2007 REGISTRATION DOCUMENT
2007 REGISTRATION DOCUMENT 2007 REGISTRATION DOCUMENT
5 NotesCONSOLIDATED FINANCIAL STATEMENTSto the financial s tatements p repared in accordance with I nternational Financial Reporting S tandards as adopted by the European Union< Contents >Risk mitigation techniquesCollateral and other securityThe BNP Paribas Global Credit Policy stipulates how transactions shouldbe structured in order to mitigate risk. Collateral and other security aretaken into account at fair value, and only accepted as the main source ofrepayment in exceptional cases; cash generated by operations is regardedas the primary source of the borrower’s ability to repay. Guarantors aresubject to the same rigorous upfront assessment process as primary debtors.Banking regulations set clear guidelines for assessing the risk-mitigatingeffect of collateral and other security under the Basel II advanced IRBapproach. The Bank’s diversified business base means that loans aresecured by many different types of collateral and security, particularlyasset financing, which may be secured by aircraft, ships or real estatefor example. Risk assessments also take into account direct guaranteesissued by the counterparty’s parent company or other guarantors suchas financial institutions. Other guarantees assessed by the Bank includecredit derivatives and export credit insurance written by governmentagencies and private insurers. Acceptance of these types of guaranteesis governed by strict criteria. A guarantee is considered as mitigating arisk only when the guarantor is rated higher than the counterparty.BNP Paribas’ system for assessing the risk-mitigating effects of collateraland other security has been validated by the French banking supervisor(Commission Bancaire) as part of the implementation of the new BaselII capital adequacy ratio.Purchases of credit protectionIn order to reduce the credit risk on certain portfolios, the Group carriesout synthetic securitisations that transfer part of the risk to the marketusing credit derivatives (purchases of options or credit default swaps)contracted either via special purpose entities or directly with otherbanks.The loans hedged by the credit derivatives remain on the consolidatedbalance sheet. BNP Paribas is exposed to counterparty risk in relationto the sellers of the credit protection. This risk is subject to the samedecision-making and management process as that applied to derivativesused for other purposes.For portfolio transactions, BNP Paribas retains part of the risk in the formof tranches which are generally junior or mezzanine.4.a.3Diversification of c redit r isksof f inancing a ctivitiesThe gross value of the Bank’s portfolio of commercial loans andcommitments amounts to EUR 788 billion at 31 December 2007(EUR 715 billion at 31 December 2006). The diversification analysisbelow covers loans granted to customers and demand accounts withcredit institutions and central banks as well as financing commitments(excluding share repurchase agreements) and financial guarantees given.No single counterparty gives rise to an excessive concentration of creditrisk, due to the size of the business and the high level industrial andgeographic diversification of the client base. The breakdown of creditrisks by industry and by region is presented in the charts below.Diversification by counterpartyDiversification of commitments by counterparty is closely and regularlymonitored. The Bank’s concentration of credit risks is well below thethresholds set in the European Directive on major banking risks, with thetop 10 client groups representing less than 4% of total commitments asof 31 December 2007 (3% as of 31 December 2006).12345678910111382007 Registration document - BNP PARIBAS
CONSOLIDATED FINANCIAL STATEMENTS5Notes to the financial s tatements p repared in accordance with I nternational Financial Reporting S tandards as adopted by the European Union< Contents >INDUSTRY DIVERSIFICATION➤BREAKDOWN OF THE PORTFOLIO OF COMMERCIAL LOANS AND COMMITMENTS AT 31 DECEMBER 2007BY INDUSTRY14%Energy excluding Electricity2%Retail2%Construction1%Chemicals excluding Pharmaceuticals1%Household goods1%Automotive1%Insurance3%Agriculture, Food, Tobacco3%Utilities (Electricity, Gas, Water, etc)3%Transportation & Logistics3%Equipment excluding IT & Electronics18%Sovereign, local government and Finance1%Hotel, Tourism, Leisure4%Real Estate1%Information Technologies & Electronics1%Media & Cultural Services3%Metal & Mining23451%Communication Services5%B to B services1%Healthcare & Pharmaceuticals6%Wholesale & Trading33%Private Individuals678910112007 Registration document - BNP PARIBAS 139
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CONSOLIDATED FINANCIAL STATEMENTS5Notes to the financial s tatements p repared in accordance with I nternational Financial Reporting S tandards as adopted by the European Union< Contents >INDUSTRY DIVERSIFICATION➤BREAKDOWN OF THE PORTFOLIO OF COMMERCIAL LOANS AND COMMITMENTS AT 31 DECEMBER <strong>2007</strong>BY INDUSTRY14%Energy excluding Electricity2%Retail2%Construction1%Chemicals excluding Pharmaceuticals1%Household goods1%Automotive1%Insurance3%Agriculture, Food, Tobacco3%Utilities (Electricity, Gas, Water, etc)3%Transportation & Logistics3%Equipment excluding IT & Electronics18%Sovereign, local government and Finance1%Hotel, Tourism, Leisure4%Real Estate1%Information Technologies & Electronics1%Media & Cultural Services3%Metal & Mining23451%Communication Services5%B to B services1%Healthcare & Pharmaceuticals6%Wholesale & Trading33%Private Individuals67891011<strong>2007</strong> Registration document - BNP PARIBAS 139