CrossBorder Supervisory Cooperation Issues and Challenges How to Please Multiple Country Supervisors

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Cross-Border Supervisory Cooperation - Issues
and ChallengesHow to Please Multiple Country
Supervisors

• Washington, DC
• June 7, 2006
• Everett Schenk
• BNP Paribas, Head of North American Territory
• Corporate and Investment Banking
• Chairman, Institute of International Bankers

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Agenda
BNP Paribas Globally and in the US
Improved Cooperation Among Regulators Globally
BNP Paribas Response
Whats Next?
3
Leading European Bank with Global Reach,
Financially Strong

• Presence in 85 countries on the 5 continents
• 130,000 people worldwide, including BNL
• 60 outside France
• 12 in the United States

• Well-balanced business mix and profitability
  growing strongly (2005)
• Market Cap _at_ 5/2/06 70.6bn
• Net Banking Income (excl BNL) 21.5bn
• After-tax ROE (excl BNL) 20.2
• Net Banking Income by geography (incl BNL)
• France 48
• Italy 17
• Rest of Europe 16
• USA 13
• Asia Other 6

Net Banking Income (incl BNL)
Corp Invest Banking 27
Asset Mgmt Services 14
Intl Retail Financial Services 25
BNL 12
French Retail 22
Retail Banking 59
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BNP Paribas platform in the US Consistent with
Global Organization
12,250 Retail Staff
2 Brands
and
742 branches in the Western United States and
Hawaii
7th biggest bank in the Western US
Retail Banking

Corporate and Investment Banking (CIB)
Private Banking Miami
Asset Management and Services
Advisory Capital Markets


Insurance FAMLI Duerr
Presence in New York, Chicago, Dallas, Houston,
San Francisco, Los Angeles
CooperNeff Advisory
Asset Management FFTW
Financing Activities
Securities Services
350 AMS Staff
2,250 CIB Staff
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Regulatory Environment of BNPPs US Platform

• Financial Holding Co
• Incorporating all business lines under one
  regulatory umbrella
• Home Country Regulator Commission Bancaire
  (France)
• Primary US Regulators
• Federal Reserve Bank of New York, Consolidated
  Supervisor
• FDIC
• State Banking Departments, primarily New York
• Other Significant Regulators
• NY Stock Exchange
• SEC
• NASD
• Large Complex Banking Organization (LCBO),
  subject to
• Onsight regulatory supervision (6 permanent
  staff)
• Targeted, horizontal and peer review examinations

• CBOT
• NYMEX
• BOX

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Agenda
BNP Paribas Globally and in the US
Improved Cooperation Among Regulators Globally
BNP Paribas Response
Whats Next?
7
Improved Productivity of Home/Host Regulatory
Relations

• Home/Host Country Regulatory Relations have
  improved enormously over the past few years as
  bank management and regulators have made strides
  in improving communication, cooperation,
  transparency, and standardization
• of best practices.
• Communication
• Internal communication between a Home Office and
  its international network
• Externally - between Home Office and Home Country
  Regulator - between local regulated
  entities and their Host Country Regulators
• Cooperation
• High degree of cooperation between Host and Home
  Country regulators, facilitating
• Increased efficiency for regulators and bank
  staff
• Improved quality of examination results
• Minimization of unnecessary cost and burden
• Places a premium on comprehensive and regular
  internal communication between a Home Office and
  its foreign operations.
• Avoids inconsistent and varying guidance from
  Home/Host Regulators to the individual banking
  organization.

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Improved Productivity of Home/Host Regulatory
Relations

• Transparency
• Pro-active sharing of information with primary
  regulators to provide a complete understanding of
  business and control activities
• Globalization of businesses and reporting has
  improved information flow to all regulators
• Standardization of Best Practices
• Promoting broader application of improved
  operations and controls through Benchmarking of
  Best Practices and Horizontal Peer Reviews by
  Regulators, when available.
• Contributing to enhanced understanding of local
  standards by Home Regulators

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Agenda
BNP Paribas Globally and in the US
Improved Cooperation Among Regulators Globally
BNP Paribas Response
Whats Next?
10
BNP Paribas Response to the New Regulatory
Environment

• Dedicated North American Territory Functions
  established
• U.S. Regulatory Relationship Oversight Committee
• Regulatory Relationship Officers covering all of
  Corporate and Investment Banking and Retail
  Banking for the U.S.
• Corporate Governance Committee and a process by
  which all Controls and Risk Indicators are
  reviewed

Evolution of U.S. Staff Interfacing with the
Primary Regulators in the U.S. (Corporate and
Investment Banking)
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BNP Paribas Response to the New Regulatory
Environment

• Dedicated Global Functions
• Establishment of a Head Office Regulatory
  Coordinator for all business lines
• Reinforcement of the Global Head of Compliance
  role in Paris
• Creation of a Globally Centralized Regulatory
  Relationship Function that oversees the 11 main
  international territories for action plans,
  regulatory communications and review of
  operational controls
• Communication
• Weekly meeting held between Regulator
  Relationship Officer and onsite Regulators for
  status updates
• Monthly meetings with the U.S. Regulatory
  Relationship Oversight Committee to discuss
  exams, findings and implementation. Participants
  include Legal, Compliance, Audit, external
  Counsel and Head Office Management
• Semi-Annual meetings between primary U.S.
  Regulators and BNP Paribas Management (local and
  global). Alternative meeting locations between
  New York and Paris
• Creation of a Global Regulatory Relationship
  Function allows BNP Paribas to communicate
  effectively to all International Regulators.

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BNP Paribas Response to the New Regulatory
Environment

• Addressing Findings/Recommendations
• Dedicated Internal staff to follow up and help
  resolve Regulatory and Internal Audit Findings
• Disciplined process for identification of aged or
  unresolved Findings are analyzed and escalated to
  Senior Management, Locally and Head Office

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Agenda
BNP Paribas Globally and in the US
Improved Cooperation Among Regulators Globally
BNP Paribas Response
Whats Next?
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Whats Next

• Develop concrete methods of sharing
  responsibilities that will produce substantial
  savings
• in aggregate supervisory man hours
• and in amount of management and employee time
  needed by banks to satisfy various home/host
  regulators.
• Support Chairman Bernankes recent call, which
  was in connection with Basel II implementation,
  for flexibility among supervisors to ensure
  appropriate standardization of requirements is
  combined with flexible accommodation of differing
  approaches by different institutions that achieve
  consistent results
• Basel II Capital Standards Encourage the Accord
  Implementation Group to avoid duplication of
  validation requirements by home/host regulators

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Whats Next

• Recommend increased reliance on home country data
  and reporting and supervisory analysis
• Unless specifically needed to satisfy host
  country safety and soundness responsibilities.
• Particularly essential in wholesale markets where
  the risks being measured are cross border and
  global in their effects.
• Support further coordination between home/host
  regulators regarding examinations and on-site
  oversight.
• Proven efficiencies from joint exams currently
  conducted by multiple domestic regulators with
  the US
• Home/host regulators who share common standards
  should be especially well equipped to combine
  their efforts.

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How to Please Multiple Country Supervisors

• Everett Schenk
• BNP Paribas, Head of North American Territory
• Corporate and Investment Banking
• Chairman, Institute of International Bankers