2007 REGISTRATION DOCUMENT

CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on the conditions for the preparation and organisation 2of the work of the Board and on internal control procedures implemented by BNP Paribas< Contents >■It fixed the terms and conditions applicable to corporate officersfor holding shares allocated following the exercise of stock optionsgranted after 1 January 2007 and submitted its proposals to the Boardof Directors.Remuneration of directors■The individual amount of directors’ fees has remained unchanged since2005. At his own request, the directors’ fees attributable to Alain Jolyas Chairman of the Compensation Committee were reduced fromEUR 6,000 to EUR 1,000.■ The Committee examined the proposed allocation of directors’ feesfor 2007 and presented its proposals to the Board.12INTERNAL CONTROLThe information below concerning the Group’s Internal Control systemhas been provided by Executive Management. The Chief ExecutiveOfficer is responsible for Internal Control systems and procedures, andfor all the statutory information in the report on Internal Control. Thisdocument was prepared using information provided by the followingGroup functions: Compliance, Risk Management, Finance-Development,Legal Affairs and the General Inspection unit. It was validated by thedecision-making body.INTERNAL CONTROL ENVIRONMENTControls within the French banking sector are governed by a wide rangeof laws and regulations, which have firmly established an internal controlculture within the Bank’s business lines.The conditions for implementing and monitoring control systems inbanks and investment firms are set out in CCLRF Regulation n° 97-02,as amended (1) . These rules lay down the principles relating to controlsystems for transactions and internal procedures, accounting systemsand information processing, risk and performance measurement systems,risk supervision and control systems, and internal control documentationand reporting systems. Under Article 42 of this Regulation, banks arerequired to prepare an annual statutory report on internal control forthe attention of the Board of Directors.As required by Regulation n° 97-02, BNP Paribas has set up an InternalControl system (referred to herein as Internal Control) in which distinctorganisations and managers are in charge of permanent controls andperiodic controls. The Internal Control system must also take into account,as appropriate, the General Regulations of AMF (French Financial MarketsAuthority), regulations applicable to branches and subsidiaries outsideFrance and to specialised operations such as portfolio management andinsurance, the most widely accepted industry practices in this area andthe recommendations of the Basel Committee.DEFINITION AND OBJECTIVES OF INTERNALCONTROLThe Executive Management of the BNP Paribas Group has set up anInternal Control system whose main aim is to ensure overall controlof risks and provide reasonable assurance that the Bank’s goals in thisarea are being met. This system is defined in the Group’s Internal ControlCharter, which is widely distributed within the Group and freely availableto all Group employees. It defines Internal Control as a mechanism forensuring:■ the effectiveness and quality of the Group’s internal operations;■ the reliability of internal and external information (particularlyaccounting and financial information);■ transaction security and effectiveness;■ the security of assets;■ compliance with applicable laws, regulations and internal policies;■ and efficient use of resources.The Charter lays down rules relating to the organisation, lines ofresponsibility and remit of the various players involved in InternalControl, and establishes the principle of the independence of thedifferent control functions (Compliance, General Inspection unit andRisk Management).SCOPE OF INTERNAL CONTROLOne of the fundamental principles of Internal Control is that it must beexhaustive in scope: it applies in the same degree to all types of risk andto all entities in the BNP Paribas Group (entities include core businesses,business lines, functions, territories and consolidated subsidiaries)without exception. It also extends to any core activities that have beenoutsourced.Implementing this principle requires a precise overview of the allocationsof responsibilities and must factor in the ongoing growth in the Group’sbusinesses.ORGANISATION AND FUNDAMENTALPRINCIPLES OF INTERNAL CONTROLInternal Control in BNP Paribas is based on four key principles:■ p ermanent Controls and Periodic Controls:■ Permanent Controls consist of ongoing risk identification andassessment, procedures, controls, and a dedicated reporting andmonitoring system - all within a process that dovetails withoperational risk monitoring. Permanent Controls are carried outboth by operational staff and their line managers, and by specialisedcontrol functions either within or independent of the entities,345678910(1) Amended by Regulations 2001-01, 2004-02 and the Decrees of 31 March 2005, 17 June 2005, 20 February 2007 and 2 July 2007.112007 Registration document - BNP PARIBAS 55