2007 REGISTRATION DOCUMENT

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 >The banking supervisor has approved this internal model and theunderlying methodologies, which include:■ capturing the correlation between interest rate, currency,commodity and equity risks, to factor in the knock-on effects of riskdiversification;■ capturing the specific interest rate risk arising from potentialfluctuations in credit spreads, to accurately and dynamically measurethe risk associated with trading in credit derivatives.The Values at Risk set out below were determined using the internalmodel, which uses parameters that comply with the methodrecommended by the Basel Committee for determining estimated valuesat risk (“Supplement to the Capital Accord to Incorporate Market Risks”).The main parameters are:■ change in the value of the portfolio over a holding period of 10 tradingdays;■ confidence level of 99% (i.e. over a 10-day holding period, any lossesshould be less than the corresponding VaR in 99% of cases);■ historical data covering one year (260 days) of trading.In 2007, total average Value at Risk was EUR 156 million (with aminimum of EUR 41 million and a maximum of EUR 378 million), aftertaking into account the EUR 152 million effect of netting the differenttypes of risk. These amounts break down as follows:Year to 31 Dec. 200731 DecemberYear to31 Dec. 2006Type of risk Average Minimum Maximum 2007 Average31 December2006Interest rate risk 61 26 110 82 42 45Credit risk 79 42 160 147 55 70Currency risk 17 3 41 41 7 8Equity price risk 134 38 323 152 55 66Commodity price risk 17 10 28 12 16 17Effect of netting (152) (189) (104) (142)TOTAL 156 41 378 245 71 644.c MARKET RISKS RELATED TO BANKINGINTERMEDIATION ACTIVITIES ANDINVESTMENTSInterest rate and currency risks related to banking intermediationactivities and investments mainly concern retail banking activities inFrance and abroad, the specialised financing and savings managementsubsidiaries, and investments made by the Group. They are managedcentrally by the Asset/Liability Management unit, which forms part of theAsset/Liability Management & Treasury (ALM-Treasury) Department.ALM-Treasury is part of the Corporate and Investment Banking Divisionand reports directly to one of the Chief Operating Officers. Strategicdecisions are made by ALM committees tasked with overseeing ALM-Treasury’s activities. These committees have been set up within eachdivision (AMS, FRB, CIB, BNL, IR FS) and at the level of the business linesand/or the main subsidiaries.4.c.1Interest r ate r iskInterest rate risk management structureInterest rate risk on the commercial transactions of the French andInternational Retail Banking divisions, the specialised financingsubsidiaries, and the savings management business lines in the AMSand Corporate Banking divisions are managed centrally by ALM-Treasurythrough the client intermediation book, with the exception of transactionsinitiated in the United States by BancWest Corp. subsidiaries. Interest raterisk on the Bank’s equity and investments is also managed centrally byALM-Treasury, in the equity intermediation and investments book.12345678910112007 Registration document - BNP PARIBAS 145