APPENDIX Appendix 6: Glossary 14 Acronym/Term Definition CNlL Commission Nationale de l’Informatique et des Libertés (an independent administrative authority protecting privacy and personal data) Collateral A transferable asset or guarantee pledged to secure reimbursement on a loan in the event that the borrower fails to meet its payment obligations. COMEX Executive Committee Ratio of Common Equity Tier 1 (CET1) capital to risk-weighted assets. The CET1 ratio is a solvency Common Equity Tier 1 ratio indicator used in the Basel III prudential accords. A company’s ownership share of its own equity, held via its direct or indirect control of one or more other companies. Company-controlled stock does not bestow voting rights and is not included in the Company-controlled stock calculation of earnings per share. A measure calculated by dividing the net expense of commercial risk by loans outstanding at the Cost of risk in basis points beginning of the period. Cost/income ratio A ratio indicating the share of net revenues used to cover operating expenses (the company’s operating costs). It is calculated by dividing operating costs by net banking income. Coverage Coverage in terms of client support. Covered bond A bond for which the reimbursement and payment of interest is backed by returns on a high-quality asset portfolio, often a portfolio of mortgage loans, which serve as collateral. The issuer often manages the payment of cash flows to investors (obligations foncières in France, Pfandbriefe in Germany). This product is mainly issued by financial institutions. Commercial paper. In the United States, commercial paper is a negotiable debt instrument issued by CP corporations on the money market. CPI Consumer Price Index CPM Credit Portfolio Management CRD Capital Requirements Directive (EU Directive) CRD III An EU Directive under which the proposals of the Basel Committee were transposed into French law in July 2010 and enacted as of December 31, 2011. In July 2009, the Basel Committee published a new set of proposals known as Basel 2.5 on the topic of market risk. The aim was to better account for default and credit migration risk on assets in the trading book (both tranched and untranched assets) and to reduce the procyclicality of value at risk. CRD IV A European Directive that enacts the proposals of the Basel3 framework into French law. The risk of loss from the inability of clients, issuers or other counterparties to honor their financial Credit and counterparty risk commitments. Credit risk includes counterparty risk related to market transactions and securitization. Credit default swap (CDS) A bilateral financial contract whereby the protection buyer periodically pays a premium to the protection seller, who in turn promises to compensate for any losses on a reference asset (a bond issued by a government, financial institution or company) upon the occurrence of a credit event (bankruptcy, default, deferred payment or restructuring). It is a mechanism to protect against credit risk. Credit derivative A financial product whose underlying asset is a credit obligation or debt security (bond). The purpose of the credit derivative is to transfer credit risk without transferring the asset itself for hedging purposes. One of the most common forms of credit derivatives is the credit default swap (CDS). CRM Comprehensive Risk Measure CRR Capital Requirement Regulation (EU regulation) CSR Corporate Social Responsibility CVA Credit valuation adjustment, i.e. the expected loss related to counterparty’s default risk. The CVA aims to account for the fact that the full market value of the transactions cannot be recovered. The method for determining the CVA is primarily based on the use of market inputs in connection with the practices of market professionals. Deleveraging A reduction in banks’ use of leverage, achievable by various means but primarily by a reduction in the size of the balance sheet (by selling assets or slowing down new lending) and/or an increase in equity (through recapitalization or retaining earnings). This financial adjustment process often has negative implications for the real economy, particularly due to the narrowing of the credit channel. Derivative A financial security or financial contract whose value changes based on the value of an underlying asset, which may be either financial (equities, bonds, currencies, etc.) or non-financial (commodities, agricultural products) in nature. This change may coincide with a multiplier effect (leverage effect). Derivatives can take the form of either securities (warrants, certificates, structured EMTNs, etc.) or contracts (forwards, options, swaps, etc.). Exchange-traded derivatives contracts are called futures. District Court The lower tier of the US federal judicial system. NATIXIS Risk and Pillar III Report 2016 14 173
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