2007 REGISTRATION DOCUMENT

2 ReportCORPORATE GOVERNANCEof the Chairman of the Board of Directors on the conditions for the preparation and organisationof the work of the Board and on internal control procedures implemented by BNP Paribas8. THE INTERNAL CONTROL, RISKMANAGEMENT AND COMPLIANCECOMMITTEE■ The terms of reference of the Internal Control and Risk ManagementCommittee, which was set up in 1994 to cater to the specific needsof banking operations, have been extended to include compliancerelatedissues, particularly in areas such as reputation risk andprofessional ethics. In 2007, its members were François Grappotte(Chairman), Jean-Marie Gianno and Jean-François Lepetit, i.e., twothirdsof its members were independent directors under AFEP-MEDEFguidelines. No members of the Bank’s Executive Management sit onthe Committee.■ In 2007, the Committee met five times and the rate of attendancewas 93% (one member having missed one meeting).■ Documentation on agenda items was distributed to Committeemembers on average three to four days prior to meetings.Internal control, compliance and relationswith regulatory authorities■ The Committee was provided with the draft annual reports oncompliance, permanent control and periodic control for the yearended 31 December 2006.■ It received a half-year summary report on permanent control andperiodic control comprising quantified data relating to procedures,control scope and implementation, risk indicators, and to the followupof recommendations made by the Bank’s General Inspection unit.The Committee was briefed on the periodic control procedures set upto keep Executive Management informed.■ The Committee listened to a presentation from the Head of GroupCompliance providing an overview of permanent control.■ It reviewed the delegation of periodic control procedures within theGroup and submitted draft proposals to the Board for setting upperiodic control procedures in the Group’s subsidiaries.■ It reviewed the Group’s exchanges of correspondence with the Frenchbanking regulator (Commission bancaire) and the financial marketsregulator (AMF) and kept abreast of issues involving US bankingregulations.■ The Committee also reviewed the Group’s policies for combatingfraud.Credit risks and market risks■The Committee discussed the key issues highlighted in the Group RiskManagement r eport for 2006 and the first half of 2007 and analysedthe breakdown by industry and geographical area.■ The Committee devoted a specific session to analysing the situation inthe financial markets in relation to the crisis that emerged during thesummer of 2007, and more specifically to liquidity and third party fundmanagement risks. It was briefed on an ongoing basis by ExecutiveManagement with regard to the businesses affected by the crisis andthe main types of exposure. In particular, the Committee reviewed theBancWest portfolio and the Bank’s exposure to financial institutions,hedge funds, monoline insurers and property market risks.■ It regularly reviewed key exposures in respect of market activitieshighlighted in the Group Risk Management report and noted the stepstaken by the Group to control the types of market risks to which it isexposed and to maintain its capital adequacy requirements. It wasbriefed on the impact of market trends on “Value-at-Risk” (VaR).■ The Committee was notified of the findings of the Risk PolicyCommittees convened regularly by Executive Management toreview specific issues: procedures for setting and managing countryrisk exposure limits, real estate financing, leveraged buyouts orsecuritisation.■ The Committee interviewed the Head of ALM (Asset LiabilityManagement) Treasury in relation to liquidity risk management andlistened to his comments concerning the organisation and controlof activities within his brief and the existing decision-making anddelegation procedures.■ The Committee was kept abreast of organisational changes to GroupRisk Management designed to bolster the overall coherence of the riskmanagement process and was notified of progress in integrating BNLinto the Group. It was also informed of the measures taken to ensurecooperation between Group Risk Management and Group Finance-Development in preparing the groundwork for implementation of BaselII and in ensuring that capital adequacy requirements are integratedinto the Group’s management tools. It listened to the comments ofExecutive Management concerning the method of calculating theGroup’s capital and analysing long-term forecast data on operationalrisk.Interviews■Without any member of Executive Management being present, theCommittee interviewed the Head of Group Risk Management, theHead of Permanent Control and Compliance, and the Head of theGeneral Inspection unit, who is in charge of periodic controls.Report of the Chairman■< Contents >The Committee reviewed the report of the Chairman on I nternalC ontrol and recommended its approval by the Board of Directors.1234567891011522007 Registration document - BNP PARIBAS