolidated financial statements and a consolidated director’s report in accordance with the Royal Decree of 23 September 1992 on the consolidated financial statements of credit institutions: YES.
B. To be completed by credit institutions which are solely or jointly-held subsidiaries ●● Name and full address of the registered office and, for enterprises governed by Belgian law, the enterprise number of the parent company or companies preparing and publishing the consolidated financial statements in which the financial statements of the reporting institution are consolidated(1):
dexia SA place Charles Rogier 11
statements B-1210 Saint-Josse-ten-Noode No. 0458.548.296
Consolidated financial Dexia Banque Belgique SA prepares and publishes consolidated financial statements including the financial statements of Dexia Bank.
●● If the parent company or companies are governed by foreign law, state the place where the above-mentioned consolidated financial statements may be obtained(1).
(1) If the financial statements are consolidated at several levels, give details of the largest and smallest aggregate to which the reporting institution belongs as a subsidiary and for which consolidated financial statements are prepared and published. statements Non-consolidated financial
200 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 201 Notes to the non-consolidated financial statements
VI. §1. List of enterprises in which the credit institution holds a participating interest
All enterprises in which the reporting institution holds a participating interest within the meaning of the Royal Decree of 23 September 1992, and other enterprises in which it has rights representing at least 10% of their issued capital, shall be listed hereafter.
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
AIA-Pool SCRL 10.00 31/12/08 EUR 450 49 Chaussée de Jette 221 B-1080 Bruxelles 0453.634.752 Arkafund nv os 5,000 25.00 31/12/09 EUR 6,651 (1,004) Alfons Gossetlaan 30 B-1702 Groot-Bijgaarden 0878.929.173 Arlinvest nv os 595,210 49.00 30/12/09 EUR 1,866 (4) Hamiltonpark 24-26 B-8000 Brugge 0480.175.140 Artesimmo I SA os 1,249 99.92 0.08 31/12/09 EUR 108 (7) Boulevard Pachéco 44 B-1000 Bruxelles Managementreport 0419.838.467 Assurance Asset Management Company nv 100.00 31/12/09 EUR 10,465 170 Sudermanstraat 5 B-2000 Antwerpen 0432.790.739 Audit en Ingénierie Sociale Consulting 100.00 31/12/09 EUR 10,806 2,064 99 bis, avenue du Général Leclerc F-75014 Paris Auxipar SA os 144,660 13.60 26.09 31/12/09 EUR 58,862 6,989 Avenue Britsiers 5 B-1030 Bruxelles statements 0414.259.878
Aviabel SA 20.00 31/12/09 EUR 38,341 4,206 Consolidated financial Avenue Louise 54 B-1050 Bruxelles 0403.248.004 Banking Funding Company SA os 13,278 21.59 31/12/09 EUR 747 64 Rue d’Arlon 82 B-1040 Bruxelles 0884.525.182 BedrijvenCentrum Mechelen nv os 500 24.33 31/12/09 EUR 531 (13) De Regenboog 11 B-2800 Mechelen
0428.667.645 statements BedrijvenCentrum Waregem nv os 500 16.64 31/12/09 EUR 1,250 86 Kalkhoevestraat 1 B-8790 Waregem Non-consolidated financial 0436.674.895 BEM - Flemish Construction & Investment os 2,793 12.05 31/12/09 EUR 4,193 (105) Company SA Rue du Lombard 34-42 B-1000 Bruxelles 0416.612.904
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
200 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 201 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
BEM II SA os 2,000 15.04 - EUR - - Rue du Lombard 34-42 B-1000 Bruxelles 0832.115.686 Berlaymont 2000 SA os 150 14.85 31/12/09 EUR 13,933 (442) Rue Guimard 9 Boîte 6 B-1040 Bruxelles 0441.629.617 Bervoets Real Estate SA os 30 15.00 31/12/09 EUR 60 (6) Avenue Maurice 8 B-1050 Bruxelles 0884.639.010 Bogey SA os 32,046 49.00 30/11/09 EUR 3,384 (41) Chaussée d’Alsemberg 1021 B-1420 Braine-l’Alleud 0447.921.551 Boonefaes Verzekeringen nv 100.00 31/12/09 EUR 164 5 Sint-Walburgapark 1 B-8630 Veurne Managementreport 0448.670.530 Brand & Licence Company SA os 123 20.00 31/12/09 EUR 150 19 Rue d’Arlon 82 B-1140 Bruxelles 0884.499.250 Bureau Laveaux & Martin SPRL 100.00 31/12/09 EUR 83 63 Rue Albert Clément 9 B-6840 Neufchâteau 0429.260.830 Caring People SA 100.00 31/12/09 EUR 274 (263) Avenue de la Métrologie 2 statements B-1130 Bruxelles 0899.572.456
Consolidated financial Copharma Industries Unltd 15.41 31/12/09 EUR 1,875 1,214 6 George’s Dock IRL-Dublin 1 Corona SA 100.00 31/12/09 EUR 19,715 4,388 Avenue de la Métrologie 2 B-1130 Bruxelles 0403.263.939 DELP Invest SCRL 92.88 31/12/09 EUR 135,540 2,253 Avenue des Dessus de Lives (LO) 2 B-5101 Loyers 0890.583.427 statements Dexia Aéropole SCRL os 770 25.67 31/12/09 EUR 365 157 Avenue Georges Lemaitre 58 B-6041 Gosselies 0476.491.813 Non-consolidated financial Dexia Anderlecht SCRL(2) os 770 25.67 0.17 31/12/09 EUR 228 1 Place de la Vaillance 35 B-1070 Bruxelles 0466.378.176
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
202 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 203 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Antwerpen-Berchem cvba os 770 25.67 0.33 31/12/09 EUR 250 249 Grote Steenweg 456 B-2600 Berchem 0475.204.681 Dexia Antwerpen-Noord cvba(3) os 770 25.67 0.33 31/12/09 EUR 348 370 Antwerpsesteenweg 49 B-2950 Kapellen 0462.317.341 Dexia Antwerpen Zuidrand cvba os 770 25.67 0.33 31/12/09 EUR 423 212 Kioskplaats 49 B-2660 Hoboken 0473.526.977 Dexia Asset Finance Holding SA os 6,379,943 100.00 31/12/09 EUR 65,618 10,022 Boulevard Pachéco 44 B-1000 Bruxelles 0893.860.839 Dexia Asset Management Luxembourg os 7,539 49.00 31/12/09 EUR 305,748 (17,505) Groupe SA 136 route d’ Arlon Managementreport L-1150 Luxembourg 522192325 Dexia Auderghem-Boitsfort scrl os 770 25.67 0.33 31/12/09 EUR 492 298 Boulevard du Souverain 282 B-1160 Bruxelles 0473.622.393 Dexia Auto Lease Luxembourg SA 490 49.00 - EUR - - 136 route d’Arlon L-1150 Luxembourg Dexia Auto Lease SA os 1 0.02 99.98 31/12/09 EUR 1,363 1,776 Place Charles Rogier 11 B-1210 Bruxelles statements 0461.783.247
Dexia Basilix SCRL(3) os 770 25.67 0.33 31/12/09 EUR 388 130 Consolidated financial Chaussée de Gand 444 B-1080 Bruxelles 0473.623.779 Dexia Berchem-Wilrijk cvba(3) os 770 25.67 0.33 31/12/09 EUR 364 214 Grotesteenweg 456 B-2600 Berchem (Antwerpen) 0475.740.062 Dexia Binche-Mariemont SCRL os 770 25.67 0.33 31/12/09 EUR 351 241 Avenue Charles Deliège 56 B-7130 Binche
0475.737.983 statements Dexia Borinage SCRL os 770 25.67 0.33 31/12/09 EUR 448 100 Rue J. Dufrane 3-5 B-7080 Frameries Non-consolidated financial 0464.955.642 Dexia Brugmann SCRL os 770 25.67 0.33 31/12/09 EUR 569 87 Avenue Brugmann 247 B-1180 Bruxelles 0466.378.374
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
202 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 203 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Brugs Ommeland cvba(2) os 770 25.67 0.33 31/12/09 EUR 358 339 Gistelse Steenweg 447 B-8200 Sint-Andries 0463.669.995 Dexia Bruxelles-Centre SCRL(3) os 770 25.67 0.33 31/12/09 EUR 604 343 Place de Brouckère 41 B-1000 Bruxelles 0473.622.096 Dexia Capital Ireland Unltd os 1,090,813,806 100.00 31/12/09 EUR 1,154,500 75,753 6 George’s Dock IRL-IFSC Dublin 1 Dexia Centre Ardenne SCRL os 770 25.67 0.33 31/12/09 EUR 202 220 Avenue de Bouillon 16 B-6800 Libramont-Chevigny 0474.723.731 Dexia Charleroi Pont-à-Nôle SCRL os 770 25.67 0.33 31/12/09 EUR 367 173 Avenue Paul Pastur 114 B-6032 Monts-sur-Marchienne 0468.860.683 Managementreport Dexia Charleroi-Sud SCRL os 770 25.67 0.33 31/12/09 EUR 464 179 Boulevard Joseph Tirou 76-82 B-6000 Charleroi 0468.859.495 Dexia Châtelet-Fleurus SCRL(3) os 770 25.67 0.33 31/12/09 EUR 412 608 Chaussée de Charleroi 181 B-6220 Fleurus 0464.104.022 Dexia Ciney-Dinant SCRL(3) os 770 25.67 0.33 31/12/09 EUR 448 150 Rue Saint-Éloi 1 B-5590 Ciney statements 0467.001.154 Dexia Commercial Finance SA os 100.00 31/12/09 EUR 6,693 2,267
Consolidated financial Place Charles Rogier 11 B-1210 Bruxelles 0440.627.349 Dexia Crédits Logements SA os 17,724 99.99 0.01 31/12/09 EUR 29,058 7,522 Boulevard Pachéco 44 B-1000 Bruxelles 0405.549.377 Dexia De Voorkempen cvba(2) os 770 25.67 0.33 31/12/09 EUR 262 88 Lage Kaart 301 B-2930 Brasschaat 0862.652.375 statements Dexia Dilbeek-Lennik cvba os 770 25.67 0.33 31/12/09 EUR 465 312 Ninoofsesteenweg 117 B-1700 Dilbeek 0476.492.308 Non-consolidated financial Dexia Druivenstreek cvba os 770 25.67 0.33 31/12/09 EUR 253 73 Stationsplein 17 B-3090 Overijse 0468.523.064 Dexia Durmevallei cvba os 770 25.67 0.33 31/12/09 EUR 374 344 Marktplein 3 B-9220 Hamme (O.-VL.) 0465.017.505
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
204 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 205 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Eeklo-Gent-Oost cvba os 770 25.67 0.33 31/12/09 EUR 323 74 Grondwetlaan 9 B-9040 Sint-Amandsberg 0468.561.864 Dexia entre Sambre et Fagnes SCRL(2) os 770 25.67 0.33 31/12/09 EUR 278 97 Faubourg-St-Germain 84 B-5660 Couvin 0461.504.521 Dexia Etterbeek SCRL os 770 25.67 0.33 31/12/09 EUR 729 1,012 Rue des Champs 6 B-1040 Bruxelles 0455.967.405 Dexia Famenne-Ardenne SCRL(2) os 770 25.67 0.33 31/12/09 EUR 352 252 Chaussée de Liège 1 B-6900 Marche-en-Famenne 0471.656.362 Dexia Famenne-Semois SCRL os 770 25.67 0.33 31/12/09 EUR 434 160 Rue des Ardennes 2 B-5570 Beauraing Managementreport 0474.536.866 Dexia Financial Products Inc. 20 100.00 31/12/09 USD 1,756 148 1209 Orange Street US-19801 Wilmington - Delaware Dexia Fléron-Beyne-Soumagne SCRL os 770 25.67 0.33 31/12/09 EUR 463 405 Avenue des Martyrs 257 B-4620 Fléron 0460.950.928 Dexia Funding Netherlands nv os 1,000 100.00 31/12/09 EUR 5,479 2,646 3105 Strawinskylaan NL-1077 ZX Amsterdam statements Dexia Geer-Visé SCRL os 770 25.67 0.33 31/12/09 EUR 485 489 Rue Saint Hadelin 1
B-4600 Visé Consolidated financial 0468.670.247 Dexia Gent-Ledeberg cvba(3) os 770 25.67 0.33 31/12/09 EUR 381 266 Zonnestraat 23-25 B-9000 Gent 0460.955.084 Dexia Gent Noord-West cvba(2) os 770 25.67 0.33 31/12/09 EUR 440 361 Brugsesteenweg 514 B-9030 Mariakerke (Gent) 0456.775.473 Dexia Geraardsbergen-Ninove cvba os 770 25.67 0.33 31/12/09 EUR 598 286 Oudenaardsestraat 4-6 statements B-9500 Geraardsbergen 0468.504.258
Dexia Groot Deurne cvba os 770 25.67 0.33 31/12/09 EUR 335 16 Non-consolidated financial André Hermanslaan 1 B-2100 Deurne 0473.611.705 Dexia Hageland Noord cvba os 770 25.67 0.33 31/12/09 EUR 501 197 Bogaardenstraat 26 B-3200 Aarschot 0461.505.214
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
204 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 205 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Hainaut Centre et Senne SCRL os 770 25.67 0.33 31/12/09 EUR 281 103 Rue Albert 1er 23 B-7100 La Louvière 0465.013.743 Dexia Haspengouw-West cvba os 770 25.67 0.33 31/12/09 EUR 338 122 Clockemstraat 38 B-3800 Sint-Truiden 0464.680.280 Dexia Haute-Ardenne SCRL os 770 25.67 0.33 31/12/09 EUR 371 209 Rue Vieux Marché 21 C B-6690 Vielsalm 0464.665.929 Dexia Hauts de Liège SCRL(2) os 770 25.67 0.33 31/12/09 EUR 310 261 Chaussée de Tongres 391 B-4000 Rocourt 0462.372.967 Dexia Herstal-Liège-Est SCRL(3) os 770 25.67 0.33 31/12/09 EUR 373 172 Place Jean Jaurès 34 B-4040 Herstal Managementreport 0455.940.481 Dexia Hesbaye-Centre SCRL os 770 25.67 0.33 31/12/09 EUR 374 422 Grand’Place 5 B-4280 Hannut 0459.659.640 Dexia Immorent SA os 450 45.00 31/12/09 EUR 4,836 (107) Boulevard Pachéco 44 B-1000 Bruxelles 0893.787.296 Dexia Ingéniérie Sociale SA 85.00 31/12/09 EUR 13,619 3,419 13, rue Croquechâtaigne statements F-45380 La Chapelle Saint-Mesmin Dexia Insurance Belgium SA os 2,574,640 99.79 31/12/09 EUR 1,106,374 11,693
Consolidated financial Avenue Livingstone 6 B-1000 Bruxelles 0405.764.064 Dexia Insurance Services Finance SA 100.00 31/12/09 EUR 89,496 (85,631) 2 rue Nicolas Bové L-1253 Luxembourg Dexia Investment Company SA os 539,999,999 100.00 31/12/09 EUR 5,442,521 266,944 Boulevard Pachéco 44 B-1000 Bruxelles 0878.760.909 Dexia Investments Ireland Unltd 100.00 31/12/09 EUR 821,501 47,329 statements 6 George’s Dock IRL-IFSC Dublin 1 IE 4886676 P
Non-consolidated financial Dexia Jette SCRL(2) os 770 25.67 0.33 31/12/09 EUR 332 197 Boulevard de Smet de Naeyer 2A B-1090 Bruxelles 0463.693.850 Dexia Kempen Noord cvba os 770 25.67 0.33 31/12/09 EUR 344 240 Gemeenteplaats 6 B-2960 Brecht 0475.811.328
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
206 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 207 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Kempen Oost cvba os 770 25.67 0.33 31/12/09 EUR 247 195 Markt 27 B-2400 Mol 0466.424.597 Dexia Klein Brabant cvba os 770 25.67 0.33 31/12/09 EUR 223 68 Nieuwstraat 21 B-2830 Willebroek 0475.123.519 Dexia Kortrijk cvba os 770 25.67 0.33 31/12/09 EUR 263 167 Doorniksewijk 19 B-8500 Kortrijk 0466.460.726 Dexia Lambermont-Laeken SCRL os 770 25.67 0.33 31/12/09 EUR 622 593 Avenue H. Conscience 182 B-1140 Evere 0462.793.631 Dexia Lease Belgium SA os 100.00 31/12/09 EUR 6,163 (576) Place Charles Rogier 11 B-1210 Bruxelles Managementreport 0431.916.551 Dexia Lease Services SA os 100.00 31/12/09 EUR 14,519 3,417 Place Charles Rogier 11 B-1210 Bruxelles 0427.903.127 Dexia Leeuw, Calevoet, Rode cvba os 770 25.67 0.33 31/12/09 EUR 386 494 Weerstandsplein 1 B-1600 St-Pieters-Leeuw 0456.766.763 Dexia Leuven cvba os 770 25.67 0.33 31/12/09 EUR 488 172 Brusselsestraat 2 B-3000 Leuven statements 0465.019.978
Dexia Liège-Centre et Sud SCRL os 770 25.67 0.33 31/12/09 EUR 494 473 Consolidated financial Rue des Mineurs 12 B-4000 Liège 0460.558.473 Dexia Life & Pensions Luxembourg SA 100.00 31/12/09 EUR 78,741 3,241 2 rue Nicolas Bové L-1253 Luxembourg LU 18421978 Dexia Limburg Centrum cvba os 770 25.67 0.33 31/12/09 EUR 444 272 Dorpsstraat 1A B-3530 Houthalen-Helchteren
0473.708.210 statements Dexia Louise SCRL os 770 25.67 0.33 31/12/09 EUR 823 338 Place Flagey 28 B B-1050 Bruxelles Non-consolidated financial 0465.123.116 Dexia Mandel-Leie cvba os 770 25.67 0.33 31/12/09 EUR 313 195 Holdestraat 19 B-8760 Meulebeke 0468.495.449
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
206 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 207 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Meetjesland scrl (en liquidation) os 770 25.67 0.33 31/12/09 EUR 107 (17) Chaussée de Ninove 643 B-1070 Bruxelles 0468.559.488 Dexia Meuse-Ourthe-Amblève SCRL os 770 25.67 0.33 31/12/09 EUR 426 685 Place Joseph Thiry 47 B-4920 Aywaille 0463.712.062 Dexia Midden-Brabant cvba (en liquidation) os 755 50.33 0.67 31/12/09 EUR (39) 0 Van Beethovenlaan 2 B-1910 Kampenhout 0459.671.419 Dexia Mons-Nord SCRL(2) os 770 25.67 0.33 31/12/09 EUR 371 299 Rue de Nimy 61-65 B-7000 Mons 0464.187.263 Dexia Mons-Sud SCRL(3) os 770 25.67 0.33 31/12/09 EUR 668 534 Avenue Jean d’Avesnes 9 B-7000 Mons Managementreport 0465.013.644 Dexia Namur-Eghezée SCRL os 770 25.67 0.33 31/12/09 EUR 357 422 Chaussée de Louvain 440 B-5004 Bouge 0464.982.366 Dexia Namur-Gembloux SCRL os 770 25.67 0.33 31/12/09 EUR 422 255 Avenue Faculté Agronomie 12 B-5030 Gembloux 0464.656.922 Dexia Namur Haute-Meuse SCRL os 770 25.67 0.33 31/12/09 EUR 502 410 Rue de Marchovelette 1 statements B-5000 Namur 0464.103.329
Consolidated financial Dexia Netevallei cvba os 770 25.67 0.33 31/12/09 EUR 264 322 Grote Markt 13 B-2500 Lier 0468.248.296 Dexia Nivelles-Tubize SCRL os 770 25.67 0.33 31/12/09 EUR 616 381 Rue de Mons 55 B-1480 Tubize 0466.977.596 Dexia Noord-Limburg cvba os 770 25.67 0.33 31/12/09 EUR 424 222 Oude Markt 26 B-3900 Overpelt
statements 0473.590.424 Dexia Nord Picardie SCRL os 770 25.67 0.33 31/12/09 EUR 309 128 Rue de la Station 52 B-7700 Mouscron Non-consolidated financial 0472.305.767 Dexia Ostbelgien SCRL (en liquidation) os 770 25.67 0.33 31/12/09 EUR 101 34 Rue Belle-Vue 30/B B-4840 Welkenraedt 0476.578.519
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
208 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 209 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Overseas Ltd 150,000 100.00 31/12/09 USD 1,242 28 180 rue des Aubépines L-1145 Luxembourg Dexia Pays de Herve SCRL(3) os 770 25.67 0.33 31/12/09 EUR 353 245 Place du Marché 22 B-4651 Battice 0462.318.628 Dexia Public Facilities Financing US SA os 19,999 99.99 0.01 31/12/09 EUR 4,955 167 Boulevard Pachéco 44 B-1000 Bruxelles 0894.448.678 Dexia Re SA 100.00 31/12/09 EUR 23,042 21,348 2 rue Nicolas Bové L-1253 Luxembourg Dexia Regio Aalst cvba os 770 25.67 0.33 31/12/09 EUR 638 410 Stationsstraat 4 B-9300 Aalst 0464.206.861
Dexia Regio Asse-Ternat cvba os 770 25.67 0.33 31/12/09 EUR 343 175 Managementreport Kattestraat 2 B-1730 Asse 0464.672.659 Dexia Regio Dendermonde cvba os 770 25.67 0.33 31/12/09 EUR 368 173 Zuidlaan 2 B-9200 Dendermonde 0463.700.184 Dexia Regio Erpe-Mere cvba os 770 25.67 0.33 31/12/09 EUR 480 432 Marktplein 36 B-9520 Sint-Lievens-Houtem 0466.990.959 statements Dexia Regio Evergem-Zelzate cvba os 770 25.67 0.33 31/12/09 EUR 161 45 (en liquidation)
Chaussée de Ninove 643 Consolidated financial B-1070 Bruxelles 0473.606.755 Dexia Regio Genk-Maaseik cvba os 770 25.67 0.33 31/12/09 EUR 381 128 Fruitmarkt 7 B-3600 Genk 0466.987.001 Dexia Regio Hasselt cvba os 770 25.67 0.33 31/12/09 EUR 396 308 Havermarkt 36 B-3500 Hasselt 0473.588.444 Dexia Regio Leie-Schipdonk cvba os 770 25.67 0.33 31/12/09 EUR 333 134 statements Volhardingslaan 72 Bus 1 B-9800 Deinze 0463.653.367 Non-consolidated financial Dexia Regio Mechelen cvba os 770 25.67 0.33 31/12/09 EUR 224 188 Dorp 56 B-2820 Bonheiden 0475.734.025
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
208 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 209 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Regio Menen-Wevelgem cvba os 770 25.67 0.33 31/12/09 EUR 397 290 Kerkomtrek 16 B-8930 Menen 0464.214.482 Dexia Regio Mortsel Kontich cvba os 770 25.67 0.33 31/12/09 EUR 329 286 Mechelsesteenweg 56 B-2640 Mortsel 0476.374.720 Dexia Regio Oostende-Oostkust cvba os 770 25.67 0.33 31/12/09 EUR 709 445 Monnikenwerve 200 B-8000 Brugge 0465.840.025 Dexia Regio Oudenburg cvba os 770 25.67 0.33 31/12/09 EUR 304 231 Ettelgemsestraat 2 B-8460 Oudenburg 0479.484.163 Dexia Regio Roeselare Izegem cvba os 770 25.67 0.33 31/12/09 EUR 532 309 Hendrik Consciencestraat 23 bus 6 B-8800 Roeselare Managementreport 0456.777.750 Dexia Regio St-Niklaas cvba os 770 25.67 0.33 31/12/09 EUR 264 65 Parklaan 33 B-9100 Sint-Niklaas 0865.262.368 Dexia Regio Tienen cvba os 770 25.67 0.33 31/12/09 EUR 399 239 Nieuwstraat 36 B-3300 Tienen 0459.668.350 Dexia Regio Torhout-Middelkerke cvba os 770 25.67 0.33 31/12/09 EUR 294 50 Markt 28 statements B-8820 Torhout 0468.461.401
Consolidated financial Dexia Regio Turnhout-Hoogstraten cvba os 770 25.67 0.33 31/12/09 EUR 531 369 Vrijheid 109 B-2320 Hoogstraten 0463.702.758 Dexia Regio Waregem-Kruishoutem cvba os 770 25.67 0.33 31/12/09 EUR 375 182 Markt 12 B-8790 Waregem 0473.703.458 Dexia Regio Westhoek cvba os 770 25.67 0.33 31/12/09 EUR 510 305 Grote Markt 31 B-8600 Diksmuide
statements 0464.991.373 Dexia Regio Zuid-Gent cvba os 770 25.67 0.33 31/12/09 EUR 351 315 Koning Albertlaan 142 B-9000 Gent Non-consolidated financial 0464.994.937 Dexia Région Huy-Andenne SCRL os 770 25.67 0.33 31/12/09 EUR 526 475 Avenue des Ardennes 33 B-4500 Huy 0464.663.058
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
210 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 211 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Région Liège-Airport SCRL os 770 25.67 0.33 31/12/09 EUR 308 190 Chaussée du Roi Albert 50 B-4431 Loncin 0475.741.448 Dexia Région Verviers-Spa SCRL(2) os 770 25.67 0.33 31/12/09 EUR 281 121 Place du Perron 41 B-4910 Theux 0474.573.488 Dexia Scheldeland cvba os 770 25.67 0.33 31/12/09 EUR 622 454 Kalkendorp 21 B-9270 Laarne 0463.671.480 Dexia Secured Funding Belgium SA os 6,200 10.00 31/12/09 EUR 62 6 Boulevard Pachéco 44 B-1000 Bruxelles 0890.181.767 Dexia Securities Belgium SA os 10,839 99.99 0.01 31/12/09 EUR 10,772 104 Boulevard Pachéco 44 B-1000 Bruxelles Managementreport 0442.757.389 Dexia Sille et Dendre SCRL os 770 25.67 0.33 31/12/09 EUR 305 213 Grand’Place 72 B-7850 Enghien 0473.630.907 Dexia Stockel SCRL os 770 25.67 0.33 31/12/09 EUR 374 138 Place Dumon 22 B-1150 Bruxelles 0458.895.815 Dexia Sud-Luxembourg SCRL os 770 25.67 0.33 31/12/09 EUR 614 337 Rue de la Poste 13 B-6700 Arlon statements 0466.444.195
Dexia Tournai-Val de Verne SCRL os 770 25.67 0.33 31/12/09 EUR 460 316 Consolidated financial Rue Royale 105/107/109 B-7500 Tournai 0473.660.007 Dexia Uccle-Rhode SCRL os 770 25.67 0.33 31/12/09 EUR 392 69 Avenue de Fré 173 B-1180 Uccle 0469.209.883 Dexia Val de Sambre SCRL(2) os 770 25.67 0.33 31/12/09 EUR 403 272 Rue de la Station 15-17 B-5060 Tamines
0461.824.423 statements Dexia Val d’Haine et Haut-Pays SCRL os 770 25.67 0.33 31/12/09 EUR 436 230 Rue Grande 49 B-7380 Quiévrain Non-consolidated financial 0468.851.874 Dexia Val d’Heure SCRL(3) os 770 25.67 0.33 31/12/09 EUR 292 100 Rue de Mettet 17 A B-5620 Florennes 0473.617.247
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
210 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 211 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Dexia Val du Piéton SCRL os 770 25.67 0.33 31/12/09 EUR 450 248 Grand-Rue 12 B-6183 Trazegnies 0475.739.567 Dexia Vallée de la Dyle SCRL os 770 25.67 0.33 31/12/09 EUR 709 243 Avenue Einstein 8 B-1300 Wavre 0459.668.845 Dexia Vallée de la Lys cvba (en liquidation) os 770 25.67 0.33 31/12/09 EUR 247 (1) Bloemenstraat 1 B-8900 Ieper 0462.410.579 Dexia Verviers-Heusy SCRL (en liquidation) os 770 25.67 0.33 31/12/09 EUR 305 262 Crapaurue 14 B-4800 Verviers 0475.224.378 Dexia Vilvoorde-Zaventem cvba os 770 25.67 0.33 31/12/09 EUR 338 204 Portaelsplein 68 Managementreport B-1800 Vilvoorde 0476.492.110 Dexia Vlaamse Ardennen cvba os 770 25.67 0.33 31/12/09 EUR 655 570 Nederstraat 17 B-9700 Oudenaarde 0459.674.288 Dexia Waterloo SCRL os 770 25.67 0.33 31/12/09 EUR 492 305 Chaussée de Bruxelles 306 B-1410 Waterloo 0465.137.368 Dexia Wemmel-Meise-Strombeek cvba os 770 25.67 0.33 31/12/09 EUR 427 386 statements Markt 60-62 B-1780 Wemmel 0465.156.966 Consolidated financial Dexia West-Limburg cvba os 770 25.67 0.33 31/12/09 EUR 473 386 Kerkstraat 2 B-3560 Lummen 0467.006.597 Dexia Woluwe SCRL os 770 25.67 0.33 31/12/09 EUR 545 381 Parvis Saint-Henri 49 B-1200 Bruxelles 0468.589.479 Dexia Zennevallei cvba os 770 25.67 0.33 31/12/09 EUR 425 360 Basiliekstraat 13
statements B-1500 Halle 0454.765.692 Dexia Zottegem-Land van Rhode cvba os 770 25.67 0.33 31/12/09 EUR 356 151 Heldenlaan 33 Non-consolidated financial B-9620 Zottegem 0460.956.965 Dexia Zuid-Oost Limburg cvba os 770 25.67 0.33 31/12/09 EUR 297 81 Visésteenweg 204 Bus 1 B-3770 Riemst 0464.705.323
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
212 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 213 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Deximmo SA os 338,866 100.00 31/12/09 EUR 77,314 402 Boulevard Pachéco 44 B-1000 Bruxelles 0436.006.090 DG INFRA+ SA os 4,800 18.05 31/12/09 EUR 28,967 (510) Boulevard Pachéco 44 B-1000 Bruxelles 0894.555.972 DG INFRA YIELD os 125,000 25.00 EUR Boulevard Pachéco 44 B-1000 Bruxelles (en constitution) DIB Invest SA os 100.00 31/12/09 EUR 3,101,846 127,912 Rue Joseph II 96 B-1000 Bruxelles 0878.881.762 Domus Flandria nv os 35,000 17.46 31/12/09 EUR 26,884 2,210 Karel Oomsstraat 37 B-2018 Antwerpen 1 Managementreport 0436.825.642 DVV Kantoor Eke SPRL os 1,000 100.00 - EUR - - Avenue Livingstone 6 B-1000 Bruxelles 0831.374.924 Elantis SA os 6,463 99.98 0.02 31/12/09 EUR 22,910 7,697 Rue des Clarisses 38 B-4000 Liège 0404.228.296 Erasmus Gardens SA 33.33 31/12/09 EUR 2,408 (435) Avenue Hermann-Debroux 42 B-1160 Bruxelles statements 0891.137.515
Esplanade 64 SA os 300 5.00 40.00 31/12/09 EUR 554 (18) Consolidated financial Rue Godecharle 15 B-1050 Bruxelles 0888.411.419 Eurco Ltd 100.00 31/12/09 EUR 1,225 1,628 6 George’s Dock IRL-Dublin 1 Eurco Re Ltd 100.00 31/12/09 EUR 57,125 12,381 6 George’s Dock IRL-Dublin 1 Eurco Rück AG 99.98 31/12/09 CHF 26,530 844 Beethovenstrasse 49 statements CH-8002 Zürich Europay Belgium SCRL os 4,592 13.28 31/12/09 EUR 1,316 4,242
Rue d’Arlon 82 Non-consolidated financial B-1040 Bruxelles 0434.197.536 Fiduciaire Dexia SA os 1,499 99.93 0.07 31/12/09 EUR 268 20 Boulevard Pachéco 44 B-1000 Bruxelles 0416.799.201
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
212 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 213 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Finimmo nv (anciennement Gimogem) os 505 50.00 31/12/09 EUR 759 51 Pacificatiestraat 39 B-2000 Antwerpen 0436.044.197 Fynergie SA os 1,249 99.92 0.08 31/12/09 EUR 89 5 Boulevard Pachéco 44 B-1000 Bruxelles 0455.739.850 Himba nv 99.00 30/12/09 EUR 337 (22) Hamiltonpark 24-26 B-8000 Brugge 0870.505.516 IBRO Holdings Unltd 99.98 31/12/09 EUR 250 100 6 George’s Dock IRL-IFSC Dublin 1 IDE Lux SCRL os 1,092 11.12 31/12/09 EUR 51,003 259 Drève de l’Arc-en-Ciel 98 B-6700 Arlon 0205.797.475 Managementreport IDE Lux Finances SCRL os 3,719 36.87 31/12/09 EUR 27,501 634 Drève de l’Arc-en-Ciel 98 B-6700 Arlon 0258.258.738 IHF SCRL os 558 24.62 31/12/08 EUR 17,015 598 Hôtel de Ville B-7100 La Louvière 0245.830.563 Immo Foire SA 161 20.00 31/12/09 EUR 198 (22) 48 Boulevard Grande-Duchesse Charlotte L-1330 Luxembourg statements Lux B 127.782 Immorente SA os 999 99.90 0.10 31/12/09 EUR 274 (13)
Consolidated financial Boulevard Pachéco 44 B-1000 Bruxelles 0406.206.306 Inforum GIE os 50 50.00 31/12/09 EUR 372 10 Rue d’Arlon 53 Boîte 4 B-1040 Bruxelles 0472.721.679 Inframan SA os 1,000 50.00 31/12/09 EUR 202 2 Boulevard Pachéco 44 B-1000 Bruxelles 0891.786.920 statements Interbrugse Maatschappij os 12.18 31/12/09 EUR 47,669 1,765 voor Huisvesting cvba Boeveriestraat 42 B-8000 Brugge Non-consolidated financial 0406.062.883 IP-1 SPRL os 50 20.33 49.59 31/12/09 EUR 6 (2) Rue Sainte Marie 5 B-4000 Liège 0899.503.368
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
214 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 215 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
IP-2 SPRL os 50 20.33 49.59 31/12/09 EUR 2 (11) Rue Sainte Marie 5 B-4000 Liège 0899.506.536 Isabel SA os 240,034 24.00 31/12/09 EUR 11,171 1,884 Boulevard de l’Impératrice 13-15 B-1000 Bruxelles 0455.530.509 J. Zinner SA os 2,096 13.10 31/12/09 EUR 5,087 64 Rue Zinner 1 B-1000 Bruxelles 0427.213.140 Justinvest Antwerpen nv os 50 33.33 31/12/09 EUR 172 18 Heistraat 129 B-2610 Antwerpen-Wilrijk 0476.658.097 Leskoo SA 50.00 31/12/09 EUR 354 (26) Avenue des Communautés 100 B-1200 Bruxelles Managementreport 0439.077.824 Lex 2000 SA os 74,339 38.09 11.91 31/12/09 EUR 207 (192) Boulevard Pachéco 44 B-1000 Bruxelles 0403.364.996 Livingstone Building nv 100.00 30/12/09 EUR 13,483 427 Sudermanstraat 5 B-2000 Antwerpen 0441.221.920 Max Havelaar Label Belgium SCRL os 50 13.33 31/12/09 EUR 429 62 Rue d’Edimbourg 26 B-1050 Bruxelles statements 0465.853.089
Notre Maison SCRL 11.90 31/12/09 EUR 12,352 770 Consolidated financial Boulevard Tirou 167 B-6000 Charleroi 0240.277.017 Ondernermerstalent nv os 310 44.29 31/12/09 EUR 64 (2) P/A Universiteit Hasselt - Agoralaan gebouw D B-3590 Diepenbeek 0883.079.288 Orfival SA 18.22 31/12/09 EUR 348 (37) Avenue Jean Etienne Lenoir 2A
B-1348 Louvain-la-Neuve statements 0441.784.223 Parfipar SA 128,156 100.00 31/12/09 EUR 119,665 21,020 69 route d’Esch Non-consolidated financial L-2953 Luxembourg Park De Haan SA os 300 15.00 31/12/09 EUR 210 (48) Place Sainte-Gudule 19 B-1000 Bruxelles 0438.533.436
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
214 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 215 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Promotion Léopold SA os 220,400 19.00 16.50 31/12/09 EUR 15,824 151 Avenue Livingstone 6 B-1000 Bruxelles 0439.904.896 Publipart SA os 209,993 10.76 30/09/10 EUR 167,820 (5,565) Rue Royale 55 Boîte 14 B-1000 Bruxelles 0875.090.844 Rabot Invest nv os 60 25.00 31/12/09 EUR 603 386 Heistraat 129 B-2610 Wilrijk 0479.758.733 Rainbow ICT-Services GIE 50.00 31/12/09 EUR 25 0 Rue Royale 192 B-1000 Bruxelles 0473.453.139 Realex SA 100.00 31/12/09 EUR 18,079 6,782 Avenue Livingstone 6 B-1000 Bruxelles Managementreport 0403.288.584 Re-Vive Brownfield Fund cvba os 400,000 49.00 EUR Oude Brusselseweg 71 B-9050 Ledeberg 0824.442.986 SCI Saint Mesmin Immobilier 100.00 31/12/09 EUR (286) (77) 13, rue Croquechâtaigne F-45380 La Chapelle Saint-Mesmin Sepia SCRL 50.00 31/12/09 EUR 4,566 241 Avenue Livingstone 6 B-1000 Bruxelles statements 0403.251.467 Service Communal de Belgique SC os 34,351 63.59 31/12/04 EUR (3,587) 0
Consolidated financial Rue d’Arlon 53 B-1040 Bruxelles 0403.166.147 Shop Equipments nv os 225 100.00 31/12/09 EUR 185 48 Scheldekaai 5-7 B-9820 Merelbeke 0424.304.625 SLF Finances SA os 85,993 27.99 31/12/09 EUR 219,146 6,868 Rue Sainte-Marie 5 B-4000 Liège 0203.978.726 statements SLF Immo SA os 101 20.49 31/12/09 EUR 149 (5) Rue Sainte Marie 5 B-4000 Liège 0480.029.838 Non-consolidated financial SLF Participations SA os 42,289 20.57 31/12/09 EUR 62,807 3,654 Rue Sainte Marie 5 B-4000 Liège 0480.029.739
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
216 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 217 Notes to the non-consolidated financial statements Notes to the non-consolidated financial statements
Name, Rights Data from the most Registered office and recent financial statements available Company number Held directly Held by Financial Currency Capital Net subsi- state- and result diaries ments reserves Type(1) Number % % (thousands of currency units) (+) or (-)
Société Mixte de Développement os 154 25.04 Immobilier SA Rue de l’Écluse 21 B-6000 Charleroi 0816.917.469 Sofibail SA - Société wallonne os 2,000 19.42 31/12/09 EUR 2,329 342 de location-financement Rue Dewez 49 B-5000 Namur 0426.091.207 Sofibru SA os 25 20.00 31/12/09 EUR 1,735 26 Rue de Stassart 32 B-1050 Bruxelles 0447.389.833 Sustainable Energy Ventures SA os 3,500,000 22.51 31/12/09 EUR 1,721 523 Rue du Vieux Marché aux Grains 63 B-1000 Bruxelles 0473.602.203 VDK Spaarbank nv os 8,771 17.79 31/12/09 EUR 229,028 9,547 Managementreport Sint-Michielsplein 16 B-9000 Gent 0400.067.788 VDL - Interass nv 100.00 31/12/09 EUR 998 61 Brusselsesteenweg 346C B-9090 Melle 0431.686.127 Vennootschap Leopoldruimte SA os 6,660 33.30 16.70 31/12/09 EUR 6,353 613 Rue Godecharle 15-17 B-1050 Bruxelles 0435.890.977
Visa Belgium SCRL os 26 14.36 31/12/09 EUR 8,160 5,431 statements Rue d’Arlon 82 B-1040 Bruxelles Consolidated financial 0435.551.972 Vlabo-Invest nv os 145 41.43 31/12/09 EUR 1,016 406 Pater Damiaanstraat 5 B-3130 Betekom 0441.188.464 Wandelaar Invest SA 39.98 31/12/09 EUR 2,397 (43) Rue du Vieux Marché aux Grains 63 B-1000 Bruxelles 0811.706.589 Zakenkantoor Vandepitte-Leplae nv 26.00 31/12/09 EUR 38 4
Astridlaan 37 statements B-8310 Assebroek - Brugge 0466.037.092 Zonnige Kempen cvba 16.29 31/12/09 EUR 29,374 754 Non-consolidated financial Grote Markt 39 B-2260 Westerlo 0404.221.368
(1) os = ordinary shares. (2) Taken over by merger on 1 January 2011. (3) Decomposed on 1 January 2011.
216 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 217 Notes to the non-consolidated financial statements
VI. §2. Enterprises for which the credit institution has unlimited liability in its capacity of fully liable partner or member
Nil
VII. Statement of formation expenses and intangible fixed assets (Assets item VIII.)
1. Formation expenses Nil
2. Intangible fixed assets Goodwill Other Of which intangible commissions fixed assets for attracting new business (in thousands of EUR) art. 27bis(1) a. ACQUISITION COST As at end of preceding period 0 74,242 0 Movements during the period Acquisitions, including own construction 0 2,752 0 Sales and disposals (-) 0 (40,670) 0
Managementreport As at end of period (A) 0 36,324 0
b. AMORTIZATION AND WRITE-DOWNS As at end of preceding period 0 61,571 0 Movements during the period Recorded 0 4,530 0 Cancellations (-) 0 (40,670) 0
As at end of period (B) 0 25,431 0
c. NET CARRYING VALUE AS AT END OF PERIOD (A)-(B) 0 10,893 0
(1) If the amounts are significant. statements Consolidated financial statements Non-consolidated financial
218 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 219 Notes to the non-consolidated financial statements
VIII. Tangible fixed assets (Assets item IX.)
Land Plant, Furniture Leasing Other Assets Costs and machinery and and tangible under for buildings and vehicles other fixed construction rented equipment similar assets & advance buildings (in thousands of EUR) rights payment a. ACQUISITION COST As at end of preceding period 1,120,178 510,299 141,073 428 232,833 23,817 73,905 Movements during the period Acquisition, including own construction 47,664 10,552 9,920 1 373 9,104 6,185 Sales and disposals (-) (26,085) (190,641) (16,819) (407) (47,437) (48) (2,379) Transfers from one item to another (+/-) 34,618 0 (2) 0 (616) (7,819) 552
As at end of period (A) 1,176,375 330,210 134,172 22 185,153 25,054 78,263
b. REVALUATION SURPLUSES As at end of preceding period 73,394 0 0 0 403 0 0 Movements during the period Cancellations (-) (6,989) 0 0 0 (78) 0 0 Transfers from one item to another (+/-) 7,469 0 0 0 (201) 0 0
As at end of period (B) 73,874 0 0 0 124 0 0
c. dEPRECIATION AND WRITE-DOWNS As at end of preceding period 608,801 464,530 106,565 416 131,326 5,814 58,006
Movements during the period Managementreport Recorded 34,595 23,930 6,185 4 5,382 2,279 5,728 Cancellations (-) (25,692) (190,639) (16,792) (407) (47,483) (4) (2,378) Transfers from one item to another (+/-) 28,383 0 0 0 (557) (1,492) (512)
As at end of period (C) 646,087 297,821 95,958 13 88,668 6,597 60,844
d. NET CARRYING VALUE AS AT END OF PERIOD (A)+(B)-(C) 604,162 32,389 38,214 9 96,609 18,457 17,419 of which Plant, machinery and equipment 9 statements Consolidated financial IX. Other assets (Assets item XI.)
(in thousands of EUR) 31/12/10 Analysis (if the amount in this item is significant) Precious metals 365,045 Assets for resale 172,017 Premiums paid for swaptions written out 796,447 Premiums paid for options 554,066 Deferred taxes – assets 5,252 Other assets 2,720 statements
X. Deferred charges and accrued income (Assets item XII.) Non-consolidated financial
(in thousands of EUR) 31/12/10 Deferred charges 272,161 Accrued income 21,087,974
218 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 219 Notes to the non-consolidated financial statements
XI. Statement of amounts owed to credit institutions (Liabilities item I.)
1. For the item as a whole
(in thousands of EUR) 31/12/09 31/12/10 Amounts due to affiliated enterprises 14,498,202 16,657,726 Amounts due to other enterprises linked by participating interests 6,205 3,436
2. For amounts owed to credit institutions (other than those repayable on demand), analysis of their remaining maturity (Liabilities item I.B. and C.)
(in thousands of EUR) 31/12/10 Up to 3 months 47,873,109 Over 3 months up to 1 year 1,325,866 Over 1 year up to 5 years 669,078 Over 5 years 829,416
XII. Statement of amounts owed to customers (Liabilities item II.)
1. Amounts owed to
(in thousands of EUR) 31/12/09 31/12/10 Affiliated enterprises 13,252,266 14,280,512
Managementreport Other enterprises linked by participating interests 264,713 225,494
2. Country analysis
(in thousands of EUR) 31/12/09 31/12/10 Customers in Belgium 55,744,928 60,289,852 Customers in foreign countries 36,044,106 38,752,759
3. Analysis according to the remaining maturity
statements (in thousands of EUR) 31/12/09 31/12/10 Repayable on demand 31,218,275 30,156,048
Consolidated financial Up to 3 months 18,454,184 14,434,117 Over 3 months up to 1 year 2,841,568 4,079,341 Over 1 year up to 5 years 8,714,211 11,834,905 Over 5 years 5,181,004 4,191,079 Undated 25,379,791 34,347,121
XIII. Statement of debts evidenced by certificates (Liabilities item III.)
statements 1. Debts which, to the best of the reporting institution’s knowledge, are due to affiliated enterprises or other enterprises linked by participating interests Nil Non-consolidated financial 2. Analysis according to the remaining maturity
(in thousands of EUR) 31/12/10 Up to 3 months 1,477,578 Over 3 months up to 1 year 2,860,042 Over 1 year up to 5 years 9,445,762 Over 5 years 2,297,061
220 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 221 Notes to the non-consolidated financial statements
XIV. Other liabilities (Liabilities item IV.)
1. Taxes, remuneration and social security Nil
2. Taxes
(in thousands of EUR) 31/12/10 Taxes payable 15,072
3. Other liabilities
(in thousands of EUR) 31/12/10 Analysis (if the amount in this item is significant) Premiums received from issued options 903,851 Other tax and social debts 169,872 Suppliers 58,357 Premiums received from issued swaptions 909,913 Dividend to be paid 14,991
XV. Accrued charges and deferred income (Liabilities item V.)
(in thousands of EUR) 31/12/09 31/12/10
Accrued charges 19,019,374 21,169,248 Managementreport Deferred income 532,809 1,372,034
XVI. Provisions for other liabilities and charges (Liabilities item VI.A.3.)
(in thousands of EUR) 31/12/09 31/12/10 Analysis (if the amount in this item is significant) Current disputes 43,062 43,660 Costs of lawyers and experts 7,809 6,971 statements Loss-making contracts 41,047 27,406 Dismantlement of buildings 4,134 4,132
Provision banking activities 9,872 11,666 Consolidated financial
XVII. Statement of subordinated liabilities (Liabilities item VIII.)
(in thousands of EUR) 31/12/09 31/12/10 A. for the item as a whole, amounts due to Affiliated enterprises 1,866,143 1,973,927 Other enterprises linked by participating interests 85,000 85,000
statements B. Charges as a result of subordinated liabilities 150,078 114,503 Non-consolidated financial
220 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 221 Notes to the non-consolidated financial statements
c. subordinated loans (Liabilities item VIII. continued)
Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination or compensations of currency determining c) Conditions for convertibility units the duration
1. EUR 98,940 28/02/2011 a) not applicable 5.70% b) no specified conditions c) none 2.(1)(2) EUR 228,674 undetermined a) early redemption starting from call date, till 18/11/2009: 6.25%; (call date on each following coupon date and thereafter: 18/05/2011) with approval of the CBFA Euribor 6 months + 1.87% b) no specified conditions c) none 3. EUR 40,000 03/12/2019 a) not applicable from year 1 to 3: 8%; b) no specified conditions from year 4 to 20: c) none - if GBP Libor 12 months < 5%: rate = GBP Libor 12 months + 20 bp - if GBP Libor 12 months > = 5%: rate = 7.55% 4. JPY 10,000,000 11/09/2025 a) not applicable 6.37%; b) no specified conditions after 11/09/2004: 6.1%, c) none payable in USD, EUR or AUD 5. JPY 10,000,000 11/09/2025 a) not applicable 6.37%; b) no specified conditions after 11/09/2004: 6.05%, c) none payable in USD, EUR or Managementreport AUD 6. JPY 15,000,000 undetermined a) early redemption on call date and year 1 to 30: 5%; (call date with approval of the CBFA thereafter: 27/11/2027) b) no specified conditions 5 years JPY swap + 2.5%, c) none may be changed every 5 years 7. EUR 35,000 15/12/2014 a) not applicable CMS linked b) no specified conditions c) none 8. EUR 15,000 15/12/2015 a) not applicable index linked on Nikkei, b) no specified conditions EUROSTOXX 50, S&P 500
statements c) none 9. EUR 15,000 15/07/2019 a) not applicable CMS linked
Consolidated financial b) no specified conditions c) none 10. EUR 11,000 16/12/2019 a) not applicable year 1 to 5: 8.875%; b) no specified conditions year 6 to 20: CMS linked c) none 11.(1) EUR 50,000 undetermined a) early redemption starting from call date, CMS linked; (call date with approval of the CBFA, thereafter after call date: 15/07/2011) at the end of each following period IRS 12 years + 250 bp of 12 years b) no specified conditions c) none
statements 12. EUR 17,500 undetermined a) early redemption starting from call date, 6.2% till 29/12/2009; (call date with approval of the CBFA thereafter: 29/12/2019) b) no specified conditions IRS 10 years + 200 bp c) none Non-consolidated financial 13.(1) EUR 17,500 undetermined a) early redemption starting from call date, CMS linked; (call date with approval of the CBFA, thereafter after call date: 29/12/2011) at the end of each following period IRS 12 years + 200 bp of 12 years b) no specified conditions c) none
(1) Following an agreement with the European Commission, Dexia will not proceed to any early redemption (call) untill the end of 2011. (2) This issue falls within the scope of the restrictions on coupon payments on Dexia’s subordinated debt as agreed with the European Commission. (3) Hybrid subordinated debt.
222 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 223 Notes to the non-consolidated financial statements
Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination or compensations of currency determining c) Conditions for convertibility units the duration
14.(1) JPY 10,000,000 undetermined a) early redemption starting from call date, 3.66%; (call date with approval of the CBFA, thereafter after call date: 29/01/2011) on each following coupon date and from JPY Libor 6 months 29/01/2031, every 5 years + 2.1% b) no specified conditions c) none 15.(1) JPY 5,000,000 undetermined a) early redemption starting from call date, 3.66%; (call date with approval of the CBFA, thereafter after 29/01/2031: 29/01/2011) each year and from 29/01/2031, JPY Libor 6 months every 5 years + 2.1% b) no specified conditions c) none 16.(2) JPY 15,000,000 undetermined a) early redemption starting from call date, 4.51% (in USD); (call date with approval of the CBFA, thereafter after 29/01/2029: 29/01/2029) on each following coupon date JPY Libor 6 months b) no specified conditions + 191 bp c) none 17.(1) USD 50,000 undetermined a) early redemption starting from call date, USD Libor 3 months (call date with approval of the CBFA, thereafter + 76 bp; 25/02/2011) on each following coupon date after 25/08/2010: b) no specified conditions USD Libor 3 months c) none + 176 bp 18.(1) USD 100,000 undetermined a) early redemption starting from call date, USD Libor 3 months
(call date with approval of the CBFA, thereafter + 76 bp; Managementreport 21/03/2011) on each following coupon date after 21/09/2010: b) no specified conditions USD Libor 3 months c) none + 176 bp 19. EUR 29,906 01/03/2022 a) not applicable Euribor 3 months + 43 bp b) no specified conditions c) none 20. EUR 44,914 04/04/2022 a) not applicable 6.00% b) no specified conditions c) none 21.(3) EUR 498,556 undetermined a) early redemption starting from call date, 4.922%;
(call date with approval of the CBFA, thereafter after 02/11/2016: statements 02/11/2016) on each following coupon date Euribor 3 months b) no specified conditions + 181 bp
c) none Consolidated financial 22. EUR 9,920 2011 a) not applicable variable b) no specified conditions c) none 23. EUR 5,227 2012 a) not applicable variable b) no specified conditions c) none 24. EUR 200 2013 a) not applicable variable b) no specified conditions c) none
25. GBP 150,000 02/09/2017 a) early redemption starting from call date, 5.9075%; statements (call date with approval of the CBFA, thereafter from 09/02/2012: 09/02/2012) on each following coupon date GBP Libor 3 months b) no specified conditions + 73.25 bp
c) none Non-consolidated financial 26. EUR 20,000 01/03/2047 a) early redemption possible from the call 5.04% (call date date and at the end of each period of 01/03/2017) 5 years following the call date and with approval of the CBFA b) no specified conditions c) none
(1) Following an agreement with the European Commission, Dexia will not proceed to any early redemption (call) untill the end of 2011. (2) This issue falls within the scope of the restrictions on coupon payments on Dexia’s subordinated debt as agreed with the European Commission. (3) Hybrid subordinated debt.
222 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 223 Notes to the non-consolidated financial statements
Ref. No. Currency Amount Maturity date a) Circumstances for early redemption Conditions in thousands or method for b) Conditions for subordination or compensations of currency determining c) Conditions for convertibility units the duration
27. EUR 20,000 02/04/2037 a) early redemption possible from the call 4.86% (call date date and at the end of each period of 02/04/2017) 5 years following the call date and with approval of the CBFA b) no specified conditions c) none 28. USD 100,000 30/09/2018 a) early redemption possible from the call till 30/09/2013: (call date date, on each following coupon date and USD Libor + 300 bp; 30/09/2013) with approval of the CBFA thereafter: b) no specified conditions USD Libor + 350 bp c) none 29. EUR 180,000 30/09/2018 a) early redemption possible from the call till 30/09/2013: (call date date, on each following coupon date and Euribor + 300 bp; 30/09/2013) with approval of the CBFA thereafter: b) no specified conditions Euribor + 350 bp c) none 30. EUR 300,000 20/06/2018 a) early redemption possible from the call till 20/06/2013: (call date date, on each following coupon date and 5.25%; 20/06/2013) with approval of the CBFA thereafter: b) no specified conditions Euribor 12 months c) none + 150 bp
(1) Following an agreement with the European Commission, Dexia will not proceed to any early redemption (call) untill the end of 2011. (2) This issue falls within the scope of the restrictions on coupon payments on Dexia’s subordinated debt as agreed with the European Commission. (3) Hybrid subordinated debt. Managementreport statements Consolidated financial statements Non-consolidated financial
224 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 225 Notes to the non-consolidated financial statements
XVIII. Statement of capital
1. Capital Amounts in thousands of EUR A. subscribed capital (Liabilities item IX.A.) As at end of preceding period 3,458,066 Changes during the period 0
As at end of period 3,458,066
Amounts Number in thousands of shares of EUR B. structure of the capital 1. Categories of shares Category A 3,458,066 359,412,616 2. Registered or bearer shares Registered shares 0 359,412,616 Bearer shares 0 0
2. Capital not paid up Nil
3. Own shares held Managementreport Nil
4. Share issuance commitments Nil
5. Authorised capital non-issued
Amounts in thousands
of EUR statements Authorised capital non-issued 3,458,066 Consolidated financial
6. Shares not representing capital Nil
XIX. Currency analysis
In EUR In foreign currencies
(equivalent statements (in thousands of EUR) in EUR) Total assets 179,198,628 33,225,593 Total liabilities 180,291,527 32,132,694 Non-consolidated financial
224 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 225 Notes to the non-consolidated financial statements
XX. Fiduciary transactions within the meaning of article 27ter §1 paragraph 3
Nil
XXI. Secured debts and commitments
Reporting institution’s own assets given or irrevocably promised as collateral security Mortgages Floating Other assets Future assets (1) charges(2) charged charged (in thousands of EUR) or pledged(3) or pledged(4) A. to secure the reporting institution’s debts ANd commitments 1. Liabilities items Sales of loans 0 0 72,572,218 0 Other deposits 0 0 18,457,470 0 2. Off-balance-sheet items Lines of credit 0 0 0 0 Derivatives 0 0 16,928,283 0 Other 0 0 0 0
B. to secure third-party debts and Commitments 1. Liabilities items 0 0 0 0 2. Off-balance-sheet items Derivatives 0 0 35,236 0
(1) Lower of the hypotecated amount of the mortgage and the carrying value of the immovable properties mortgaged. Managementreport (2) Hypotecated amount of mortgage. (3) Carrying value of the assets concerned. (4) Amount of the assets concerned.
XXII. Statement of any liabilities and of the commitments which could give rise to a risk (Off-balance-sheet items I. and II.)
(in thousands of EUR) 31/12/09 31/12/10
statements Total contingent liabilities on behalf of affiliated enterprises 16,315,064 17,062,164 Total contingent liabilities on behalf of other enterprises linked by participating interests 3,605 3,507 Total commitments towards affiliated enterprises 4,573,719 3,215,243
Consolidated financial Total commitments towards other enterprises linked by participating interests 607,635 399,200 statements Non-consolidated financial
226 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 227 Notes to the non-consolidated financial statements
XXIII. Information on operating results (Statement of income items I. to XV.)
31/12/09 31/12/10 A. 1. Employees recorded in the personnel register Number of employees recorded in the personnel register at the closing date 6,896 6,600 Average number of employees in full-time equivalent (FTE) 6,380,69 5,974,85 Number of actual working hours 9,200,455 8,448,172
1bis. Temporary personnel and persons placed at the disposal of the enterprise Number of employees recorded in the personnel register at the closing date 1 0 Average number of employees in full-time equivalent (FTE) 0,55 0 Number of actual working hours 970 0 Charges to the enterprise (in thousands of EUR) 36 0
2. Personnel charges (in thousands of EUR) Remuneration and direct social benefits 428,891 413,773 Employer’s contribution for social security 120,565 116,409 Employer’s premiums for extra-statutory insurance 60,995 80,982 Other personnel charges 5,869 6,267 Pensions 3,081 1,536
3. Provisions for pensions (in thousands of EUR) Decrease (336) (36)
B. 1. Other operating income (in thousands of EUR) Analysis of statement of income item XIV., if the amount is significant Rents received 35,584 27,971 Cost recovery of affiliates 23,893 28,006 Compensation received missing coupon equities 27,204 27,791
Other 117,566 120,247 Managementreport
2. Other operating charges (Statement of income item XV.) Taxes 71,149 71,471 Other operating charges 49,293 62,050 Analysis of other operating charges if the amount is significant Compensation missing coupon equities 28,945 28,451
C. operating results in relation to affiliated enterprises Income 9,611,644 20,421,353 Charges 7,330,763 17,201,528 statements 31/12/09 31/12/10
Belgian Foreign Belgian Foreign Consolidated financial (in thousands of EUR) operations operations operations operations D. operating results by origin I. Interests receivable and similar income 3,898,780 986,851 3,112,611 567,513 III. Income from variable-yield securities From shares and other variable-yield securities 7,922 1,738 2,036 0 From participating interests in affiliated enterprises 391,204 0 626,605 0 From participating interests in other enterprises linked by participating interests 33,564 0 11,777 0 From other shares held as financial fixed assets 4,950 0 2,476 0 IV. Commissions receivable 426,697 2,963 449,715 15,394
VI. Profit on financial transactions statements Profit on trading of securities and other financial instruments (55,257) (74,971) (127,084) (79,140) Profit on disposal of investment securities (27,216) (42,831) 157,077 (1,889)
XIV. Other operating income 168,443 1,636 202,476 1,539 Non-consolidated financial
Notes: ●● With regard to foreign operations, the notes to the standard ●● The notes to the standard chart of financial statements chart of financial statements should include a separate should include a country analysis of items III.B. and C. with analysis by category of activity and geographical market, if reference to the location of the head office of the enter- the sale and provision of ordinary banking activities are prises concerned. organised in a significantly different manner from one market category to another.
226 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 227 Notes to the non-consolidated financial statements
XXIV. Forward off-balance-sheet transactions on securities, currencies and other financial instruments which are not commitments that could give rise to a risk within the meaning of off-balance-sheet item II.
1. Type of transaction Amount as at end of period Of which transactions (in thousands of EUR) not intended as hedges A. sECURITIES TRANSACTIONS Forward purchases and sales of transferable and negotiable securities 62,045 62,045
B. CURRENCY TRANSACTIONS(1) Forward foreign exchange transactions 22,401,688 22,401,688 Cross currency interest-rate swaps 21,436,498 20,171,214 Currency futures 791,122 791,122
C. othER FINANCIAL INSTRUMENTS Interest-rate transactions(2) Interest-rate swaps 976,888,839 792,683,674 Interest-rate futures 44,964,710 2,269,322 Forward rate agreements 115,852,333 115,852,333 Interest-rate options 225,064,318 224,993,261 Other forward purchases and sales(3) Other options contracts 48,764,453 43,217,611 Other futures contracts 89,280 89,280
Managementreport 2. Effect on results of exemption from the valuation rule referred to in article 36bis, § 2, relating to interest-rate transactions
Amount as at end of period(2) Difference between market (in thousands of EUR) value and carrying value(4) As part of cash management 27,402,900 (1,712) As part of asset and liability management 133,950,116 (1,587,410)
(1) Amounts to be delivered. (2) Nominal/notional reference amount. (3) Agreed buying/selling price. (4) +: Positive difference between the market value and results accounted for. -: Negative difference between the market value and results accounted for. statements Consolidated financial XXV. Extraordinary results
(in thousands of EUR) 31/12/09 31/12/10 A. Gains on transfers of fixed assets to affiliated enterprises 157,418 132,847 losses on transfers of fixed assets to affiliated enterprises (25,595) 1
B. other extraordinary income (Statement of income item XVII.E.) Nil
other extraordinary charges (Statement of income item XVIII.E.)
statements Nil Non-consolidated financial
228 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 229 Notes to the non-consolidated financial statements
XXVI. Income taxes
(in thousands of EUR) 31/12/09 31/12/10 A. Analysis of statement of income item XX.A. 1. Income taxes of the current period Taxes and withholding taxes due or paid 17,213 24,758 Excess of income tax prepayments and withholding taxes included in assets 0 0 Estimated additional charges for income taxes (included in liabilities item IV.) (2,967) (1,528) 2. Income taxes on prior periods Additional charges for income taxes due or paid 6,583 90 Additional charges for income taxes, estimated (included in liabilities item IV.) or for which provision has been established (included in liabilities item IV.A.2.) 53 800
B. MAIN SOURCES OF DIFFERENCES BETWEEN THE PROFITS BEFORE TAXES AS stATED IN THE FINANCIAL STATEMENTS AND THE ESTIMATED TAXABLE PROFITS, WITH SPECIAL MENTION OF TIMING DIFFERENCES (if the income taxes of the current period are materially influenced by such differences) Gains on shares 259,558 164,299 Dividend received deduction 0 608,792
C. EFFECT OF EXTRAORDINARY RESULTS ON THE AMOUNT OF INCOME TAXES of THE CURRENT PERIOD 1. Extraordinary income 547 680 2. Extraordinary charges 13,244 1,139
D. stATUS OF FUTURE TAXATION (if it is important for the purpose of evaluating the reporting institution’s financial position) Nil Managementreport XXVII. Other taxes and taxes supported by third parties
(in thousands of EUR) 31/12/09 31/12/10 A. Value added tax, turnover taxes and special taxes charged during the period 1. To the reporting institution (deductible) 53,486 62,244 2. By the reporting institution 84,034 110,383
B. Amounts retained on behalf of third parties for 1. Payroll withholding taxes 134,077 126,114
2. Withholding taxes on investment income 205,815 204,855 statements Consolidated financial statements Non-consolidated financial
228 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 229 Notes to the non-consolidated financial statements
XXVIII. Commitments given and received not reflected above
A. Description of the supplementary 3. Dexia New retirement or survivor’s pension plans New staff members taken on since 1 April 2002 joined the Dexia new benefit scheme, i.e. the Artesia BC group benefit 1. Dexia Old scheme. This scheme is organised in the framework of a contract with an insurance company. These insurances are financed by In the framework of the supplementary retirement or survivor’s contributions of the employer. These contributions are ac- pension plans, Dexia Bank subscribed a group insurance with counted for in the statement of income. an insurance company. This insurance is paid for by contributions of staff members and of the employer. B. Lernout & Hauspie 2. Ex-Artesia
In the framework of the supplementary retirement or survivor’s See part “Management report, General information, Litigation”. pension plans, a contingency plan has been existing since 1 January 2000 within the Artesia BC Group and was concluded with an insurance company in favour of its staff members. C. Transactions with related parties
For staff members who were affiliated to the BACOB pension not concluded at general market plan on 31 December 1999, this contingency fund foresees conditions transitory measures, as well as for employees who were affili- ated to the Artesia pension fund before 31 December 1999. Nil. These insurances are financed by contributions of the employer. Managementreport XXIX. Financial relationship with
(in thousands of EUR) 31/12/10 A. diRECTORS AND MANAGERS B. iNDIVidUALS OR LEGAL PERSONS WHO CONTROL THE CREDIT INSTITUTION DIRECTLY OR INDIRECTLY, BUT WHO ARE NOT AFFILIATED ENTERPRISES C. othER ENTERPRISES CONTROLLED DIRECTLY OR INDIRECTLY BY THE PERSONS MENTIONED UNDER B. D. thE AUDITOR(S) AND PERSONS LINKED TO THE AUDITOR(S)
A. 1. Amounts receivable from them 1,398
statements 2. Contingent liabilities for their account 14,935
B. 1. Direct and indirect remuneration and pensions included in the statement of income, as long as Consolidated financial this disclosure does not concern exclusively or mainly the situation of a single identifiable person For directors and managers 5,768 For former directors and managers 0
D. 1. Remuneration paid to auditors 1,309 2. Remuneration paid for exceptional services or special assignments carried out at the behest of the bank to the auditors Other audit assignments 0 Tax advices 0 Other assignments out of audit assignments 0 statements Non-consolidated financial
230 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 231 Social report
I. Statement of the persons employed
1. Employees recorded in the personnel register
A. During the financial period and during the preceding financial period Codes Full-time Part-time Total (T) Total (T) or total or total in full-time in full-time equivalents (FTE) equivalents (FTE) 31/12/10 31/12/10 31/12/10 31/12/09 Average number of employees 100 4,650 2,103 5,974.85 (FTE) 6,380.69 (FTE) Number of actual working hours 101 7,485,995 962,176 8,448,172 (T) 9,200,455 (T) Personnel charges (in thousands of EUR) 102 418,713 189,430 608,143 (T) 608,708 (T) Amount of the benefits in addition to wages (in thousands of EUR) 103 3,072 (T) 3,216 (T)
B. As at the closing date of the financial period Managementreport Codes Full-time Part-time Total in full-time equivalents a. Number of employees recorded in the personnel register 105 4,518 2,082 5,834.75
b. By nature of the employment contract Contract of unlimited duration 110 4,377 2,081 5,693.25 Contract of limited duration 111 141 1 141.50 Contract regarding a specific work 112 0 0 0.00 Contract regarding substitution 113 0 0 0.00 statements
c. By sex
Male 120 3,012 497 3,290.80 Consolidated financial Primary education 1200 10 4 12.30 Secundary education 1201 569 182 662.80 Higher non-university education 1202 1,335 229 1,470.60 University education 1203 1,098 82 1,145.10 Female 121 1,506 1,585 2,543.95 Primary education 1210 6 15 11.03 Secundary education 1211 345 626 717.79 Higher non-university education 1212 622 712 1,122.13 University education 1213 533 232 693
d. By professional category
Management personnel 130 135 10 138.70 statements Employees 134 4,383 2,048 5,688.28 Workers 132 0 24 7.77 Other 133 0 0 0.00 Non-consolidated financial
2. Temporary personnel and persons placed at the disposal of the enterprise Nil
230 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 231 Social report
II. List of personnel movements during the financial period
1. Entrants Codes Full-time Part-time Total in full-time equivalents a. Number of employed persons recorded in the personnel register during the financial period 205 154 17 165.17
b. By nature of the employment contract Contract of unlimited duration 210 61 17 72.17 Contract of limited duration 211 93 0 93.00 Contract regarding a specific work 212 0 0 0.00 Contract regarding substitution 213 0 0 0.00
2. Leavers Codes Full-time Part-time Total in full-time equivalents a. Number of employed persons of which the date of termination of the contracts has been recorded in the personnel register during the financial period 305 342 125 398.21
b. By nature of the employment contract
Managementreport Contract of unlimited duration 310 218 124 273.71 Contract of limited duration 311 124 1 124.50 Contract regarding a specific work 312 0 0 0.00 Contract regarding substitution 313 0 0 0.00
c. By reason of termination of contract Pension 340 16 68 49.40 Prepension 341 2 0 2.00 Dismissal 342 39 15 46.06 Other reason 343 285 42 300.75 of which number of former employees who continued rendering services to the enterprise statements at least on a part-time basis in the capacity of self-employed person 350 0 0 0.00 Consolidated financial statements Non-consolidated financial
232 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 233 Social report
III. Information on vocational training for employed persons during the financial period
Codes Male Codes Female Total of formal continued vocational training initiatives for the employed persons at the expense of the employer 1. Number of employees 5801 1,696 5811 1,389 2. Number of training hours 5802 44,382 5812 35,261 3. Charges to enterprise (in thousands of EUR) 5803 3,618,397 5813 2,874,818 of which Gross costs directly linked to the training 58031 3,618,397 58131 2,874,818 Contributions paid and deposits to collective funds 58032 0 58132 0 Received contributions (decrease) 58033 0 58133 0
Total of less formal and informal continued vocational training initiatives for the employed persons at the expense of the employer 1. Number of employees 5821 2,697 5831 2,368 2. Number of training hours 5822 35,488 5832 29,619 3. Charges to enterprise (in thousands of EUR) 5823 2,701,780 5833 2,254,935
Total of initial vocational training initiatives at the expense of the employer 1. Number of employees 5841 0 5851 0 2. Number of training hours 5842 0 5852 0 3. Charges to enterprise (in thousands of EUR) 5843 0 5853 0 Managementreport statements Consolidated financial statements Non-consolidated financial
232 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 233 Report of the Auditor
Dexia Bank Belgium SA
Statutory auditor’s report for the year ended 31 December 2010 The original text of this report is in Dutch and French
Dexia Bank Belgium SA Statutory auditor’s report for the year ended 31 December 2010 to the Shareholders’ Meeting
To the shareholders
As required by law and the company’s articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. This report includes our opinion on the financial statements together with the required additional comments.
Unqualified audit opinion on the financial statements
We have audited the financial statements of Dexia Bank Belgium SA for the year ended 31 December 2010, prepared in accordance with the accounting principles applicable in Belgium, which show total assets of 212,424,221 (000) EUR and a profit for the year of 698,018 (000) EUR.
Managementreport The Board of Directors of the company is responsible for the preparation of the financial statements. This responsibility includes among other things: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Réviseurs d’Entreprises/ Instituut van de Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures
statements in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the company’s preparation and fair presentation of the financial statements in order to design audit Consolidated financial procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. We have assessed the basis of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the financial statements, taken as a whole. Finally, the Board of Directors and responsible officers of the company have replied to all our requests for explanations and information. We believe that the audit evidence that we have obtained provides a reasonable basis for our opinion.
In our opinion, the financial statements as at 31 December 2010 give a true and fair view of the company’s assets, liabilities, financial position and results in accordance with the accounting principles applicable in Belgium. statements Non-consolidated financial
234 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 235 Report of the Auditor
Additional comments
The preparation and the assessment of the information that should be included in the directors’ report and the company’s compliance with the requirements of the Companies Code and its articles of association are the responsibility of the Board of Directors.
Our responsibility is to include in our report the following additional comments which do not change the scope of our audit opinion on the financial statements:
●● The directors’ report includes the information required by law and is in agreement with the financial statements. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the company, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not in obvious contradiction with any information obtained in the context of our appointment. ●● Without prejudice to certain formal aspects of minor importance, the accounting records are maintained in accordance with the legal and regulatory requirements applicable in Belgium. ●● No transactions have been undertaken or decisions taken in violation of the company’s articles of association or the Companies Code such as we would be obliged to report to you. The appropriation of the results proposed to the Shareholders’ Meeting is in accordance with the requirements of the law and the company’s articles of association.
Diegem, 24 March 2011
The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Managementreport
Frank Verhaegen Bernard De Meulemeester Partner Partner statements Consolidated financial statements Non-consolidated financial
234 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 235 Additional information
Addresses of the main Dexia Lease Belgium Dexia Crédits Logement Registered Office subsidiaries of Dexia Registered Office Place Rogier 11 Bank Boulevard Pachéco 44 B-1210 Brussels B-1000 Brussels Tel: + 32 2 222 37 08 Fax: + 32 2 222 37 13 Branch Offices www.dexialease.be Corona Chaussée de Dinant 1033 Avenue de la Métrologie 2 B-5100 Wépion Dexia Lease Services B-1130 Brussels Tel: + 32 81 46 82 11 Place Rogier 11 Tel: + 32 78 15 14 15 Fax: + 32 81 46 05 55 B-1210 Brussels Fax: + 32 2 216 23 98 Tel: + 32 2 222 38 36 www.corona.be H. Consciencestraat 6 Fax: + 32 2 222 37 13 B-8800 Roeselare Dexia Asset Management Tel: + 32 51 23 21 11 Dexia Life & Pensions Luxembourg Luxembourg Fax: + 32 51 23 21 45 2, rue Nicolas Bové Route d’Arlon 136 L-1253 Luxembourg L-1150 Luxembourg Dexia Ingénierie Sociale Tel: + 352 262 54 41 Managementreport Tel: + 352 2797-1 13, rue Croquechataigne Fax: + 352 262 54 45 480 Fax: + 352 27 97 49 40 BP 30064 www.dexia-life.com www.dexia-am.com F-45380 La Chapelle St Mesmin Tel: + 33 2 36 56 00 00 Dexia Re Dexia Auto Lease Fax: + 33 2 36 56 00 01 2, rue Nicolas Bové Place Rogier 11 [email protected] L-1253 Luxembourg B-1210 Brussels Tel: + 352 227 343 1 Tel: + 32 2 285 37 77 Dexia Insurance Belgium Fax: + 352 227 347 Fax: + 32 2 282 66 01 Avenue Livingstone 6 www.dexia-auto-lease.be B-1000 Brussels Elantis Tel: + 32 2 286 76 11 Registered Office and BranchO ffice
statements Dexia Bank Belgium Fax: + 32 2 286 76 99 Rue des Clarisses 38 Dublin Branch www.dvvlap.be B-4000 Liège 6 George’s Dock Tel: + 32 4 232 45 45 Consolidated financial IRL-IFSC Dublin 1 Dexia Insurance Belgium Invest Fax: + 32 4 232 45 01 Tel: + 353 16 45 50 31 Avenue Livingstone 6 Fax: + 353 18 29 15 77 B-1000 Brussels Branch Office Tel:: + 32 2 286 69 22 Boulevard Saint-Michel 50 Dexia Commercial Finance Fax: + 32 2 286 72 20 B-1040 Brussels Place Rogier 11 Tel: + 32 2 732 12 12 B-1210 Brussels Dexia Investment Company Fax: + 32 2 737 29 27 Tel: + 32 2 282 66 33 Boulevard Pachéco 44 www.elantis.be Fax: + 32 2 282 66 99 B-1000 Brussels www.dexiacommercialfinance.be Tel: + 32 2 222 71 94 Eurco Ltd Fax: + 32 2 285 35 48 6, George’s Dock statements IRL-Dublin 1 Dexia Investments Ireland Tel: + 353 1 85 15 200 6 George’s Dock Fax: + 353 1 829 0433
Non-consolidated financial IRL-IFSC Dublin 1 Tel: + 353 1 645 50 00 Sepia Fax: + 353 1 829 15 77 Avenue Livingstone 6 www.dexia-investments.ie B-1000 Brussels Tel: + 32 2 286 63 27 Fax: + 32 2 284 74 76
236 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 237 Additional information
General Information about Dexia Complaints Bank If you encounter a problem, you can take it initially to your branch, then to your relations manager or to the Complaints Name Department. Dexia Bank Belgium SA Dexia Bank Contact numbers Complaints Department – DT 19/12 Tel: +32 2 222 11 11 Boulevard Pachéco 44 Fax: +32 2 222 11 22 B-1000 Brussels E-mail: [email protected] Main postal address Boulevard Pachéco 44 If you are not satisfied with the response you receive, you can B-1000 Brussels turn to the mediator of Dexia Bank, Mr Gilles Jockin.
Company number Dexia Bank RPM Brussels VAT BE 403.201.185 Mediation Service – DT 19/13 Mr Gilles Jockin Managementreport Banking, Finance and Insurance Commission number Boulevard Pachéco 44 19649 A B-1000 Brussels E-mail: [email protected] Website http://www.dexia.be If you are a natural person acting in a private capacity and you are not satisfied with the responses you have received from the Information about the Annual Report is available on the inter- above, you can take your complaint to the Mediation Service net and can be obtained from of the Financial Sector if it relates to banking products:
Dexia Bank Service de Médiation pour le Secteur Financier
Division Communication – PA 10 Rue Belliard 15/17, box 8 statements Boulevard Pachéco 44 B-1040 Brussels B-1000 Brussels E-mail: [email protected] Tel: +32 2 222 45 50 Consolidated financial E-mail: [email protected] It if relates to insurance products, you can take your complaint to the Insurance Mediation Service.
Service de Médiation Assurances Square de Meeûs 35 B-1000 Brussels E-mail: [email protected] statements Non-consolidated financial
236 Dexia Bank Belgium Annual Report 2010 Annual Report 2010 Dexia Bank Belgium 237