INFORMATION STATEMENT of BNP Paribas, a French incorporated company (société anonyme) (the Bank or BNP Paribas and, together with its consolidated - PDF

INFORMATION STATEMENT of BNP Paribas, a French incorporated company (société anonyme) (the Bank or BNP Paribas and, together with its consolidated subsidiaries, the Group or BNP Paribas Group ), for use

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INFORMATION STATEMENT of BNP Paribas, a French incorporated company (société anonyme) (the Bank or BNP Paribas and, together with its consolidated subsidiaries, the Group or BNP Paribas Group ), for use in connection with the Bank s Warrant and Certificate Program, U.S. Medium-Term Note Program and Programme for the Issuance of Debt Instruments Dated as of June 3, 2013 TABLE OF CONTENTS FORWARD-LOOKING STATEMENTS... 1 INCORPORATION BY REFERENCE... 1 EXCHANGE RATE AND CURRENCY INFORMATION... 2 PRESENTATION OF FINANCIAL INFORMATION... 3 RISK FACTORS... 4 SELECTED FINANCIAL DATA CAPITALIZATION OF THE GROUP MANAGEMENT S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RECENT DEVELOPMENTS BUSINESS OF THE GROUP LEGAL PROCEEDINGS MAIN SHAREHOLDERS OF BNP PARIBAS RISK MANAGEMENT GOVERNMENTAL SUPERVISION AND REGULATION OF BNP PARIBAS IN FRANCE CAPITAL ADEQUACY OF THE BNP PARIBAS GROUP MANAGEMENT OF THE BANK INDEPENDENT STATUTORY AUDITORS i FORWARD-LOOKING STATEMENTS This information statement contains forward-looking statements. The Group may also make forwardlooking statements in its audited annual financial statements, in its interim financial statements, in its offering circulars, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Group s beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made, and the Group undertakes no obligation to update publicly any of them in light of new information or future events. INCORPORATION BY REFERENCE We have incorporated by reference in this information statement certain information that we have made publicly available, which means that we have disclosed important information to you by referring you to those documents. The information incorporated by reference is an important part of this information statement. The following documents are incorporated by reference into this information statement: Chapters 4 and 5 of the English-language version of our 2012 Registration Document (Document de référence) filed with the AMF (reference number D ) (the 2012 Registration Document ); Chapter 2 of the English-language version of the First Update to the 2012 Registration Document (Actualisation du document de référence) filed with the AMF (reference number D A01); Chapter 4 of the English-language version of our 2011 Registration Document (Document de référence) filed with the AMF (reference number D ) (the 2011 Registration Document ); Chapter 3 of the English-language version of the First Update to the 2011 Registration Document (Actualisation du document de référence) filed with the AMF (reference number D A01); and the press release entitled 2012 Restated Quarterly Result Series dated as of April 18, 2013 (the Restatement Press Release ). Each Registration Document and the Restatement Press Release may also be consulted on our website at Other information contained on our website is not a part of this information statement. 1 EXCHANGE RATE AND CURRENCY INFORMATION In this information statement, references to euro, EUR and refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended by the Treaty on European Union and as amended by the Treaty of Amsterdam. Most of the financial data presented in this information statement are presented in euros. References to USD, $, U.S.$ and U.S. dollars are to United States dollars. References to cents are to United States cents. On May 24, 2013, the Noon Buying Rate was U.S. $1.29 per one euro. The following table shows the period-end, average, high and low Noon Buying Rates for the euro, expressed in U.S. dollars per one euro, for the periods and dates indicated. Month Period Average U.S. dollar/euro End Rate* High Low May April March February January Year U.S. dollar/euro * The average of the Noon Buying Rates on the last business day of each month (or portion thereof) during the relevant period for year average; on each business day of the month (or portion thereof) for monthly average. Fluctuations in exchange rates that have occurred in the past are not necessarily indicative of fluctuations in exchange rates that may occur at any time in the future. No representations are made herein that the euro or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or euros, as the case may be, at any particular rate. 2 PRESENTATION OF FINANCIAL INFORMATION The audited consolidated financial statements as of and for the years ended December 31, 2012, 2011 and 2010 have been prepared in accordance with international financial reporting standards ( IFRS ) as adopted by the European Union. The Group s fiscal year ends on December 31, and references in this information statement to any specific fiscal year are to the twelve-month period ended December 31 of such year. Due to rounding, the numbers presented throughout this information statement may not add up precisely, and percentages may not reflect precisely absolute figures. 3 RISK FACTORS Risks Relating to the Bank and its Industry Difficult market and economic conditions could have a material adverse effect on the operating environment for financial institutions and hence on the Bank s financial condition, results of operations and cost of risk. As a global financial institution, the Bank s businesses are highly sensitive to changes in financial markets and economic conditions generally in Europe, the United States and elsewhere around the world. The Bank has been and may continue to be confronted with a significant deterioration of market and economic conditions resulting, among other things, from crises affecting sovereign obligations, capital, credit or liquidity markets, regional or global recessions, sharp fluctuations in commodity prices, currency exchange rates or interest rates, inflation or deflation, restructurings or defaults, corporate or sovereign debt rating downgrades or adverse geopolitical events (such as natural disasters, acts of terrorism and military conflicts). Market disruptions and sharp economic downturns, which may develop quickly and hence not be fully hedged, could affect the operating environment for financial institutions for short or extended periods and have a material adverse effect on the Bank s financial condition, results of operations or cost of risk. European markets have experienced significant disruptions in recent years as a result of concerns regarding the ability of certain countries in the Euro-zone to refinance their debt obligations and the extent to which European Union member states or supranational organizations will be willing or able to provide financial support to the affected sovereigns. These disruptions contributed to tightened credit markets, increased volatility in the exchange rate of the euro against other major currencies, affected the levels of stock market indices and created uncertainty regarding the economic prospects of certain countries in the European Union as well as the quality of bank loans to sovereign debtors in the European Union. The Bank holds and in the future may hold substantial portfolios of sovereign obligations issued by the governments of, and has and may in the future have substantial amounts of loans outstanding to borrowers in, certain of the countries that have been most significantly affected by the crisis in recent years. The Bank also participates in the interbank financial market and as a result, is indirectly exposed to risks relating to the sovereign debt held by the financial institutions with which it does business. More generally, the sovereign debt crisis has had, and may continue to have, an indirect impact on financial markets and, increasingly, economies, in Europe and worldwide, and therefore on the environment in which the Bank operates. If economic conditions in Europe or in other parts of the world were to deteriorate, particularly in the context of an exacerbation of the sovereign debt crisis (such as a sovereign default), the Bank could be required to record impairment charges on its sovereign debt holdings or record losses on sales thereof, and the resulting market and political disruptions could have a significant adverse impact on the credit quality of the Bank s customers and financial institution counterparties, on market parameters such as interest rates, currency exchange rates and stock market indices, and on the Bank s liquidity and ability to raise financing on acceptable terms. Legislative action and regulatory measures taken in response to the global financial crisis may materially impact the Bank and the financial and economic environment in which it operates. Legislation and regulations have been enacted or proposed in recent periods with a view to introducing a number of changes, some permanent, in the global financial environment. While the objective of these new measures is to avoid a recurrence of the recent financial crisis, the impact of the new measures could be to change substantially the environment in which the Bank and other financial institutions operate. The new measures that have been or may be proposed and adopted include more stringent capital and liquidity requirements, taxes on financial transactions, restrictions and temporary or permanent taxes on employee compensation over specified levels, limits on the types of activities that commercial banks can undertake (particularly proprietary trading and, potentially, investment banking activities more generally), restrictions or prohibitions on certain types of financial products or activities, increased internal control and transparency requirements with respect to certain activities, more stringent conduct of business rules, increased regulation of certain types of financial products including mandatory reporting of derivative transactions, requirements either to mandatorily clear, or otherwise mitigate risks in relation to, over-the-counter derivative transactions, and the creation of new and strengthened regulatory bodies. Certain measures that have been or are in the process of being adopted and will be applicable to the Bank, such as the Basel 3 and Capital Requirements Directive 4 prudential frameworks, the requirements in 4 relation to them announced by the European Banking Authority and the designation of the Bank as a systemically important financial institution by the Financial Stability Board, will increase the Bank s regulatory capital and liquidity requirements and may limit its ability to extend credit or to hold certain assets, particularly those with longer maturities. The Bank implemented an adaptation plan in response to these requirements, including reducing its balance sheet and bolstering its capital base. Ensuring and maintaining compliance with further requirements of this type that may be adopted in the future may lead the Bank to take additional measures that could weigh on its profitability and adversely affect its financial condition and results of operations. New measures such as the proposed French banking law or, at the E.U. level, the Liikanen proposal (if adopted) could require the Bank to ring-fence certain of its activities within a subsidiary that will be required to comply with prudential ratios and raise financing on a stand-alone basis. The Federal Reserve s proposed framework for the regulation of foreign banks may also require the Bank to create a new intermediate holding company for its U.S. activities, which would be required to comply with specific capital and liquidity requirements on a stand-alone basis. In addition, the proposed French banking law, as well as the proposed E.U. framework for a single supervisory mechanism and the proposed E.U. framework for the recovery and resolution of financial institutions, will grant increased powers to regulators (including the French banking regulator, the Financial Stability Board, the French deposit guarantee fund and, potentially, the European Central Bank) to prevent and/or resolve banks financial difficulties, such as the power to require banks to adopt structural changes, issue new securities, cancel existing equity or subordinated debt securities, convert subordinated debt into equity, and, more generally, ensure that any losses are borne by banks shareholders and creditors. These measures, if adopted, may restrict the Bank s ability to allocate and apply capital and funding resources, limit its ability to diversify risk and increase its funding costs, which could, in turn, have an adverse effect on its business, financial condition, and results of operations. Some of the new regulatory measures are proposals that are under discussion and that are subject to revision, and would in any case need adapting to each country s regulatory framework by national legislators and/or regulators. It is therefore impossible to accurately predict which measures will be adopted or to determine the exact content of such measures and their ultimate impact on the Bank. Depending on the nature and scope of regulatory measures that are ultimately adopted, they could (in addition to having the effects noted above) affect the Bank s ability to conduct (or impose limitations on) certain types of activities, its ability to attract and retain talent (particularly in its investment banking and financing businesses) and, more generally, its competitiveness and profitability, which would in turn have an adverse effect on its business, financial condition, and results of operations. The Bank s access to and cost of funding could be adversely affected by a resurgence of the Euro-zone sovereign debt crisis, worsening economic conditions, further rating downgrades or other factors. The Euro-zone sovereign debt crisis as well as the general macroeconomic environment have at times adversely affected the availability and cost of funding for European banks. This was due to several factors, including a sharp increase in the perception of bank credit risk due to their exposure to sovereign debt in particular, credit rating downgrades of sovereigns and of banks, and debt market speculation. Many European banks, including the Bank, at various points experienced restricted access to wholesale debt markets and to the interbank market, as well as a general increase in their cost of funding. Accordingly, reliance on direct borrowing from the European Central Bank increased substantially. Were such adverse credit market conditions to reappear due to factors relating to the economy or the financial industry in general or to the Bank in particular, the effect on the liquidity of the European financial sector in general and the Bank in particular could be materially adverse. The Bank s cost of funding may also be influenced by the credit rating on its long-term debt, which was downgraded by two of the principal rating agencies in Further downgrades in the Bank s credit ratings by any of the three rating agencies may increase the Bank s borrowing costs. A substantial increase in new provisions or a shortfall in the level of previously recorded provisions could adversely affect the Bank s results of operations and financial condition. In connection with its lending activities, the Bank regularly establishes provisions for loan losses, which are recorded in its profit and loss account under cost of risk. The Bank s overall level of provisions is based on its assessment of prior loss experience, the volume and type of lending being conducted, industry standards, past due loans, economic conditions and other factors related to the recoverability of various loans. Although the Bank uses its best efforts to establish an appropriate level of provisions, its lending businesses may have to increase their provisions for loan losses substantially in the future as a result of deteriorating economic conditions or other causes. Any significant increase in provisions for loan losses or a significant change in the 5 Bank s estimate of the risk of loss inherent in its portfolio of non-impaired loans, as well as the occurrence of loan losses in excess of the related provisions, could have a material adverse effect on the Bank s results of operations and financial condition. The Bank may incur significant losses on its trading and investment activities due to market fluctuations and volatility. The Bank maintains trading and investment positions in the debt, currency, commodity and equity markets, and in unlisted securities, real estate and other asset classes. These positions could be adversely affected by volatility in financial and other markets, i.e., the degree to which prices fluctuate over a particular period in a particular market, regardless of market levels. There can be no assurance that the extreme volatility and market disruptions experienced during the height of the recent financial crisis will not return in the future and that the Bank will not incur substantial losses on its capital market activities as a result. Moreover, volatility trends that prove substantially different from the Bank s expectations may lead to losses relating to a broad range of other products that the Bank uses, including swaps, forward and future contracts, options and structured products. To the extent that the Bank owns assets, or has net long positions, in any of those markets, a market downturn could result in losses from a decline in the value of its positions. Conversely, to the extent that the Bank has sold assets that it does not own, or has net short positions in any of those markets, a market upturn could expose it to potentially unlimited losses as it attempts to cover its net short positions by acquiring assets in a rising market. The Bank may from time to time have a trading strategy of holding a long position in one asset and a short position in another, from which it expects to gain based on changes in the relative value of the two assets. If, however, the relative value of the two assets changes in a direction or manner that the Bank did not anticipate or against which it is not hedged, the Bank might realize a loss on those paired positions. Such losses, if significant, could adversely affect the Bank s results of operations and financial condition. The Bank may generate lower revenues from brokerage and other commission and fee-based businesses during market downturns. Financial and economic conditions affect the number and size of transactions for which the Bank provides securities underwriting, financial advisory and other investment banking services. The Bank s corporate and investment banking revenues, which include fees from these services, are directly related to the number and size of the transactions in which it participates and can decrease as a result of market changes that are unfavorable to its Investment Banking business and clients. In addition, because the fees that the Bank charges for managing its clients portfolios are in many cases based on the value or performance of those portfolios, a market downturn that reduces the value of its clients portfolios or increases the amount of withdrawals would reduce the revenues the Bank receives from its asset management, equity derivatives and private banking businesses. Independently of market changes, below-market performance by the Bank s mutual funds may result in increased withdrawals and reduced inflows, which would reduce the revenues the Bank receives from its asset management business. During recent market downturns (and particularly during the 2008/2009 period), the Bank experienced all of these
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