Groupe Banque Populaire Annual Report

BANQUE POPULAIRE GROUP

2005 Annual Report

01THE BANQUE POPULAIRE GROUP IN 2005

Copies of this annual report are available on request, free of charge, from Banque Fédérale des Banques Populaires, Le Ponant de Paris, 5 rue Leblanc, 75511 Paris Cedex 15.

This document is also available for download from www.banquepopulaire.fr(financial reporting section).

The original French language version of this annual report was registered with the Autorité des marchés financiers on March 23, 2006 in compliance with Article 212-13 of the General Regulations

of the Autorité des marchés financiers. It may be used in connection with a financial transaction only if completed by an Information Notice duly registered with the Autorité des marchés financiers.

The annual report was drawn up by the Banque Populaire Group and is the responsibility of its signatories.The English language version of this report is a free translation from the original French. All possible

care has been taken to ensure that the translation is an accurate representation of the original.

BANQUE POPULAIRE GROUP

2005 Annual Report

2005 ANNUAL REPORT

Table of contents P.04 > Presentation of the Banque Populaire GroupP.05 > Chairman's messageP.06 > ProfileP.07 > Key figures for 2005 and ratings

P.08 > Corporate governanceP.08 > BOARD OF DIRECTORS P.09 > Director’s responsibilitiesP.09 > Other positions held by DirectorsP.12 > Other disclosures about the Directors

P.13 > CHAIRMAN'S REPORT ON THE CONDITIONS IN WHICH THE WORK OF THEBOARD OF DIRECTORS IS PREPARED AND ORGANIZED

P.13 > Role and organization of the Board of DirectorsP.17 > Consultative Committees

P.20 > CORPORATE GOVERNANCE RULES FOR THE BANQUE POPULAIRE BANKSP.20 > Responsabilities of the Board of Directors P.21 > Responsabilities of the ChairmanP.22 > Responsabilities of the Chief Executive Officer

P.23 > STATUTORY AUDITORSP.23 > Names, addresses and dates of appointmentP.23 > Fees paid to the Banque Populaire Group’s Statutory Auditors

P.24 > INTERNAL FINANCING MECHANISMS

P.25 > Group structureP.25 > INTRODUCTIONP.26 > PRINCIPAL SHAREHOLDERSP.27 > SIMPLIFIED FINANCIAL ORGANIZATION CHARTP.28 > THE GROUP'S HISTORYP.29 > KEY EVENTS OF 2005P.29 > MEMBER-STAKEHOLDERSP.32 > BANQUE POPULAIRE BANKSP.38 > BANQUE FEDERALE DES BANQUES POPULAIRESP.41 > NATEXIS BANQUES POPULAIRES P.44 > THE GROUP'S INTERNATIONAL OFFICES

P.46 > Group business reviewP.46 > PERSONAL CUSTOMERSP.49 > SMALL BUSINESSES P.52 > CORPORATE CLIENTSP.59 > INSTITUTIONAL CLIENTSP.60 > BANKS AND FINANCIAL INSTITUTIONS

P.61 > Sustainable developmentP.61 > THE BANQUE POPULAIRE GROUP'S COMMITMENTP.65 > HUMAN RESOURCESP.70 > ENVIRONMENT AND SOLIDARITYP.74 > PATRONAGE AND SPONSORING

01

02

03

04


P.77 > Financial information P.78 > MANAGEMENT REPORTP.78 > Group overview in 2005P.86 > Risk managementP.98 > Directors’ compensationP.101 > Subsequent events

P.102 > RECENT DEVELOPMENTS P.104 > CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005P.112 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSP.215 > STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

P.217 > Chairman’s report on internal control proceduresP.217 > GENERAL ORGANIZATIONP.217 > Organization of internal control at the level of the consolidated entitiesP.218 > Organization of internal control at the level of Banque Fédérale des Banques Populaires

P.220 > RISK MONITORING AND CONTROL PROCEDURES P.220 > Risk management organization P.223 > Group complianceP.224 > Adaptation to the new regulatory environment

P.225 > INTERNAL AND CONTROL PROCEDURES COVERING FINANCIAL AND ACCOUNTING INFORMATION

P.225 > Preparation of the consolidated financial statementsP.225 > Conversion of Group consolidated financial statements to IFRSP.225 > Control process P.226 > Role of the Audit Committee P.226 > Outlook

P.227 > STATUTORY AUDITORS’ REPORT ON THE CHAIRMAN’S REPORT ON INTERNAL CONTROL PROCEDURES

P.228 > Additional information P.228 > PERSON RESPONSIBLE FOR THE AMF ANNUAL REPORTP.228 > STATEMENT BY THE PERSON RESPONSIBLE FOR THE AMF ANNUAL REPORTP.228 > FINANCIAL COMMUNICATIONS P.228 > Financial calendarP.228 > Information officer

P.228 > DOCUMENTS ON DISPLAY

P.229 > Cross-reference tableP.231 > Contacts

05

06

07

2005 ANNUAL REPORT

Presentation of the Banque Populaire Group

It defines itself as a major multi-banner universal bank.The localretail banking business is conducted under the flagship “BanquePopulaire” banner, backed up by complementary banners.CASDEN Banque Populaire serves employees of the Frencheducation, research and culture systems, Crédit Coopératifoperates in the social and subsidized economy, ACEF caters to civilservants, while SOCAMA mutual guarantee companies cater tothe needs of tradespeople and Crédit Maritime Mutuel serves thefishing, marine and coastline industries.

The financing, investment banking and services for corporate andinstitutional clients are provided by Natexis Banques Populaires andits subsidiaries, which include Coface.

The Banque Populaire Group stands out from other bankinggroups on account of its unique structure, its origins in thecooperative movement and corporate governance commensuratewith its values.

These three features have helped drive strong businessdevelopment based on brisk organic growth, selective acquisitionsand long-term partnerships.

A three-dimensional organization n The 19 Banque Populaire regional banks,CASDEN Banque Populaire and Crédit Coopératif

The Banque Populaire banks are cooperative organizations, withstrong roots in their local areas and their sectors of activity.They arethe Group's parent companies and shareholders of Banque Fédéraledes Banques Populaires.They represent the Group's centre of gravityin retail banking, which contributes over two-thirds of the Group'searnings.They are autonomous banks, providing their clients with alocal service and the full range of banking and insurance products andservices.

Cooperative dimension

n Banque Fédérale des Banques Populaires

It houses the central corporate functions of the BanquePopulaire Group and acts as the holding company for NatexisBanques Populaires. Its role is to supervise, coordinate andoversee strategic planning for the entire Group.

Federal dimension

n Natexis Banques Populaires

Listed on Eurolist Paris, it is active in financing, investment bankingand services and contributes close to one-third of the Group'searnings either directly or through its subsidiaries.

Its range of corporate banking services and internationalpresence was enriched by the acquisition of Coface in 2002(credit insurance and credit management services).

Listed-company dimension

Cooperative and regionalfoundations True to the cooperative spirit that has guided it since its inception,the Banque Populaire Group attaches great importance to localrelationships and regional roots. It provides long-term support to allentrepreneurs, be they in or outside France.

As cooperative banks, the Banque Populaire banks forge a modernand special type of relationship with their clients. Of these clients,3 million are member-stakeholders, which guarantees theirindependence and gives them the resources they need to expand.

The Directors of the Banque Populaire banks, who play an activepart in the economic and community life of their regions, representthese member-stakeholders.They help to improve understandingof the local economic fabric and the men and women who play akey role in its development.

The Banque Populaire Group's presence throughout France isprovided both by the 19 Banque Populaire regional banks and bybranches of other Group entities.

The Group's international expansion is led primarily by NatexisBanques Populaires and its Coface subsidiary,which has a presencein 58 countries.

Corporate governancecommensurate with the Group's valuesThe Banque Populaire banks are the Group's parent companies.Their Directors are responsible for control and supervision and forsetting their bank's overall goals in accordance with the nationalstrategy.

The Banque Populaire Group's corporate governance isunderpinned by the principles of cooperation. Banque Fédéraledes Banques Populaires' Board of Directors acts as the Group'sgoverning body, and its decisions are binding on the Group andits member units.

T he Banque Populaire Group provides banking,financial and insurance services to a broad clientbase of individuals, tradespeople, farmers,

businesses, and banking and financial services groups.


2005 was a very good year for the Banque Populaire Group. Itsperformance reached new heights. Net banking income came toB8.24 billion, representing an increase of 8% at comparable scope.Gross operating income advanced by 12%, with the cost/incomeratio improving to 65.4%. Net income attributable to equity holdersof the parent rose by 27% to B1.5 billion. In an environment markedby further lackluster growth in the Eurozone, the geographical focusfor our operations, these undeniably strong figures were attributablein part to an exceptionally low cost of risk and, above all, the briskmomentum of our business activities.

All the Group's business activities posted fresh and significant improvement in their commercialand financial performance

All the Group's business activities posted fresh and significantimprovement in their commercial and financial performance during2005. In local retail banking, the Banque Populaire banks delivered aharmonious combination of growth rates ranking among thestrongest in the market and further first-class cost/income ratios. AndNatexis Banques Populaires capitalized to the full on its neworganization in financing, investment banking and services.Hard workby our teams, the quality of our business assets and the tight fitbetween our offering and the needs of our various customersegments formed the cornerstone of this success.

At the same time, our Group is undergoing radical change andgrowing stronger. Some very large-scale projects have beenimplemented successfully over the past few years. Our ability tomove with the times while consistently staying true to our values wasreflected by the merger of certain Banque Populaire banks, thepooling of IT resources to form the i-BP platform, the integration of

Crédit Coopératif and Crédit Maritime Mutuel, the acquisition ofCoface, the overhaul of Natexis Banques Populaires' goals, the ramp-up in our high-quality partnerships and our international expansion.

The overall strategic planning carried out during 2005, our commonvision and the Plan that has evolved from it now provide us with aframework for action and a powerful means of looking ahead to thefuture and maintaining our consistency.The upgrade in Standard andPoor's long-term and short-term ratings of the Group and of NatexisBanques Populaires at the beginning of 2006 provided a ringingendorsement of the quality of our results and strategy, as did the verystrong performance of our listed vehicle, which posted the largestgains in the French banking sector during 2005.

In this fast-moving environment, the Banque Populaire Groupcontinues to look to the future and devise new projects. It is growingby drawing on our more than 3 million member-stakeholders, over300 directors and over 45,000 employees in France and abroad,which together form an invaluable talent pool.

Because our cooperative values require us to reconcile continuouslyour economic and social responsibilities, we are constantly steppingup our efforts on the social and economic fronts,such as by providingassistance for the creation of new businesses and regionaldevelopment,expanding microfinancing and the support provided tothe disabled, talented young musicians and the conservation ofmaritime and aquatic heritage by the Banque Populaire GroupFoundation.

This coherence between our values, our organization and our abilityto act and move forward gives us the strengths we need to capitalizeon future changes in the banking industry.

Chairman's message Philippe Dupont, Chairman of the Banque Populaire Group

The Chairman represents the Group nationally and internationallyand safeguards the Group's cohesion and identity. He is also theChairman of Natexis Banques Populaires.

This governance structure benefits from an ever more activestakeholder base. It is a key contributor to the success of theBanque Populaire Group and each of its member units.

A strategy of expansion andpartnershipsLeveraging its historic strengths, the Banque Populaire Group hassuccessfully bolstered its prominent positions year after year withprofessionals and SMEs and built a solid business with over 6 millionretail clients. In this market, the Group has made the most effectiveuse of various expansion drivers, including new branches,recruitmentand affiliation models (CASDEN Banque Populaire,ACEF, etc.).

The growth in the income and margins of the retail bankingactivities derived mainly from organic expansion, but was alsoboosted by acquisitions, such as the addition of Crédit Coopératif(in the social economy sector) and the affiliation of CréditMaritime Mutuel (in the fishing sector and coastline economy) in2003 and the purchase of a shareholding in DZ Bank andVolksbank International (VBI) to build up the Group's retailbanking base in Central and Eastern Europe.

Through its listed subsidiary Natexis Banques Populaires, theBanque Populaire Group is also a major player in financing(conventional and structured finance) and one of the principalplayers in private equity for small and medium-sized enterprises.A highly reputed asset manager, it also ranks among the leadersin the French employee savings market and among the worldleaders in credit insurance, company information and debtcollection.

2005 ANNUAL REPORT

Profile

(1) 19 Banque Populaire regional banks, CASDEN Banque Populaire and Crédit Coopératif

(2) Active employees

Banque Populaire GroupMOODY’S Aa3STANDARD & POOR’S AA-

Natexis Banques PopulairesMOODY’S Aa3STANDARD & POOR’S AA-

21 Banque Populaire banks(1)

76 Mutual Guarantee companies

3,000,000 Member-Stakeholders

6,800,000 Clients

45,530 Employees(2)

2,807 Branches in France

Established in 68 countries


Key figures for 2005

2005: IFRS2004: under IFRS excl. IAS 32-39 and IFRS 4

0,0

1,7

3,4

5,1

6,8

8,5

NET BANKING INCOME IN MILLIONS OF EUROS

2004

2005

7,646 8,242

+8%

0,0

1,7

3,4

5,1

6,8

8,5

GROSS OPERATINGINCOME IN MILLIONS OF EUROS

2004

2005

2,5412,852

+12%

0,0

1,7

3,4

5,1

6,8

8,5

NET INCOME ATTRIBUTABLE TO EQUITYHOLDERS OF THE PARENT IN MILLIONS OF EUROS

2004

2005

1,195

1,522

+27%

0,0

1,7

3,4

5,1

6,8

8,5

CUSTOMER DEPOSITS IN BILLIONS OF EUROS

31/1

2/20

04

31/1

2/20

05

87.597.9

+11%

0,0

1,7

3,4

5,1

6,8

8,5

CUSTOMER SAVINGS IN BILLIONS OF EUROS

31/1

2/20

04

31/1

2/20

05

96.9

117.9

+22%

0,0

1,7

3,4

5,1

6,8

8,5

OUTSTANDING LOANS IN BILLIONS OF EUROS

31/1

2/20

04

31/1

2/20

05

120.2138.4

+15%

0,0

1,7

3,4

5,1

6,8

8,5

TOTAL REGULATORY CAPITAL IN BILLIONS OF EUROS

01/0

1/20

05

31/1

2/20

05

16.5219.33

+17%

0,0

1,7

3,4

5,1

6,8

8,5

TIER ONE RATIO

01/0

1/20

05

31/1

2/20

05

8.4 % 8.5 %

2005 ANNUAL REPORT

Corporate governance

THE BOARD OF DIRECTORS In sections below (including page 13), the Board of Directors referred to is that of Banque Fédérale des Banques Populaires, theGroup's central body.

MEMBERS AT DECEMBER 31, 2005 PRINCIPAL DUTIES WITHIN THE COMPANY (1) FIRST APPOINTED / TERM OF OFFICE ENDS IN (2)

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Philippe Dupont Chairman, Banque Populaire Group 07-08-1999 / 05-2008

VICE CHAIRMEN

Claude Cordel Chairman of Banque Populaire du Sud 09-23-1999 / 05-2008Francis Thibaud Chief Executive Officer of Banque Populaire du Sud-Ouest 07-05-2000 / 05-2006Jean-Louis Tourret Chairman of Banque Populaire Provençale et Corse 07-08-1999 / 05-2006

BOARD SECRETARY

Richard Nalpas Chief Executive Officer of Banque Populaire Toulouse-Pyrénées 07-05-2000 / 05-2006

DIRECTORS

Christian Brevard Deputy Vice Chairman of Banque Populaire d’Alsace 12-20-2000 / 05-2006Michel Castagné Deputy Vice Chairman of Banque Populaire Occitane 05-27-2004 / 05-2007Jean Clochet Chairman of Banque Populaire des Alpes 05-27-2004 / 05-2007Jean-François Comas Chief Executive Officer of Banque Populaire Côte d'Azur 05-31-2001 / 05-2007Pierre Delourmel(3) Chairman of Banque Populaire de l’Ouest 05-19-2005 / 05-2006Pierre Desvergnes Chairman of CASDEN Banque Populaire 05-27-2004 / 05-2007Daniel Duquesne(4) Chief Executive Officer of Banque Populaire Loire et Lyonnais 05-31-2001 / 05-2007Stève Gentili Chairman of BRED Banque Populaire 10-20-1999 / 05-2008Bernard Jeannin(5) Chief Executive Officer of Banque Populaire Bourgogne

Bourgogne Franche-Comté 01-19-2005 / 05-2008Yvan de La Porte du Theil Chief Executive Officer of Banque Populaire Val de France 05-22-2002 / 05-2008Pierre Noblet Deputy Vice-Chairman of Banque Populaire Rives de Paris 05-27-2004 / 05-2007

NON-VOTING DIRECTORS

François Ladam Chief Executive Officer of Natexis Banques Populaires Jean-Claude Detilleux Chairman and Chief Executive Officer of Crédit Coopératif

MEMBERS IN AN ADVISORY CAPACITY

Michel Goudard Deputy Chief Executive Officer of Banque Fédérale des Banques PopulairesBruno Mettling Deputy Chief Operating Officer of Banque Fédérale des Banques Populaires

ATTEND MEETINGS

Olivier Haertig Secretary-General of Banque Fédérale des Banques PopulairesPatrick Delaval Representative of Banque Fédérale des Banques Populaires' work councilPierre Ribuot Representative of Banque Fédérale des Banques Populaires' work council

(1) Company: Banque Fédérale des Banques Populaires, abbreviated to BFBP.

(2) Date of the AGM approving the financial statements.

(3) Pierre Delourmel was coopted as a director to replace René Clavaud at the Board Meeting of Banque Fédérale des Banques Populaires on May 19, 2005. This appointment will be ratified by shareholders at the AGM on May 18, 2006.

(4) From February 22, 2006 onwards, Daniel Duquesne was replaced by Yves Gevin, Chief Executive Officer of Banque Populaire Atlantique. Yves Gevin was coopted as a director at the Board Meeting of Banque Fédérale des Banques Populaires on February 22, 2006. This appointment will be ratified by shareholders at the AGM on May 18, 2006.

(5) Bernard Jeannin was coopted as a director to replace François Moutte at the Board Meeting of Banque Fédérale des Banques Populaires on January 19, 2005. This appointment will be ratified by shareholders at the AGM on May 19, 2005.

T he Banque Populaire Group, through Banque Fédérale des Banques Populaires (the Group's centralbody) has elected to apply the recommendations resulting from the consolidation of the AFEP, MEDEFand ANSA reports published in 2003 in areas where there is no corporate governance legislation in

France. It is worth noting that the concept of independent directors is not relevant to Banque Fédérale desBanques Populaires (see the section on page 16 for further details).

01CORPORATE GOVERNANCE


Philippe Dupont

CHAIRMAN OF THE BANQUE POPULAIRE GROUP

Chairman of the Board of DirectorsNatexis Banques Populaires

Christian Brevard

DEPUTYVICE CHAIRMAN OF THE BOARD OF DIRECTORS

Banque Populaire d’AlsaceImmeuble Le Concorde4 quai KléblerBP 1040167000 Strasbourg

Chairman of the Board of Directors Natexis Bleichroeder SA

Director Natexis Banques Populaires

Member of the Board of Directors Natexis Bleichroeder Inc

Chairman of the Management Board Bruker Biospin SA

Legal manager Bruker Daltonique

Permanent representative of Banque Populaired’Alsace,on the Board of Directors Natexis Pramex International

Michel Castagné

DEPUTYVICE CHAIRMAN OF THE BOARD OF DIRECTORS

Banque Populaire Occitane52-54 place Jean Jaurès

81012 Albi Cedex 9

Chairman of the Supervisory Board Assurances BP IARD

ChairmanCastagné SAS

DirectorMaaf Assurances

Permanent representative of Maaf SA,on the Supervisory Board Maaf Vie

Permanent representative of Maaf SA,on the Board of DirectorsCovea

Jean Clochet

CHAIRMAN OF THE BOARD OF DIRECTORS

Banque Populaire des Alpes2 avenue du GrésivaudanBP 43 – Corenc38701 La Tronche Cedex

DirectorBanque Privée St Dominique

Chairman and Chief Executive OfficerRoutin SA

Brasseries des Cimes

Chairman Routin Nord Europe (Copenhagen)

Chairman of the board Routin America Inc

Joint legal manager Montania

SCI C3 et Houille Blanche

Other positions held by Directors MAIN DUTIES PERFORMED OUTSIDE BANQUE FÉDÉRALE DES BANQUES POPULAIRES

Other directorships in any company

Directors' responsibilities Banque Fédérale des Banques Populaires' Directors are the exe-cutive managers of the Banque Populaire Group, i.e. ChiefExecutive Officers and Chairmen of the Banque Populaire banks.

The Chief Executive Officers have a wealth of knowledge of thebanking industry acquired throughout their professional careersduring which they have held increasingly senior duties at leadingregional and national banking companies.

They were selected based on a list of aptitudes, a key criterionbeing the acquisition of in-depth experience in various responsi-bilities and at different units of the Banque Populaire Group.

The Chairmen of the Banque Populaire banks hold or have heldprominent responsibilities at regional or national companies,which play an integral part in regional economic life.

They boast a wealth of experience in the management of a busi-ness and in the interactions this involves with the environmentand particularly with financial service providers.

2005 ANNUAL REPORT

Jean-François Comas

CHIEF EXECUTIVE OFFICER

Banque Populaire Côte d’Azur457 Promenade des Anglais06292 Nice Cedex 3


Natexis Assurances

Natexis Coficiné

Permanent representative of Banque Populaire Côte d'Azur,Chairman Foncière Victor Hugo

Société Méditerranéenne d’investissement

Permanent representative of Banque Populaire Côte d’Azur,on the Board i-BP

Claude Cordel


Banque Populaire du Sud10 place de la SalamandreCS 98-00130969 Nîmes Cedex 9

Chairman of the Board of Directors Natexis Factorem

Chairman SAS Holding Clobia

SAS CPSL


SAS Dupleix

SNC Hydromons

Pierre Delourmel


Banque Populaire de l'Ouest1 place de la TrinitéCS 86434 - 35000 Rennes

Chairman and Chief Executive Officer Delourmel Automobile SA

Delourmel Agriculture SA

ChairmanSAS Ouest Motoculture

SAS Delourmel Jardinage

Chief Executive OfficerBretagri SA

Director Caisse Régionale du Crédit Maritime Mutuel du Littoral de la Manche

Caisse Régionale du Crédit Maritime Mutuel du Finistère

Pierre Desvergnes

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

CASDEN Banque Populaire

91 cours des Roches

Noisiel

77424 Marne la Vallée Cedex 2

Chairman of the Board of Directors Maine Gestion SA

Sicav Fructi-Actions Rendement

Parnasse Finance

Invest Kappa

DirectorNatexis Asset Management

Parnasse MAIF S.A.

Permanent representative of CASDEN BanquePopulaire,on the Board of DirectorsNatexis Altaïr

Parnasse Services SA

Sicav Valorg

Sicav Fructidor

on the Supervisory Board SCPI Parnasse Immo

Permanent representative of Parnasse Finance,on the Board of Directors Parnassienne de Crédit

Legal manager SARL Inter-promo

SARL Cour des roches

Daniel Duquesne


Banque Populaire Loire et Lyonnais

Immeuble PDG Part-Dieu

141 rue Garibaldi

69211 Lyon Cedex 03

DirectorNatexis Banques Populaires

Natexis Asset Management

Garibaldi Participations

Chairman Garibaldi Capital Développement

Sepel

Member of the Supervisory BoardVolksbank CZ

Volksbank International Austria



Permanent representative of Banque Populaire Loireet Lyonnais,on the Board i-BP

Stève Gentili


BRED Banque Populaire

18 quai de la Rapée

75012 Paris

Chairman of the Board of DirectorsBRED Gestion

Natexis Pramex International

Vice Chairman of the Supervisory Board Banque Internationale de Commerce - BRED


Natexis Algérie

Coface

BRED Cofilease

COFIBRED

LFI

Bercy Gestion Finances +

Pramex Italia S.R.L.

Permanent representative of BRED Banque Populaire,on the Board BICEC

Bernard Jeannin


Banque Populaire Bourgogne Franche-Comté

14 boulevard de la Trémouille

BP 310

21008 Dijon Cedex

DirectorNatexis Assurances

Natexis Lease

Natexis Paiements

Legal manager SCI « IM BP »

Permanent representative of Banque PopulaireBourgogne Franche-Comté,on the Board i-BP

Yvan de La Porte du Theil


Banque Populaire Val de France

9 avenue Newton

78183 St Quentin-en-Yvelines

Chairman of the Supervisory Board M.A. Banque (formerly SBE)


Coface

Permanent representative of Banque Populaire Val de France,on the Board i-BP (Vice-Chairman)

Richard Nalpas


Banque Populaire Toulouse-Pyrénées33-43 avenue Georges Pompidou31135 Balma Cedex


Natexis Assurances

Natexis Bleichroeder Inc.

Natexis Bleichroeder SA (Vice-Chairman)

Permanent representative of Banque Populaire Toulouse-Pyrénées,on the Board Natexis Asset Management Immobilier

Maison du Commerçant SA

Multi-croissance SAS

Socama 31

i-BP

Irdi S.A.

Permanent representative of Banque PopulaireToulouse-Pyrénées,on the Supervisory BoardLatecoere

Pierre Noblet

DEPUTYVICE CHAIRMAN

Banque Populaire Rives de Paris55, avenue Aristide BriandBP 54992542 Montrouge Cedex

ChairmanNatexis Intertitres

Sonodas SAS

Vice ChairmanNatexis Lease

Director Natexis Paiements

Francis Thibaud


Banque Populaire du Sud-Ouest10 quai des Queyries33072 Bordeaux Cedex

2005 ANNUAL REPORT


Natexis Paiement (Vice Chairman)

Socami Bordeaux et Région

Socama Sud-Ouest (Vice Chairman)

Permanent representative of Banque Populaire du Sud-Ouest,on the Boardi-BP

Socama Sud-Ouest

Soprolib Sud-Ouest

Jean-Louis Tourret


Banque Populaire Provençale et Corse245 boulevard MicheletBP 25 - 13274 Marseille Cedex 09

Chairman of the Board of DirectorsNatexis Interépargne

ChairmanTourret SAS

Proclair SAS

Sopres SAS


Lafarge Ciments

Legal manager Tourret Entreprises

Tourret Electronique

Proclair Provence

Proclair Rhône Alpes

Other disclosures about the Directors

Integrity of DirectorsIn accordance with the enforcement rules of EC directive 2003/71(Article 14.1, paragraph 2), none of these Board members ormembers of Executive Management has been convicted of fraudover the past five years (minimum),has been subject to bankruptcy,liquidation or receivership proceedings over the past five years(minimum),has been officially incriminated or punished by corporateor regulatory authorities,has been enjoined from acting as a Directoror Executive of a listed-company or from managing or participatingin the business of a listed-company over the last five years (minimum).

Potential conflicts of interestAs far as Banque Fédérale des Banques Populaires is aware, nopotential conflicts of interest exist between the duties of theDirectors vis-à-vis Banque Fédérale des Banques Populaires andtheir private interests in accordance with the aforementionedEuropean regulations.

In addition, the Directors have not agreed to any restrictionconcerning the sale within a given timeframe of their shareholdingin the capital of Banque Fédérale des Banques Populaires. TheDirectors do not hold any shareholding other than that requiredfor the performance of their duties.

Contracts between Banque Fédérale desBanques Populaires and its DirectorsIn accordance with the aforementioned EC regulation, there are noservice agreements between the Directors and Banque Fédéraledes Banques Populaires potentially leading to the grant of benefitsat their term and liable to compromise their independence or tointerfere with their decisions.

None of the Directors of Banque Fédérale des Banques Populaires isbound to the Company or one of its subsidiaries by an employmentcontract.



CHAIRMAN'S REPORT ON THE CONDITIONS IN WHICH THE WORK OF THE BOARD OF DIRECTORS IS PREPARED AND ORGANIZED

T his report forms an integral part of theChairman’s full report on the conditions in whichthe work of the Board of Directors is prepared

and organized and on internal control procedures.

Role and organization of the Boardof DirectorsThe Board of Directors of Banque Fédérale des BanquesPopulaires,which has been a joint stock company (société anonyme)under French law since May 31, 2001 exercises a certain numberof legal functions. These include the responsibilities of BanqueFédérale des Banques Populaires as the central body of the BanquePopulaire network. More generally, the Board is responsible forsupervising and defining various aspects of the strategy of theBanque Populaire Group, such as expansion, profitability, security,organization, information systems and other matters.

Each Director is considered as representing all shareholders and isexpected in all circumstances to act accordingly.

Members of the Board of Directors The Board of Directors of Banque Fédérale des BanquesPopulaires has sixteen members, all elected by the shareholders inGeneral Meeting.All the Directors are individuals, and the majorityof Directors must be either Chairman, Director or Chief ExecutiveOfficer of a Banque Populaire bank.

Directors exercising one of these roles are selected from two listsof candidates put forward by the Chairmen and Chief ExecutiveOfficers of the Banque Populaire banks according to a selectionprocess defined by the Board of Directors. Directors are electedfor a three-year term of office and may stand for re-election.

Their term of office expires at the close of the Annual GeneralMeeting of the shareholders held to approve financial statementsfor the previous year. Each Director is required to hold one BanqueFédérale des Banques Populaires share.

The term of office of the Directors comes to an end at the closeof the Annual General Meeting in the year of their sixty-eighthbirthday.

Notice of Board of Directors' meetings The Board of Directors may be convened by the Chairman asoften as is required by the interests of BFBP. It addresses all mattersset forth in the agenda for the meeting by the Chairman.When ithas not met for more than two months, at least one-third of themembers of the Board may ask the Chairman to call a meeting toconsider a specific agenda.

It meets at the Company's head office or at any place indicated inthe notice convening the meeting.

Notice of the meeting must be provided by mail or by any othermeans at least three days in advance. If all the Directors agree, aBoard meeting may also be called verbally and without any advancenotice. An attendance register is kept, which is signed by Boardmembers present at the meeting. It is obligatory for designatedrepresentatives of the work council to be convened to all meetingsof the Board of Directors,which they attend in an advisory capacity,in accordance with the law and regulations. Any other person(s)invited to the meetings by the Chairman of the Board of Directorsmay also attend in an advisory capacity.

Record of deliberations - Minutes - Copies - ExcerptsThe Board's deliberations are recorded in minutes kept in a specialminute book and are signed by the Chairman of the meeting and atleast one Director or, where the Chairman is unable to sign, by atleast two Directors. Copies or excerpts from the minutes of themeetings may be duly certified by the Chairman of the Board ofDirectors, the Deputy Chief Executive Officer or a speciallyauthorized representative.

Powers of the Board of DirectorsThe Board of Directors determines the strategic priorities forBFBP's activities and ensures that they are implemented. Subject tothe powers expressly attributed to Annual General Meetings andwithin the scope of the corporate purpose, it considers all mattersthat affect the Company's operations and settles through itsdecisions matters which concern it.

In its dealings with third parties, BFBP is bound even by the acts ofthe Board of Directors that fall outside the scope of the corporate purpose, unless it can prove that the third party knewthat the act was ultra vires or that it could not have been unaware thereof given the circumstances.The sole publication of thebylaws shall not suffice to establish such evidence.

The Board of Directors conducts the audits and verifications that itdeems necessary. Each Director receives all the informationrequired to carry out his duties and is sent any documents which heconsiders to be useful.

The Board of Directors notably has the following powers:

1. it defines the policy and strategic goals for the network and theBanque Populaire Group;

2. it negotiates and enters into national and international agreementson behalf of the Banque Populaire Network;

2005 ANNUAL REPORT

3.more generally, it makes use of the prerogatives the Companyenjoys pursuant to law in its capacity as the Group's central body;

4. it approves the executive officers of the Banque Populaire banks anddefines the terms of their approval. It may also rescind this approval;

5. it approves the bylaws of the Banque Populaire banks and anyamendments made thereto;

6. it takes the requisite measures to protect the liquidity and capitaladequacy of the Banque Populaire network by defining andimplementing the requisite internal mutual guarantee systems;

7.on the recommendation of the Chairman, it appoints and dismisses the Senior Executive Vice President, Internal Audit and RiskManagement, who monitors the consistency and efficacy of theGroup's internal control. The Senior Executive Vice President,Internal Audit and Risk Management communicates the results ofaudit assignments to the Board;

8. it establishes a Group Risk Management Committee and defines its jurisdiction, members and operating procedures;

9.more generally, it lays down the general internal guidelines that areobligatory for all Banque Populaire banks to uphold, with a view toensuring the goals defined in Article L. 511-31 of the Monetary andFinancial Code;

10. it draws up the Company's annual budget and sets the rules forcalculating the subscriptions payable by the affiliated BanquePopulaire banks;

11. it prepares the Company's balance sheet and annual financialstatements;

12. it reviews the consolidated financial statements of the BanquePopulaire Group;

13. it adopts the Board's internal rules.

Even so, a two-thirds majority of Directors attending the meeting is required for the following decisions:

n the entry of a third party into the Company's share capitalthrough a capital increase;

n the merger of two or more Banque Populaire banks, the completeor partial disposal of their business assets or their winding-up;

n the creation of a new Banque Populaire bank;

n the removal of an affiliated bank;

n the adoption and amendment of the Board's internal rules;

n changes to the way in which Executive Management is exercised.

The Board of Directors may decide to set up committees responsible for studying matters that it or its Chairman submits tothem for consideration. It sets the composition and responsibilitiesof the committees exercising their activities under its supervision. Aplain majority of votes by members attending the meeting isrequired to determine the creation, operating rules and any feespaid to committee members.

Non-voting directorsThe Ordinary General Meeting may appoint up to five non-votingdirectors.The non-voting directors may be chosen from among theshareholders or elsewhere.

They are appointed for a period of three years, which ends at theclose of the Ordinary General Meeting of the shareholders that hasvoted on the financial statements for the previous financial year andheld in the year in which their appointment ends.

The Board of Directors may make provisional appointments between two Annual General Meetings. These appointments aresubject to ratification at the subsequent Ordinary General Meeting of the shareholders.

Non-voting directors may stand for re-election. They may be dismissed at any time following a vote by shareholders at the AnnualGeneral Meeting.

The role of non-voting directors is to ensure that the Companydischarges its responsibilities, especially those provided for in law,without becoming involved or interfering in management of theCompany.

They are convened to meetings of the Board of Directors andparticipate in the deliberations in an advisory capacity, without theirabsence impairing the validity of the Board's decisions.

The Board of Directors may make payments to the non-votingdirectors by deducting amounts from the directors' fees allotted bythe Annual General Meeting to its members.

Chairman and Chief Executive OfficerThe Chairman of the Board of Directors represents the Board ofDirectors. The Chairman organizes and directs the Board and reports on these tasks to the General Meeting.The Chairmanis responsible for the proper running of the Company'smanagement bodies and in particular for ensuring that the Directorsare able to perform their duties.

The age limit for a Chairman has been set at 65.

The Chairman of the Board of Directors oversees the Company'sExecutive Management. He carries the widest powers to act in allcircumstances in the Company's name. He exercises these powerswithin the scope of the corporate purpose, subject to those whichthe law expressly confers upon shareholders' meetings and on theBoard of Directors or those which under the Company's internalrules are deemed to fall within the latter's jurisdiction in its capacityas the Company's central body, and as listed more specifically inArticle 15-II of the bylaws.

In addition, in his capacity as Chief Executive Officer, theChairman represents the Company in his dealings with thirdparties.The Company is bound even by the acts of the Chairmanthat fall outside the scope of the corporate purpose, unless it canprove that the third party knew that the act was ultra vires orthat it could not have been unaware thereof given thecircumstances.The sole publication of the bylaws shall not sufficeto establish such evidence.

Lastly, if recommended by the Chairman, the Board of Directorsmay appoint up to five Deputy Chief Executive Officers to assistthe Chairman in his role as Chief Executive Officer. The scopeand duration of the powers vested in the Deputy ChiefExecutive Officer(s) are determined by the Board of Directorsin conjunction with its Chairman. The Deputy Chief Executive



Officers enjoy the same powers as the Chairman in the exerciseof his duties as Chief Executive Officer. The Deputy ChiefExecutive Officer(s) may not remain in office after their sixty-fifthbirthday.

Election of the Chairman of the Board of Directors Article 2 of the internal rules states that according to Article 11 ofthe bylaws of Banque Fédérale des Banques Populaires theChairman of the Board is elected by a simple majority for theduration of his term as Director and he may be re-elected.Thebylaws also determine that a quorum of at least half the membersof the Board is required to be present for the election to takeplace, with the Chairman then elected by a majority of the votescast by the Directors present (Article 12).

The Chairman of the Board of Directors of Banque Fédérale desBanques Populaires has the title of Chairman of the BanquePopulaire Group.

Executive Management The Chairman of the Board of Directors of Banque Fédérale desBanques Populaires is also its Chief Executive Officer. Heexercises these powers within the scope of the corporatepurpose, subject to those which the law expressly confers uponAnnual General Meetings and on the Board of Directors or thosewhich under the Company's internal rules are deemed to fallwithin the latter's jurisdiction as they relate to the central body ofBanque Fédérale des Banques Populaires.

The Chief Executive Officer represents Banque Fédérale desBanques Populaires in its dealings with third parties. If recommendedby the Chairman, the Board of Directors may appoint up to fiveDeputy Chief Executive Officers to assist him.

Organization of the Board of Directors' work The Board of Directors meets at least five times each year, in linewith a calendar set at the beginning of the year. The Chairman maycall additional meetings if circumstances so require.

The Board of Directors met eight times during 2005.The absenceof a member of the Board is an unusual event, since the attendancerate stood at 95.52%.

The internal rules of Banque Fédérale des Banques Populairesrequire Directors to make every reasonable effort to attend andparticipate in all the meetings of the Board and at the specializedcommittees on which they sit.

Meetings last for an average of four hours (aside from the meetingheld after the Annual General Meeting of the shareholders to electthe office of the Board).

They systematically include a review of business trends at the Groupand Banque Fédérale des Banques Populaires since the previousmeeting, as well as the latest news and developments in the bankingindustry.

The Board prepares the interim and annual financial statementsof Banque Fédérale des Banques Populaires, as well as theconsolidated financial statements of the Banque PopulaireGroup. The business trends and results of Natexis BanquesPopulaires are also presented systematically.

It participates directly in defining the policy and strategic goals of thenetwork and the Banque Populaire Group.

All investments of strategic importance carried out by NatexisBanques Populaires and its subsidiaries or other Group subsidiariesare submitted for its prior approval.

Four times a year the Board hears a detailed report on the work ofthe Banque Fédérale and Group Risk Management Committee,which is followed by a debate.Acting on the recommendations ofthe committee, the Board then takes any decisions it deemsappropriate.

Directors receive an information dossier around one week ahead ofeach meeting.

Each agenda item considered by Board may give rise to adebate.The members of the Board attach great importance toasking questions of the persons making presentations, as well asof members of the Group's executive management (Chairman,Deputy Chief Executive Officer of Banque Fédérale desBanques Populaires, Deputy Chief Operating Officer of BanqueFédérale des Banques Populaires, Chief Executive Officer ofNatexis Banques Populaires), who always attend Boardmeetings.

A record of the decisions taken is sent within three business days ofthe Board meeting to all the Group's executive officers, with theapproved minutes of the previous meeting.

Accurate minutes are also taken of meetings of the Board ofDirectors. They keep a record of the discussions initiated, thepositions presented and questions asked.

Eleven Directors sit on the Boards of Directors of both BanqueFédérale des Banques Populaires and Natexis Banques Populaires.

Decisions of the Board of DirectorsThe internal rules of Banque Fédérale des Banques Populaires alsostate the manner in which the Board shall reach decisions.They areto be made by means of formal votes for the approval of thefinancial statements, budget, resolutions to be submitted forshareholders' approval at the Annual General Meeting and, moregenerally, any issues of strategic importance referred to the Boardby the Chairman.

Office of the BoardThe Office of the Board comprises the Chairman, three ViceChairmen including two Chairmen of Banque Populaire banks andone Chief Executive Officer of a Banque Populaire bank and aSecretary, who must also be a Chief Executive Officer of a BanquePopulaire bank. The Office of the Board does not have decision-making powers under the internal rules, but the Chairman may callmeetings of its members to inform or consult them on mattersfalling within his authority.

2005 ANNUAL REPORT

Independent DirectorsThe concept of independent Director, as defined by the Boutonreport on corporate governance, is not relevant to BanqueFédérale des Banques Populaires. As the central body of acooperative group, the Board of Banque Fédérale des BanquesPopulaires should naturally comprise representatives of theBanque Populaire banks. These banks hold over 99% of theCompany's capital (as at December 31, 2005) in their capacity ascredit establishments affiliated with Banque Fédérale desBanques Populaires by law.

However, under the bylaws, the seats on the Board are not heldby the Banque Populaire banks, but by individuals. Despitebeing the Chairmen or Chief Executive Officers of BanquePopulaire banks, Directors do not sit on the board asrepresentatives of their respective banks, but as part of thecorporate governance structure of the Banque PopulaireGroup, exercising the powers devolved to Banque Fédéraledes Banques Populaires by law.

Code of ethics Article 11 of the Company's internal rules draws the Directors'attention to insider trading legislation prohibiting the use of confidential information about the Group's listed subsidiaries towhich the Directors may have access in their capacity asDirectors of Banque Fédérale des Banques Populaires.

Independent Internal Audit FunctionThe Board of Directors monitors the independence of the Internal Audit Function.The internal auditors have full authority torequire the audited entities to provide them with all necessarydocuments and information to enable them to carry out theiraudit. They also have unrestricted access to all the computerapplications used by the Banque Populaire Group.

Assessment of the Board's performance The performance of the Board of Directors of BanqueFédérale des Banques Populaires is measured primarily by thefrequency of its meetings, the wealth of information madeavailable to Directors, who also sit on the Boards of BanquePopulaire banks, and the openness of discussions on thevarious matters submitted to the Board. The representativenature of the Board and the manner in which its meetings areconducted ensure that the Board fulfils its stewardship role asthe central governing body of the Banque Populaire Group,assuming full responsibility for determining strategy andpolicies.

In November 2005, a questionnaire was sent to all members ofthe Board of Directors to solicit their opinion about theorganization of the Board's work (and in particular the contents,availability of dossiers in advance of meetings, exhaustiveness andclarity of the reports), the organization of meetings (choice of

A number of strategic issues weresubmitted for review by the Board,notably including:

n the structure of the Group'sinternational retail banking strategy;

n the merger between BanquePopulaire des Pyrénées-Orientales, del'Aude et de l'Ariège and BanquePopulaire du Midi to create BanquePopulaire du Sud;

n the link-up between Crédit MaritimeMutuel's regional banks and localBanque Populaire banks;

n the entry of insurance partnersMAAF and MMA into the share capitalof SBE (now renamed MA Banque);

n changes in the organization andresources of Banque Fédérale desBanques Populaires.

The Board reviewed the workperformed on the detailed strategicprogram carried out by the Group at the start of 2005.This collective

review, the findings of which aresummarized in the Group's Strategicplan, provided a fresh endorsement of the fundamentals of the Group'sbusiness model. On this basis, theGroup produced a common vision of the principal challenges and the elements required for further brisk expansion.

The Board also analyzed the updatedmedium-term plan for Natexis Banques Populaires, which representsan integral part of the Group's strategic program, and gave its approvalto several partnerships set up by this subsidiary.

More technical dossiers were alsosubmitted for its approval, such as the organization of the Group'sBusiness Continuity plans and the 2006 Business and CommunicationsAction plan.

In connection with the CRBF 97-02reform, it also adopted charters

at its meeting on September 7, 2005laying down guidelines for compliancechecks, risk management and auditing at the Banque Populaire Group.

It was regularly given a detailed updateon Banque Populaire Group's latestbusiness trends.

It also heard two reports on theactivities of the Banque Fédérale des Banques Populaires' RiskManagement Committee and fourreports on the activities of the Group Risk Management Committee.

At its meeting on February 24, 2005,the Chairman presented his report on the conditions in which the work of the Board of Directors is prepared and organized and on internal control procedures (prepared in line with the FrenchFinancial Security Act).

Main issues addressed by the Board of Directors during 2005



speakers, structure of presentations, time spent on debates), theperformance of their duties as Directors and, lastly, the level ofcoordination between the work of the Board and that of thecommittees.

Directors were also asked to suggest improvements to the waythe Board operates.

The results of this survey were submitted to the Board ofDirectors on February 22, 2006.

They showed that Directors consider in a very favorable light thedossiers submitted for review, the minutes of the Board, thechoice of speakers, the clarity of presentations, the time spent ondiscussions, answers given to questions, and the reports on theRisk Management Committee's work.

Directors also expressed a favorable opinion on reports on thework of the Audit and Remuneration Committees and on theinformation provided about the follow-up on its decisions.

Proposals will be made on other points in response to thewishes expressed by cer tain Directors concerning thesometimes excessive length of Board meetings, the arduousagendas and the availability in advance of cer tain dossiersconcerning the Board.

Directors' feesThe fees paid to the Board of Directors(1) set by shareholders atGeneral Meetings are shared equally among the Directors.Members of the Office of the Board and the Committees of theBoard receive an additional share for each additional post held.Members of more than one Committee of the Board receive aseparate share for each Committee of which they are amember.

Consultative committeesAs part of the modernization of its organization inspired by theViénot report of 1999, the Board of Directors of BanqueFédérale des Banques Populaires reviewed its corporategovernance and decided to create two specialist committeesalongside the Group Risk Management Committee, namely theAudit Committee and the Remuneration Committee.

Each of these committees has four members (two Chairmenand two Chief Executive Officers of a Banque Populaire bank)nominated by the Chairman and elected by the Board ofDirectors of Banque Fédérale des Banques Populaires. Minutesof meetings of the committees are drawn up and the Chairmanof each committee reports to the Board on the work of hiscommittee.

As with the Group Risk Management Committee, thesecommittees serve to advise and assist the Board of Directors ofBanque Fédérale des Banques Populaires.

The Audit Committee The Audit Committee reviews the company and consolidatedfinancial statements of Banque Fédérale des Banques Populaires

prior to their submission to the Board of Directors and theconsolidated financial statements of the Banque Populaire Group.Executive Officers may not attend relevant meetings of thiscommittee. The committee is responsible for ensuring thataccounting policies are appropriate and are applied consistentlyfrom one year to the next, and for assessing the reasonablenessof the main assumptions used to prepare the financial statements.The scope of its responsibilities also extends to accounting andfinancial documents published by Banque Fédérale des BanquesPopulaires.

It also makes recommendations to the Board concerning thechoice of Statutory Auditors, their audit program and the feebudget. It meets at least twice a year. Meetings are attended bythe Statutory Auditors.

Lastly, the committee may also request the presence of otherindividuals who in one way or another are involved in the production or supervision of financial statements, includingmembers of the Finance and Internal Audit Departments.

The Remuneration Committee The Remuneration Committee makes recommendations to theBoard concerning the compensation, pension and other benefitsawarded to Executive Officers.The Directors concerned are notpresent at meetings at which their compensation and benefitsare discussed.

The Chairman of the Board may also ask the committee to helpexamine any issues relating to the overall compensation, benefitsand pension policy for Executive Officers of Banque PopulaireGroup entities, prior to bringing these matters before the fullBoard for consideration.

During 2005, the Remuneration Committee of the BanquePopulaire Group, chaired by Philippe Dupont, met to review thecompensation of Group Executives, in accordance with its remit.All committee members were present.

After examining the actual compensation paid in 2004 toExecutive Officers of the Banque Populaire regional banks andBanque Fédérale des Banques Populaires, the committee putforward recommendations for 2005.These were passed on tothe Executives of the regional banks for approval by the regionalRemuneration Committees.

Two work sessions took place before these meetings, in which thecommittee examined the criteria used to determine the fixed andvariable components of compensation.

The fixed component is determined according to three criteria:

n the level of net banking income,

n geographical mobility,

n seniority in the position.

For 2005, the variable portion was determined based onperformance in three areas:

n net banking income,

n cost/income ratio,

n return on equity.

(1) Details of the amounts received by individual Directors are given in the Directors’ compensation section.

2005 ANNUAL REPORT

The Group Risk Management CommitteeAside from the Audit Committee and the RemunerationCommittee, Banque Fédérale des Banques Populaires alsoboasts a Risk Management Committee, whose remit is defined inArticle 10 of the internal rules of Banque Fédérale des BanquesPopulaires.

The Board of Directors of Banque Fédérale des BanquesPopulaires established a Risk Management Committee pursuantto the central body powers vested with Banque Fédérale desBanques Populaires under Article L. 511-31 of the Monetary andFinancial Code.

When not attended by the executive officers of BanqueFédérale des Banques Populaires, the Group Risk ManagementCommittee's sessions are dedicated solely to Banque Fédéraledes Banques Populaires.

n The Group Risk Management Committee meets four timeseach year in plenary session to hear reports, in accordance withthe banking regulations, regarding risk assessment andmonitoring and an appraisal of internal control systems of theBanque Populaire Group. It independently monitors overall riskon an ex-ante and ex-post basis. Monitoring is based on regularstandardized counterparty risk reports providing analyses ofindustry and country risks and a breakdown between interbank,sovereign and client risks, as well as on interest-rate and liquidityrisk reports. The committee is also charged with examiningoverall risk strategies, exposure limits and internal controlsystems. Following this review, the committee makesrecommendations to the Board of Directors regarding any riskmanagement decision applicable to all Banque Populaire Groupentities.

The Group Risk Management Committee meets twice each yearin plenary session to hear reports regarding risk assessment andmonitoring and an appraisal of internal control systems ofBanque Fédérale des Banques Populaires.

Plenary sessions of this committee are chaired by the GroupChairman.The committee is made up of six Directors includingthe four members of the Office of the Board. They are alsoattended by the Deputy Chief Executive Officers and theDeputy Chief Operating Officer of Banque Fédérale desBanques Populaires, the Chief Executive Officer of NatexisBanques Populaires and the Senior Executive Vice President,Internal Audit and Risk Management. No Executive Officersattend meetings of the Group Risk Management Committee inplenary session to review reports concerning Banque Fédéraledes Banques Populaires. Experts or line managers from any ofthe Group's banks may be invited to attend to provide additionalinsight into the matters under review.

Decisions are taken by a two-thirds majority. Minutes of theplenary sessions are presented to the Board of Directors ofBanque Fédérale des Banques Populaires for consideration.

n The Group Risk Management Committee holds a monthlymeeting, with restricted attendance, to review the maincounterparty risks at each Group bank on a consolidated basisor at the Banque Populaire Group as a whole, as well as any loans

made to Executive Officers of the Banque Populaire banks, thushelping to prevent any conflicts of interest.

The monthly meeting of Group Risk Management Committee isattended by three standing members and three substitutemembers appointed for one year by the Board of Directors of Banque Fédérale des Banques Populaires on therecommendation of the Chairman after the Annual GeneralMeeting of the shareholders.

The Chairman of the monthly Group Risk ManagementCommittee meeting is chosen from among the Chairmen of theBanque Populaire banks who are members of the Office of theBoard. His substitute does not have to be a member of theOffice of the Board.The two Chief Executive Officers sitting onthe monthly committee are selected from those Directors whoare not members of the Office of the Board. Their substitutesmay be members of the Office. Decisions are adopted by amajority of at least two votes.

To reflect changes in the regulatory environment, BanqueFédérale des Banques Populaires decided to make adjustmentsto its organization. Effective January 1, 2006, the Group CreditRisk Committee will assume the monthly Group RiskManagement Committee's responsibilities for supervising theBanque Populaire Group's counterparty risks on a consolidatedbasis.



COMMITTEE CHAIRMAN MEMBERS ATTENDANCE NUMBER OF SESSIONS RATE IN 2005

Group Risk Management Committee

Group Risk Management Committee Plenary Session

First half 2005 (1) Philippe Dupont (2) : R. Clavaud, C. CordelY. de La Porte du Theil, F. Moutte,R. Nalpas, F. Thibaud

87.5%

Second half 2005 (1) Philippe Dupont (1bis) (3) : J-F Comas, C. Cordel,Y. de La Porte du Theil, R. Nalpas,F. Thibaud, J-L Tourret

CARG Mensuel

First half 2005 René Clavaud (2) Members(2):Y. de La Porte du Theil, F. MoutteSubstitutes(2):J-F. Comas, R. Nalpas, J-L.Tourret 96.3% 9

Second half 2005 Jean-Louis Tourret (3) Members(3):J-F. Comas, Y. de La Porte du TheilSubstitutes(3):C. Cordel, B. Jeannin, R. Nalpas

Audit Commitee

First half 2005 Richard Nalpas (4) (4 ): P. Desvergnes, F.Thibaud, J-L.Tourret 100% 2

Second half 2005 Richard Nalpas (4) (4) : P. Desvergnes, F.Thibaud, J-L.Tourret

Remuneration Commitee

First half 2005 Philippe Dupont (5 bis) (5) : R. Clavaud, C. Hébrard, R. Nalpas, F.Thibaud100% 2

Second half 2005 Philippe Dupont (5 bis) (5) : R. Clavaud, C. Cordel, R. Nalpas, F.Thibaud

4 concerning the Group2 concerning Banque Fédéraledes Banques Populaires

(1) First half 2005: appointed by the Board of Directors of Banque Fédérale des Banques Populaires meeting on May 27, 2004.

Second half 2005: appointed by the Board of Directors of Banque Fédérale des Banques Populaires meeting on May 2005.

(1 bis) When the Group Risk Management Committee considered issues relating to Banque Fédérale des Banques Populaires in plenary session, it was chaired by René Clavaud during thefirst half of 2005 and by Jean-Louis Tourret during the second half of 2005.

(2) Appointed until the Annual General Meeting of the shareholders held to approve financial statements for 2004.

(3) Appointed until the Annual General Meeting of the shareholders held to approve the financial statements for 2005.

(4) Appointed for the term of their appointment as Director of Banque Fédérale des Banques Populaires.

(5) Appointed for the term of their appointment as members of the Office of the Board of Banque Fédérale des Banques Populaires.

(5 bis) When the Remuneration Committee considered issues relating to Banque Fédérale des Banques Populaires, it was chaired by René Clavaud during the first half of 2005 and by Jean-Louis Tourret during the second half of 2005.

2005 ANNUAL REPORT

O n November 20, 2002, the Board of Directorsof Banque Fédérale des Banques Populairesapproved a Corporate Governance Charter

for the Banque Populaire banks and FrameworkInternal rules for their Boards of Directors.

This charter establishes the rules of corporate governance andcodes of conduct to be followed by all the Banque Populairebanks (Directors' code of conduct). It sets out the responsibilitiesof the Board of Directors, Chairman, Chief Executive Officer andConsultative Committees of the Banque Populaire banks.

The Banque Populaire banks are cooperative banks, and theirmember-stakeholders play a central role in their organization.Boards of Directors are made up of member-stakeholders, whoare clients like any others. The Group Risk ManagementCommittee oversees lending decisions regarding these Directors,to avoid conflicts of interest.

Well before the May 15, 2001 Corporate Governance Actentered the statute books, the Banque Populaire banks hadalready decided to optimize the effectiveness of their executiveand management bodies by separating the roles of Chairman andChief Executive Officer, thus separating responsibility for strategicdecisions and control from the implementation of these decisionsand the management of the business.

Responsibilities of the Board of DirectorsThe Directors derive their authority from the member-stakeholders, whether individuals or organizations, from amongwhom they are elected. The Annual General Meetings ofmember-stakeholders represent a high point in the life of acooperative bank, allowing broad-based par ticipation in itsaffairs, the free flow of information, transparency and aninformed exchange of views.

The Board of Directors collectively represents all member-stakeholders and is bound to act in all circumstances in the bestinterests of the member-stakeholders of the Banque Populairecooperative bank.

Directors have no individual powers of management, exercisingtheir powers only collectively through the Board of Directors.

Directors' code of conduct Each Director must understand that he represents all member-stakeholders and act accordingly in the fulfillment of his duties.

Directors must allocate the time and attention necessary to theperformance of their duties. They must make all reasonable

efforts to attend meetings of the Board of Directors and theGeneral Meetings of the shareholders. Training events areoffered to Directors as required.

Where Directors, in exercising their duties, gain access toinformation not yet in the public domain, they are bound by aduty of confidentiality and professional secrecy.

Directors who sit on Consultative Committees are expected tomeet the same standards as apply to all Directors, namely loyalty,diligence, competence, regular attendance, confidentiality andprofessional secrecy.

Directors are expected to make a more general contribution topromoting the image of their Banque Populaire bank in theregional community and economy. They play an active part inencouraging and introducing new business.

Organization of the Board of DirectorsThe Directors elect from their number a Chairman for arenewable term of three years, providing that this does notexceed the term of his appointment as a Director or go beyondthe date of his sixty-fifth bir thday. Beyond this date, theChairman's appointment is for a term of office of one year, andmay not exceed the statutory age limit set by the GeneralMeeting held to approve financial statements in the year of hissixty-eighth birthday.

On the recommendation of the Chairman, the Board ofDirectors appoints a Chief Executive Officer, who may not be amember of the Board, for a renewable term of five years or untilhis sixtieth birthday. Beyond the date of his sixtieth birthday, theChief Executive Officer's appointment is for one year and maynot exceed the age limit set in the bylaws at the date of his sixty-fifth birthday.

The Board of Directors adopts internal rules governing theorganization and work of the Board and of its ConsultativeCommittees.

On the recommendation of the Chairman, the Board ofDirectors may set up and determine the membership of thefollowing Consultative Committees:

n a Risk Management Committee,

n an Audit Committee.

The Board of Directors may elect to combine the roles of thesetwo committees in a single body to be known as Audit and RiskManagement Committee.

The purpose of these committees is to:

1/ review, on a company and consolidated basis, the mainconclusions arising from risk monitoring systems, findings fromthe internal control processes and the main conclusions arrived

CORPORATE GOVERNANCE RULES FOR THE BANQUE POPULAIRE BANKS



at by the Internal Auditors, in accordance with bankingregulations;

2/ analyze financial statements and other financial documentsproduced by the bank following approval of accounts and toconduct further enquiries into particular areas before suchdocuments are brought before the Board of Directors.

In addition, the Board of Directors may elect to create two othercommittees:

n a Remuneration Committee responsible for drawing up, in theabsence of those concerned, any proposal concerning theemployment terms of Executive Officers. The committee'sproposals must be in accordance with Group policy regardingExecutive remuneration;

n a Member-Stakeholder Policy Committee. This committee isresponsible for tabling proposals to develop and promote thecooperative aspects of the Company, through steady increases inthe number of member-stakeholders, a balanced distribution ofcapital, communications policy and involvement in localcooperative ventures, etc.

The powers of the Board of Directors

Strategy and operational structureThe Board of Directors is responsible for setting the bank'soverall strategy and policy, in accordance with the strategy andpolicy of the Banque Populaire Group.

It determines key strategic policies based on joint recommen-dations of the Chairman and Chief Executive Officer and makesperiodic checks on their implementation in terms of thefundamental issues of expansion, profitability, security and theadequacy of the resources employed.

Risk control The Board of Directors is responsible for controlling the majorrisk exposures of the bank and ensuring the quality and reliabilityof internal control systems in accordance with bankingregulations (CRBF 97-02).

n It sets the overall direction of lending policy and sets exposurelimits regarding the division and distribution of risk and itsrelationship with the bank’s capital. It determines the exposurethresholds above which it must be consulted, ensurescompliance with the procedures relative to the powers of theGroup Risk Management Committee of Banque Fédérale desBanques Populaires, and monitors exposure using regularinformation given on an aggregate basis on the cases consideredby the Group Risk Management Committee and on theportfolio as a whole.

n It sets overall limits for other major areas of financial risk, withregard to the bank's ability to bear potential losses, and monitorsthe compliance with these limits and the level of risk using theregular information with which it is provided to this end.

n The Board of Directors also reviews the procedures forcontrolling operational risk, relating to information systems,accounting, fraud and embezzlement, procedures, and legal risks.

n It sets targets regarding internal control and risk control havingreviewed the reports submitted to it, and in particular followingthe analysis of those reports required by law or regulations.

The results of any on-site inspections carried out by BanqueFédérale des Banques Populaires or by the Banking Commissionor other regulators are submitted to the Board of Directors fordiscussion. The Board is responsible for monitoring theimplementation of any recommendations made as a result ofsuch checks. The Board is required to take without delay, anymeasures or corrective steps necessary to protect the financialand economic balance of the bank and thus preserve itscompetitiveness.

In more general terms, the Board of Directors is responsible forensuring that the controls and checks in place are adequate fortheir purpose and for making such further controls and checksas it considers necessary.

Capital remuneration policyThe Board fixes the rate of capital remuneration.This rate mustbe compatible with the creation of such provisions and reservesas may be required to ensure adequate cover of risk exposure,and with ensuring that the bank has sufficient resources to allowits growth. The rate is set within the legal maximum level forinterest paid on shares in its capital.

The Board decides on the capitalization of reserves, ensuringthat any such transfers are exceptional in nature.

Responsibilities of the Chairman The Chairman is one of the two Directors with responsibilityunder the terms of the Monetary and Financial Code. As a result,he is one of the two key contacts for the banking authorities andmust, therefore, have a clear overview of the bank's operationsin order to fulfill his duties.

Owing to the separation of functions, the Chairman does nothave responsibility for the Executive Management of the bank.He is not the legal representative of the bank and may not makeundertakings on its behalf to third parties.

Management of the Board of Directors The Chairman is responsible for managing the Board ofDirectors and is also the natural point of contact for the bank'sexecutives, member-stakeholders and third par ties in theirdealings with the Board.

The Chairman is responsible for the smooth running of thebank's management bodies (the Board of Directors, ExecutiveManagement and General Meetings), and for ensuringcompliance with the legal requirements on the responsibilities ofthe Board: setting the remuneration of Executives, setting anddistributing Directors' fees, the maximum level of which isdetermined by the General Meeting, and informing the Board ofregulated and non-regulated agreements.

The Chairman organizes and directs the work of the Board andreports on this work to the General Meeting. In this respect, the

2005 ANNUAL REPORT

management report to the Annual General Meeting providesinformation regarding the work of the Board, such as the numberof meetings held during the year, the main topics discussed andthe work of the Consultative Committees, etc.

The Chairman determines the agenda for meetings of the Boardof Directors and thus has the power to raise subjects fordiscussion.

The Chairman ensures that the minutes of meetings of theBoard of Directors give a full account of the work performed bythe Board. A copy of these minutes is supplied to BanqueFédérale des Banques Populaires immediately after theirapproval by the Board of Directors.

The Chairman will use the decisions of the Board of Directorsof Banque Fédérale des Banques Populaires to guide the Boardof Directors in the overall direction to follow and requirementsthat must be met.

Relationships with the Chief Executive Officerand the GroupThe Chairman works with the Chief Executive Officer onpreparing the strategic decisions to be submitted to the Boardand for the implementation of which the Chief Executive Officeris responsible.

As one of the two key points of contact for the Group, alongsidethe Chief Executive Officer, the Chairman ensures that thepolicies adopted by the Board of Directors are in keeping withthose determined by the Group.The Chairman plays an activerole in the federal life of the Group, such as participating infederal conferences and commissions and meetings of Chairmenof the Banque Populaire banks.

The Chairman represents his Banque Populaire bank at theAnnual General Meetings of Banque Fédérale des BanquesPopulaires. Should the Chairman be unable to attend, the bankwill be represented either by a Director chosen by the Chairmanor by the Chief Executive Officer.

By staying in permanent contact with Executive Management,the Chairman ensures that the strategies and policies approvedby the Board are implemented, and also keeps himself informedabout the overall conduct of the bank's operations.

The Chairman appends his signature to documents relating tothe Group Risk Management Committee alongside that of theChief Executive Officer and ensures that the decisions of thisbody are upheld. Both the Chairman and Chief Executive Officerare systematically informed by Banque Fédérale des BanquesPopulaires of the Group Risk Management Committee's findings.

The Chairman receives Internal Audit reports from BanqueFédérale des Banques Populaires and reports from FrenchBanking Commission inspections and ensures the Board is fullyinformed of the findings of inspections carried out by the BankingCommission or other regulatory bodies. The Chairman alsoensures that the minutes of the Board meeting at which theBanking Commission's letter was discussed are provided to theBanking Commission.

Responsibilities of the ChiefExecutive OfficerExecutive responsibility The Chief Executive Officer, as a responsible Director under theMonetary and Financial Code, works with the Chairman topropose choices of strategy to the Board of Directors andensures that these are in keeping with the strategy and policiesdefined by the Group.

Thus alongside the Chairman, the Chief Executive Officer is thebank's representative and point of contact for Group bodies andsupervisory and regulatory organizations. The Chief ExecutiveOfficer also participates in the federal life of the Group.

The Chief Executive Officer is responsible for implementingstrategies and policies approved by the Board of Directors.

The Chief Executive Officer is appointed by the Board ofDirectors and answers to the Board on the proper performanceof his duties. Periodically, at the Chairman's request, the ChiefExecutive Officer reports to the Board of Directors on theimplementation of policies adopted by the Board.

The head of the bank and manager of its staffThe Chief Executive Officer is the bank's legal representative vis-à-vis third par ties and in law. He is vested with the fullestexecutive powers and is the head of the Banque Populaire bank,responsible for smooth operational and day-to-day managementof the bank's affairs.

The Chief Executive Officer is also responsible for managementof the bank's staff. In agreement with the Chairman and inaccordance with banking regulations, he informs the Board ofDirectors of the choice of the head of the Internal Auditfunction, whose independence is then safeguarded by the Board.

Risk controlThe Chief Executive Officer is jointly responsible with theChairman for implementing an internal control system safeguardingthe bank against the risks to which it is exposed, including credit andmargin risks, interest rate risks, market risks, foreign currency risks,liquidity risks, operational risks and risks relating to subsidiaries.TheChief Executive Officer makes regular checks on the correctoperation of these systems, ensures that adequate resources areprovided to internal control given the nature of these risks, andsupervises reporting to the Board of Directors.

The Chief Executive Officer is also responsible for the system ofdelegating decisions on commitments. He ensures that the staffauthorized to make such commitments have the skills andtraining required.

The Chief Executive Officer is responsible for ensuring constantcontrol over risk and for promoting a strong culture of riskawareness within the bank's staff.

The Chief Executive Officer is responsible for ensuring there is apolicy for controlling legal risk with regard to operational risks andparticularly legal risks which could threaten the bank's image.



Names, addresses and dates of appointment The Statutory Auditors and Substitute Auditors are appointed inaccordance with Art.27 to 33 of Decree no.84-709 of July 24,1984concerning the activities and supervision of credit institutions.

The Statutory Auditors were appointed by the Conseil Syndical ofthe former Chambre Syndicale des Banques Populaires onSeptember 20, 2000 for a six year term.

The meeting of the Board of Directors of Banque Fédérale desBanques Populaires on June 23, 2004 noted the resignation ofPriceWaterhouseCoopers as Statutory Auditors for the consolida-ted financial statements of the Banque Populaire Group,and appoin-ted Salustro Reydel (member of KPMG International) to replace itfor the remainder of their appointment.

Since the appointment of the Group's Statutory Auditors expiresfollowing the audit of the 2005 financial statements, the Board of

Directors of Banque Fédérale des Banques Populaires decided at itsmeeting on February 22, 2006 to renew their appointment accor-dingly for a period of six years as follows:

n Statutory Auditors

BARBIER FRINAULT ET AUTRES Ernst & Young41, rue Ybry - 92576 Neuilly-sur-seine Cedex 4Represented by Olivier DURAND

SALUSTRO REYDELMember of KPMG International1, cours Valmy - 92923 Paris la Défense CedexRepresented by Michel SAVIOZ

n Substitute Auditors

Pascal Macioce41, rue Ybry - 92576 Neuilly-sur-seine Cedex 4Louis-Pierre Schneider32, rue Guersant - 75017 Paris

STATUTORY AUDITORS

(1) Including audit fees in respect of fully consolidated companies:- Ernst & Young network: €1,038,000 in 2005 and €971,000 in 2004- KPMG network: €2,095,000 in 2005 and €1,472,000 in 2004

(2) For the Ernst & Young group, this item includes fees for the Basel II reform project implemented at both Banque Fédérale des Banques Populaires and Natexis Banques Populaires.

The following table shows fees paid in 2004 and 2005 by the Banque Populaire Group and its fully consolidated subsidiaries to theStatutory Auditors and members of their respective groups:

in thousands of euros DECEMBER 31, 2005 DECEMBER 31, 2004

Ernst & Young KPMG % Ernst & Young RSM Salustro Reydel %Network Network Network KPMG Network

Audit- Independent audit 1,240 3,075 62.0% 1,121 2,006 41.3%certification, review of parentcompany and consolidatedfinancial statements (1)

- Ancillary assignments and 1,820 659 35.6% 4,170 32 55.5%other audit assignments(2)

Sub-total 3,060 3,734 97.7% 5,291 2,038 96.8%

Other services- Legal, fiscal, employment-related 0 41 0.6% 0 0 0.0%- Information technology 0 0 - 0 0 -- Internal audit 55 0 0.8% 48 0 0.6%- Other 39 27 0.9% 191 0 2.5%

Sub-total 94 68 2.3% 239 0 3.2%

Total fees 3,154 3,803 100.0% 5,530 2,038 100.0%

Fees paid to the Banque Populaire Group’s Statutory Auditors

2005 ANNUAL REPORT

INTERNAL FINANCING MECHANISMS

A number of group entities benefits from theBanque Populaire network's guarantee system, including the Banque Populaire banks,

the exclusive Mutual Guarantee Companies, andBanque Fédérale des Banques Populaires, as well asCrédit Maritime Mutuel by virtue of its legal affiliationto Banque Fédérale des Banques Populaires,under theterms of the Monetary and Financial Code.

The system guaranteeing the liquidity and capital adequacy ofthe Banque Populaire network has been organized under aframework decision by Banque Fédérale des Banques Populaires,in its capacity as central body in accordance with Art. L. 511-30,L. 511-31, L. 511-32 and L. 512-12 of the Monetary and FinancialCode to which the bylaws of the Banque Populaire banks makeexplicit reference (Article 1).

The system works by pooling the capital of all banks in thenetwork.

Banque Fédérale des Banques Populaires is able to put thesystem into effect by calling upon the Banque Populaire banks tocontribute capital, within the limits of their own resources. As alast resort, Banque Fédérale des Banques Populaires will make itsown capital available to meet the liquidity and capital adequacyrequirements of the Banque Populaire banks.

The mechanism works in two stages.The first stage consists of the“Federal Solidarity Funds” held by Banque Fédérale des BanquesPopulaires and the second takes the form of the “RegionalSolidarity Funds” set aside by the Banque Populaire banks.

Each year, the Banque Populaire banks transfer an amount to thisregional fund equal to 10% of their net income before transfersto the fund for general banking risks and tax, after deduction oftax on the amount of the transfer.Withdrawals from these fundsby the Banque Populaire banks must be authorized by BanqueFédérale des Banques Populaires.

In the company financial statements, the federal and regionalsolidarity funds are accounted for respectively by BanqueFédérale des Banques Populaires and the Banque Populairebanks in a specific sub-compartment of the fund for generalbanking risks. As part of the consolidation process, since IAS 30and IAS 37 no longer recognize the fund for general banking risksas eligible for recognition as a liability, all the solidarity funds werereclassified under the Group's equity in the opening 2004balance sheet. In the same way, additions to and write-backs fromthe fund during the 2004 financial year and during the first half of2005 were eliminated from the income statement.

In addition, under a collective agreement, each Banque Populairebank guarantees the liquidity and capital adequacy of the mutualguarantee companies whose corporate purpose is confined toguaranteeing the lending activities of the banks.

The Banque Populaire network's guarantee system alsoguarantees the liquidity and capital adequacy of Crédit MaritimeMutuel, for which Banque Fédérale des Banques Populaires is thecentral body, in accordance with Article L. 512-69 of the FrenchMonetary and Financial Code.This guarantee system comes intoeffect only after Crédit Maritime Mutuel's own system.

Lastly, the members of the network contribute, along with allFrench credit institutions, to the Fonds de Garantie des Dépôts(deposit guarantee fund) set up in application of the Depositors'Protection Act.

02GROUP STRUCTURE


Group structure

A successful business model combining strong financial performance and pursuit of thecommon good while staying faithful to the Group's cooperative values.

n The 21 Banque Populaire banks n Banque Fédérale des Banques Populaires


INTRODUCTION

The Banque Populaire Group is a cooperative group in whichthe 19 Banque Populaire regional banks, CASDEN BanquePopulaire and Crédit Coopératif are the parent companies.Thecapital of these companies is wholly owned by their member-stakeholders. The Banque Populaire banks control BanqueFédérale des Banques Populaires, the central body of the BanquePopulaire Group.

The other entities of the Banque Populaire Group are primarilydirect or indirect subsidiaries of Banque Fédérale des BanquesPopulaires. Its largest subsidiary is Natexis Banques Populaires,which is listed on the Eurolist Paris market.

The term “Banque Populairebanks”In this AMF annual report all references to the “Banque Populairebanks” correspond to:

n the 19 Banque Populaire regional banks (at December 31,2005),

n CASDEN Banque Populaire, a nationwide bank serving theemployees and employer institutions of the French national education, research and culture systems;

n Crédit Coopératif Banque Populaire or “Crédit Coopératif ”,a major player in the social economy. It joined the otherBanque Populaire banks on January 30, 2003 when it took onthe status of “société coopérative anonyme de banque populaireà capital variable”.

T he Banque Populaire Group is one of France'slargest retail banking networks, with 6,800,000clients and 2,807 branches. Rapid business

development, driven by a combination of steady organic growth and selective acquisitions, has giventhe Group leading positions across its personal, smallbusiness, corporate and institutional client segments.

n Crédit Maritime Mutuel, which does not have BanquePopulaire status but which, as an affiliated institution (sinceenactment of the French Financial Security Act of August 1,2003, Article 93(1)), benefits from the Banque Populaireguarantee system.

The term “network” Within the meaning of Art. L. 512-11 of the Monetary andFinancial Code, the Banque Populaire network encompasses:

n The Banque Populaire banks, all of which are cooperativebanks.

n The mutual guarantee companies whose sole corporatepurpose is guaranteeing loans issued by Banque Populaire banks.

n Banque Fédérale des Banques Populaires, a joint stockcompany (société anonyme) governed by company law.

Both Banque Fédérale des Banques Populaires andNatexis Banques Populaires registered an AMF annualreport with the Autorité des marchés financiers inMarch 2006.

(1) Banque Fédérale des Banques Populaires thus became the central body for the establishments forming Crédit Maritime Mutuel. The French Financial Security Act of August 1, 2003also enshrined the removal of Caisse centrale de Crédit Coopératif as central body of Crédit Coopératif. This body was merged into Crédit Coopératif on June 30, 2003 and was wound up onOctober 17, 2003. In exchange for benefiting under the Banque Populaire guarantee system, Crédit Maritime Mutuel may contribute to any financial measures in favor of other banks in theBanque Populaire network that may be decided by the Board of Directors of Banque Fédérale des Banques Populaires.

2005 ANNUAL REPORT

PRINCIPAL SHAREHOLDERS

n The Board of Directors of the Banque Fédérale des BanquesPopulaires is composed of individuals holding senior executivepositions at Banque Populaire banks.

The Banque Populaire banks with shareholdings in BanqueFédérale des Banques Populaires of over 5% at December 31,2005 are as follows:

BRED Banque Populaire 9.57%

CASDEN Banque Populaire 9.52%

Banque Populaire Rives de Paris 8.87%

Banque Populaire Val de France 8.56%

Banque Populaire Lorraine Champagne 6.68%

Banque Populaire Bourgogne Franche-Comté 6.31%

Voting rights All the shareholders in Banque Fédérale des Banques Populaireshave equal voting rights. No shareholder may exercise more than5% of voting rights (maximum limit under the bylaws).

Improper controlGiven the duties incumbent upon Banque Fédérale des BanquesPopulaires as central body under French banking legislation,control of the capital is exercised jointly by the 21 affiliatedBanque Populaire banks. Furthermore, the control exercised bythe Banque Populaire banks over Banque Fédérale des BanquesPopulaires cannot be deemed to be improper given the ceilingon voting rights specified in the bylaws.

Change in controlTo the best of Banque Fédérale des Banques Populaires' know-ledge, there are no agreements in place that, if implemented,could subsequently lead to a change in control of the Company.This statement is made in accordance with European legislation.The provisions of Article L.512-10 of the French Monetary andFinancial Code oblige the Banque Populaire banks to retain aninterest of at least 51% in Banque Fédérale des BanquesPopulaires.

02GROUP STRUCTURE


SIMPLIFIED FINANCIAL ORGANIZATION CHART(1)

at January 1, 2006

The Banque Populaire Group is organized in three dimensions: a COOPERATIVEDIMENSION comprising the Banque Populaire banks, the Group's parentcompanies, a FEDERAL DIMENSION provided by the Banque Fédérale, the centralbody of the Group and also the holding company of Natexis Banques Populaires,which, as the Group's listed vehicle, forms the LISTED-COMPANY DIMENSION.

100% Natexis LeaseLease financing

100% Natexis Bleichroeder S.A.Investment company (Paris)

100% Natexis Bleichroeder Inc.Investment company(New York)

Internationalnetwork(3)

Natexis Banques Populaires

CORPORATE AND INSTITUTIONALBANKING AND MARKETS

PRIVATE EQUITY AND WEALTHMANAGEMENT

100% NatexisPrivate EquityPrivate equity

95.8% Natexis Private BankingLuxembourg S.A.International private banking

100% Banque PrivéeSaint DominiqueWealth management in France

Natexis Altaïr 100%IT outsourcing

company

100% Natexis AssurancesLife, personal risk, and non-lifeinsurance

100% Natexis Asset ManagementFund management Financial managementof employeeinvestment funds

100% Natexis InterépargneEmployee savings Account keeping and marketing

100% Natexis PaiementsElectronic banking

100% SlibBanking software and IT facilities management

100% Natexis InvestorServicingValuation, middle office,reporting

SERVICES RECEIVABLES MANAGEMENT

75%(2)t

Banque Fédérale des Banques Populaires

99.3%MA Banque

BICECRetail bank in Cameroon

65.8%

52.5%

Crédit Maritime Mutuel

Affiliated withBanque Fédérale100%

t

t

19 Banque Populaire regional banks,CASDEN Banque Populaire, Crédit Coopératif

3,000,000 member-shareholders100%

100% Coface ServicesCompany information Debt collection

100% Coface Deutschland Credit insuranceCredit management

100% Coface ItaliaCredit insuranceGuaranteesCredit management

94% Coface AustriaCredit insuranceCredit management

100% Coface North AmericaCredit insurance Credit management services

100% Coface S.A.Credit insurance Credit management services

99.7% Natexis FactoremFactoring Credit insurance

(1) This organization chart shows only subsidiaries with over 100 full-time equivalent employees (FTEs) at December 31, 2005.(2) Incl. the Alizé Levier employee investment plan (2.1%).(3) See map of international network (page 44-45).

The stated percentages show direct and indirect ownership levels.

informatique-Banque Populaire (i-BP)

Group information systems platform

2005 ANNUAL REPORT

THE GROUP'S HISTORY

March 13, 1917Creation of the Banque Populaire banks

The Banque Populaire banks are established to help boost lending to small and medium-sized businesses. They are organized as cooperative companies entirely owned by theirmember-stakeholders.

June 20, 1921 Creation of Caisse Centrale des Banques Populaires

The 74 Banque Populaire banks, united by a common identity, setup a central structure to organize a system of mutual financial support by centralizing,managing and investing their cash surpluses.

May 23, 1929 Creation of Chambre Syndicale des BanquesPopulaires

A second central body is created to strengthen the system ofmutual support. Its three roles are the exercise of control, thepower to represent the banks and the establishment of a forumfor dialogue and consultation.

And more recently,June 2, 1998 Friendly takeover bid by Banque Populaire Group for Natexis S.A.

At the time, Natexis S.A. was the holding company of theNatexis Group, which had been formed through the 1996merger of Crédit National and Banque Française du CommerceExtérieur. At the close of the offer period, Caisse Centrale desBanques Populaires owned 53.2% of Natexis S.A. and theGroup's total interest was 71.4%. Its interest was raised to74.36% at the end of 1998.

July 27, 1999 Creation of Natexis Banques Populaires

The businesses conducted by Caisse Centrale des BanquesPopulaires are transferred to Natexis S.A., which is renamedNatexis Banques Populaires.

T he Banque Populaire Group can trace its originsback to the late 19th century, with the creationof the first Banque Populaire bank in various

regions of France (Angers, Menton, Montceau-Les-Mines,Toulouse,etc.) at the instigation of shopkeepers,industrial companies and tradespeople, who groupedtogether to form associations to facilitate their member-stakeholders' access to lending.

December 23, 1999Caisse Centrale des Banques Populaires becomesBanque Fédérale des Banques Populaires

The registered office transfers to the Ponant de Paris building. Byend-1999, the Group owns 88.06% of Natexis BanquesPopulaires. By year-end 2000, the figure has been reduced to79.23% following the first public issue of new capital by NatexisBanques Populaires in its new configuration.

May 31, 2001 Banque Fédérale des Banques Populaires adopts jointstock (société anonyme) status

Under Article 27 of the “NRE”Act (Act no. 2001-420 of May 15,2001 concerning corporate governance), Chambre Syndicaledes Banques Populaires is wound up and all its assets, rights andobligations are transferred to Banque Fédérale des BanquesPopulaires, together with the collective guarantee fund.

August 2, 2002 and April 2004 Natexis Banques Populaires acquires Coface

Following a simplified public tender offer in July 2002 and asqueeze-out bid followed by a mandatory delisting in April 2004,Natexis Banques Populaires becomes the sole owner of Coface,a credit insurance and credit management services specialist.

November 18, 2002 Memorandum of understanding between the BanquePopulaire Group and Crédit Coopératif

January 10, 2003 Memorandum of understanding between the BanquePopulaire Group and Crédit Maritime Mutuel

January 30, 2003 Crédit Coopératif adopts “société anonymecoopérative de banque populaire” status

Following approval by shareholders at its Extraordinary GeneralMeeting, Crédit Coopératif becomes a Banque Populaire bankand joins the Banque Populaire Group's internal guaranteesystem.

August 1, 2003 Banque Fédérale des Banques Populaires becomesthe central body of the Crédit Maritime Mutuel banks

Following changes in the law in the summer of 2003 (Art. 93 ofthe French Financial Security Act no. 2003-706) and inaccordance with the agreement signed in January 2003 betweenthe Banque Populaire Group and Crédit Maritime Mutuel,Banque Fédérale des Banques Populaires replaced CaisseCentrale du Crédit Coopératif as the central body of the CréditMaritime Mutuel banks.

02GROUP STRUCTURE


Greater cohesion within the Groupn Launch of the strategic program for the entire BanquePopulaire Group.

n Convention held for Directors and senior executives of theBanque Populaire banks and Crédit Maritime Mutuel (called “Atthe heart of Cooperation”, focusing on the following issues:“How to be a Director today?” and “Cooperative values”).

Expansion in local retail banking in France n Further adjustments:

- November 29, 2005: creation of Banque Populaire du Sud,which represents the culmination of efforts to bring togetherthe Banque Populaire du Midi, and Banque Populaire desPyrénées-Orientales de l’Aude et de l’Ariège, launched in late2004.

- Crédit Maritime Mutuel: deployment of the strategic plan tolink the Caisses du Crédit Maritime Mutuel up with BanquePopulaire banks on the coastline.

n Active policy of new openings implemented by the BanquePopulaire banks: 131 new branches opened in 2005.

Financing, investment banking and services n Natexis Banques Populaires' medium-term plan was analyzedand endorsed by Banque Fédérale des Banques Populaires' Boardof Directors on January 19,2005.The major achievements made bythe Services core business,with a particular focus on the customersof the Banque Populaire banks, were as follows:

- Electronic banking application systems were pooled withBNP Paribas in the retail banking business by leveragingNatexis Banques Populaires' platform (agreement signed inlate 2005);

- The partnership with The Bank of New York in custodial services was ramped up;

- Financial services: completion on schedule of the CAP 2005streamlining plan to refocus on the following businesses:custodial services, depositary and issuer services, and software publishing.

IT systems geared to the Group'sexpansion n The ramp-up in i-BP together with the active pursuit ofplanned migration projects (Banques Populaires LorraineChampagne; Rives de Paris; Midi et Pyrénées-Orientales,Aude etAriège; Crédit Coopératif), and the first deliveries by the federaldata warehouse.

KEY EVENTS OF 2005

MEMBER-STAKEHOLDERS: 3 MILLION IN 2005

Cooperative spirit is firmly rooted in the European companies.The first Convention of the European Association of CooperativeBanks, which was held in Brussels on December 1, 2005, wasattended by delegations from over 35 cooperative bankinggroups of which Confédération Internationale des BanquesPopulaires (CIBP) is a partner.The Banque Populaire Group wasnaturally represented at the event since it believes that thebusiness model of cooperative banks fits perfectly with theemphasis on social responsibility in European economies.

For the Banque Populaire Group, this undertaking by the 19Banque Populaire regional banks, CASDEN Banque Populaire,Crédit Coopératif and Crédit Maritime Mutuel has yieldedtangible results, with the number of member-stakeholdersbreaking above the 3 million mark in 2005.

Over 300 stakeholder initiativesIn 2005, the White Paper on member-stakeholders, which wasdrafted in 2004, adopted by the Board of Directors of BanqueFédérale des Banques Populaires and laid out new cooperativegoals for the decade, served as a reference document for all theBanque Populaire banks. Action plans were drawn up and adoptedby all their Boards of Directors.

An increasing number of varied and original initiatives wereimplemented embodying the cooperative spirit and encouragingenterprise in the regions. The Déclic Clubs, regional initiativeawards, summer schools, business start-up meetings, member-

W ith strong roots in European companies,cooperation represents a strategic assetthat is an integral part of its identity.

Through its longstanding and robust relationship withits member-stakeholders, the Group demonstrates ona daily basis its commitment to cooperation andhones its local initiatives. The number of member-stakeholders broke above the 3 million mark in 2005.

2005 ANNUAL REPORT

stakeholder meetings and councils, voluntary work awards and thePop Reporter scheme are all examples of creative energieschanneled into the pursuit of the common good.

At the end of 2005, three Banque Populaire banks supportedmore than 60 Déclic Clubs, representing a total of almost 300jointly funded projects.Ten Banque Populaire banks hold regionalinitiative awards. One Banque Populaire bank has organizedvoluntary work awards and the Pop Reporter scheme for youngpeople for the past three years. Meanwhile, Crédit Coopératifawards National Prizes and Trophies for Social EconomyInitiatives.

This ability to act, to become involved, and to share is founded ona positive view of human nature and is a first-class illustration ofthe spirit of the Banque Populaire Group. It helps to forge strongand enduring local and regional relationships between member-stakeholders and the staff of the Banque Populaire banks.

Greater emphasis on communicationBanque Fédérale des Banques Populaires systematically enrichesthe Societatis intranet, the principal communication system set upto support efforts to share best practices that is accessible to theGroup's 45,500 Group employees and the 300 Directors of theBanque Populaire banks.

Regional initiatives also include an annual management chart, regularmeetings of the working parties of member-stakeholder managers,and an annual decentralized meeting of member-stakeholders.

A DVD containing the special edition of France 2's “Banque etPopulaire à la fois: On vous dit pourquoi” (Bank and Popular:We'll tellyou Why!) TV program, presented by Jérôme Bonaldi et EglantineEmeye, was used to help train recent recruits, as well as activelyeducate new clients and member-stakeholders. On this DVD, over200,000 copies of which have been distributed by the BanquePopulaire regional banks, member-stakeholders talk about the rolethey play in the life of their local and regional communities.

A comic strip called “The Banque Populaire spirit, a humanadventure” tells the story of the Banque Populaire banks. TheDirectors and then the Group's 45,500 employees were givena special preview of this cartoon, of which 85,000 copies wereprinted. The comic strip is given to all new member-stakeholders of the Banque Populaire banks. It was awarded thesilver trophy in the corporate book category of the Top Com2006 awards.

In late 2005, a new area dedicated to member-stakeholders was set up on the Banque Populaire Group's website atwww.banquepopulaire.fr. The Regions in Action section presents thestakeholder initiatives led by member-stakeholders and jointlyfunded by the Banque Populaire banks.

Consultation to discuss and buildfor the futureAt regional level, the business star t-up meetings, known aswelcome meetings at certain Banque Populaire banks, bringtogether several hundred new clients and member-stakeholdersat branches to forge a closer relationship with the Bank'semployees. Meetings also provide an opportunity to informnewcomers about the specific features, corporate governance,results and projects of their particular Banque Populaire bank.

Larger meetings of 200 to 300 member-stakeholders are heldregularly by cer tain Banque Populaire banks to provideopportunities to meet others and forge ties. For instance,Banque Populaire Lorraine Champagne has organized summeruniversities during September for its longstanding member-stakeholders for the past ten years to inform them about thelatest business and financial trends.

The September 2005 Annual decentralized Meeting of member-stakeholders was held in Pau in the region served by BanquePopulaire du Sud-Ouest. Focused on the theme “Osonsl'audace” (Dare to be entrepreneurial), it led to numerous

For decades the Banque PopulaireGroup has played an active role in the French economy at both regionaland national level. Every day the Group demonstrates that it has retainedits own distinctive style and forged astrong personality. In the future, just as in the past, the Group will continueto be guided by three fundamentalprinciples: Entrepreneurship,Cooperation and Humanity.

Entrepreneurship. Founded byentrepreneurs for entrepreneurs, theBanque Populaire Group encouragesentrepreneurship. It seeks to release the

creative energy of its clients and staff. It respects bravery, tenacity andenthusiasm among people developingtheir professional or personal projects.The vision of the entrepreneur requiresoptimism. It is a source of constantprogress.

Cooperation. The Banque PopulaireGroup's history, its way of doingbusiness and its day-to-day experienceshows its dedication to thecooperative spirit. Cooperation meansworking together for the commongood, accepting one's full responsibilityto one's partners and society. It implies

mutual trust. It is meaningless unless it is for the long term. It withstandsthe pressures of short-termism.

Humanity. The Banque PopulaireGroup is built on respect for thelifestyles, sensitivities, expectations and individuality of its clients and partners. Every person and every project is unique.To succeed they need to be listened to andinformed in a clear and transparentway, to be understood. Putting the individual at the heart of theprocess gives shape and strength to the banking relationship.

Entrepreneurship, Cooperation, Humanity: the Group’s values

02GROUP STRUCTURE


discussions between all political and operational participants ofthe member-stakeholders of the Banque Populaire regionalbanks, CASDEN Banque Populaire, Crédit Coopératif andCrédit Maritime Mutuel.

On June 22, 2005, the Banque Populaire banks reaffirmed the roleof their Directors as ambassadors for the Banque Populaire Groupand key players in the renewal of its cooperative mission, at theNational Directors' Convention, named “The heart ofcooperation”. A special boxed-set comprising a DVD, CD andhandbook was given out to each participant at the event so thatthey can relive this national event time and again.

Three stakeholder initiatives n Déclic Clubs are groups of member-stakeholders involved involuntary work from the same town or region who use theirinitiative, skill and contacts to promote citizenship projects.

For example, the Citizen Power Club in Tourcoing is one of themost active stakeholder initiative clubs in the area served byBanque Populaire du Nord.This club, which has 21 members, hasalready supported four projects since its inception in 2003. Mostrecently, it has worked with La Parlotte, a theatre group of youngpeople performing Shakespeare in a Commedia dell'Arte fashion.Several performances have been staged, all of them successfully,attracting significant coverage in the local and regional press.During 2005, the theatre group performed at the Avignonfestival.The Citizen Power club contributed B2,000 to help finda venue and rehearsal facility for the group, which is set tobecome La Parlotte's home.

n Regional initiative awards provide recognition each year forvoluntary projects that improve the facilities of a region.Whetheron the initiative of an individual or an organization these projectscover the natural, architectural, cultural, but also customs andtraditions, professional and economic heritage of the regions ofFrance.

For example, l’Ecole de l’ADN (DNA school). The judges'special prize in the 2005 regional initiative awards by BanquePopulaire du Midi (now Banque Populaire du Sud) went tol’Ecole de l’ADN, a training and information center aboutprogress in molecular biology and genetics. It is developing anew concept by opening up biology workshops for members ofthe general public with an interest in biotechnologies. Run byhigh-level scientists, these workshops provide a beginners'introduction to genetics. L’Ecole de l’ADN invites trainees todiscuss with scientists the issues raised by the manipulation ofliving organisms, including both the potential benefits andhazards. Since 2001, l’Ecole de l’ADN has delivered professionaltraining courses to employees working in biotechnology-relatedsectors, such as food, health, chemicals and legal services. Sinceit is jointly funded by the French research ministry for theLanguedoc Roussillon region, l’Ecole de l’ADN is free forstudents in secondary and further education. A network ofl’Ecole de l’ADN units is being set up in Paris, Grenoble,Marseille and Angers.

n The National Prizes and Trophies for Social Economy Initiativesawarded by Crédit Coopératif reward participants in the socialeconomy pursuing ground-breaking and innovative economic,technological, social and/or cultural initiatives.

For example, “rethreading the needle”. The Second Initiativeprize worth B6,000 was awarded to Association CréationTissage 3 (ACT 3) in 2005. Founded in 1996, ACT 3 aims topromote professional training for and the social reintegration offormer women prisoners or women experiencing serious socialor professional problems. What sets this organization apart isthat it brings together two apparently diametrically opposedworlds, namely the world of haute couture (through apartnership with the leading couturiers) and prison. During theirsentence, inmates receive training in haute couture weaving.Theprogram aims to restore their self-respect, to integrate themgradually into a team and to help them rediscover the world ofemployment. Upon their release, the women are employedunder a two-year reintegration contract to assist them financiallyand socially.To date, 80% of the women enrolled in the programhave successfully rejoined the world of work, and none of themhas reoffended.

Cooperative banks in EuropeFaced with a series of challenges as a result ofeconomic, financial and regulatory changes,cooperative banks in Europe held their first convention in Brussels on December 1, 2005 under the auspices of the European association of cooperative banks and the ConfédérationInternationale des Banques Populaires (CIBP).Cooperative banks, which operate throughdecentralized networks, comply with both the banking legislation in force and cooperative legislation.The business model is underpinned by three pillars: democracy, transparency and proximity. Based on these firm foundations,cooperative banks put individuals at the heart of their activities and their organizations, thereby assuming full responsibility towards society.To this end, cooperative banks naturally contribute to local economic development and to the objectivesset in the Lisbon Agenda, particularly towards enhancing competitiveness and social cohesion.Backed by its network of 4,500 credit institutions and a presence provided by 720,000 employees working at 60,000 branches, they account for over half the number of banks in Europe.They serve 140 million clients, including 60 million member-stakeholders. All in all, cooperative banks have market share of around 20% across the 25 memberstates of the European Union.

2005 ANNUAL REPORT

BANQUE POPULAIRE BANKS

T rue to their cooperative values, the BanquePopulaire banks foster close, lasting relation-ships with their member-stakeholders and

clients. They are key players in their regionaleconomy.

Banks with the cooperative spirit at their core The Banque Populaire banks draw their strength from the spiritthat inspired their creation by a group of men and women aimingto take control of their own destiny. This is reflected in theircooperative status and the way in which they conduct their day-to-day business.

They are firmly rooted in the cooperative movement, whichplaces the individual – whether a client, member-stakeholder oremployee – firmly at the center of their concerns.

The Banque Populaire banks are incorporated as “sociétésanonymes coopératives de banque populaire à capital variable”(1).The banks represent the cooperative dimension of the BanquePopulaire Group.

At the end of 2005, there were 21 Banque Populaire banks: the19 regional banks, CASDEN Banque Populaire and CréditCoopératif.

Under their cooperative status, clients of all of these banks canbecome member-stakeholders, providing that they meet thecriteria set out in the bank's membership policy. Returns oninvested capital may not exceed the average yield on bondsissued by private sector companies.

At year-end 2005, the Banque Populaire banks were owned by 3 million member-stakeholders, embodying the cooperativespirit on a daily basis.

The cooperative spirit ensures an emphasis on long-termgrowth at the Banque Populaire banks. Part of the very essenceof a cooperative company is that it represents the freely electedassociation of individuals seeking to provide a long-term solutionto their shared economic requirements.

The importance of these shared cooperative values has allowedthe Group to expand in recent years. In 2003, Crédit Coopératifdecided to become a new Banque Populaire bank, while CréditMaritime Mutuel has become a bank affiliated with BanqueFédérale des Banques Populaires.

Member-stakeholder clients at the heart of the organization The status of member-stakeholder clients is unlike any other.Theircapital investment may not be speculative in nature and is notmade with a view to generating a profit through large dividends.

But although member-stakeholders are not traditional investors,nor are they traditional clients. They subscribe to the keycooperative value of loyalty.They are committed to a long-termrelationship and have a natural tendency to introduce new clients,thereby enlarging the mutual base.

Cooperative status gives priority to collective investment overindividual investment.The optimization of profits, a way of assessingthe efficiency of any company, becomes an essential step towardsfulfilling the cooperative company's service to the commoninterest. This is a long-term endeavor, and there cannot be anyconflicts of interest between member-stakeholders and clients.Reserves do not contribute to the value of the shares in thecompany but are simply a collective asset owned by current andfuture member-stakeholders.

Member-stakeholder clients contribute to the life of the bank: theyunderstand its constraints, they support its ambitions and helpdrive them forward on a daily basis.

Strong regional roots During 2005, the Banque Populaire banks proudly restated thefeatures that set them apart.As cooperative regional banks, theydemonstrate every day their closeness to clients in all thedifferent senses of the term.This cooperative, human dimensionhas been adopted as a major pillar of future expansion.

The Banque Populaire banks have retained and developed theregional focus, that has guided them since their creation. For them,being a regional bank goes much deeper than simply providingservices in a particular geographical area. It means being fullyinvolved in and committed to developing the regional economyand dedicated to serving the local community.

Their 331 Directors, including 18 non-voting Directors (but notincluding Crédit Coopératif whose Directors are legal entities)include 176 business owners or senior executives, 28 tradespeopleand independent retailers, nine farmers and 27 self-employedprofessionals.All of them maintain close ties with local communityand business organizations as well as local chambers of commerce,in many cases serving on their boards.

This involvement of Directors in all areas of regional life gives theBanque Populaire banks an in-depth understanding and knowledgeof their local economy.They thus cement particularly strong linkswith their regions and are key players in regional development.Theyserve to reconcile the interests of their member-stakeholders,clients, staff, and local socio-economic environment.

Prominent regional playersWith the European Union increasingly becoming a community ofregions, several Banque Populaire banks have merged to form major

€5,194 million Net banking income

€971millionNet income attributable to equity holders of the parent

(1) Except for BRED Banque Populaire, which is a “société anonyme coopérative de banque populaire à capital fixe”.

65.2%Cost/income ratio

02GROUP STRUCTURE


regional players. By joining forces to become prominent regionalforces, they are better able to support clients,strengthen their capitalbase, sharpen their regional image, win market share and give theiremployees increased opportunities to move to new jobs.Today'snew communications technologies provide an opportunity toredraw the maps and allocate resources more effectively, withoutever losing sight of the overriding need to maintain close relationsbetween the bank and its member-stakeholders, its clients and themany other players in the regional economy.

The creation in 2005 of Banque Populaire du Sud, the productof the merger between Banque Populaire du Midi and BanquePopulaire des Pyrénées-Orientales, de l’Aude et de l’Ariège,dovetailed perfectly with the major drive to consolidate andmake adjustments implemented over the past few years.

With its 390,000 clients, including 147,000 member-stakeholdersand 142 branches, the new bank is a force to be reckoned within the region.With net banking income of B289 million in 2005,it ranks as the fifth-largest of the Banque Populaire banks.

The formation of Banque Populaire du Sud is an exciting projectfor clients, member-stakeholders and the entire staff, whichshould help to promote economic development in the region.

Close relationships with clientsLocal personalized service forms the cornerstone of the BanquePopulaire Group's client relationships.This unwavering emphasison closeness is made possible by highly skilled and motivatedteams and backed up by identification of the best solutions foreach client based on a global approach to their needs.

Every member of staff at the Banque Populaire banks is aware thatthe aim is not to get clients to sign up immediately for this savingsproduct or that loan, but to gain an in-depth understanding of eachclient's needs and expectations.This focus on client requirements,and on the way they change from one moment to the next, hashelped build up momentum right across the Banque Populairenetwork. It is this same approach that allows client relationships tobe built and developed over the long term.

The Banque Populaire branch network is steadily expanding.During 2005, the number of branches increased by a net figure of115, lifting the total number of branches operated by the Group to2,807 at year-end December (including both Crédit Coopératifand Crédit Maritime Mutuel), with two or three new branchesopening on average each week.

This dynamic and sustained expansion in the Group's coverageof France has led to the opening of 755 branches over six years.

For the Banque Populaire banks, local banking remains the mainavenue of expansion thanks to the size, quality and stability of theclient base and the long-term deposits they bring. In practice, thispresence is backed up by local relations in all their various otherforms.

In addition, technological advances in remote banking channels haveenabled subscribers to enjoy online access to all banking services.The same is true of the 80% of business clients for whom theBanque Populaire Group provides teletransmission services.

In order to meet all client expectations, the Banque Populaire bankshave strengthened their capabilities in all areas, and particularly inwealth management, project financing and insurance.

The Banque Populaire Group has also developed the requisitestrategic alliances, drawing on networks such as the SOCAMAmutual guarantee companies, ACEF and CASDEN BanquePopulaire (cooperative mutual bank serving the employees of theFrench national education, research and cultural systems).

BylawsThe Banque Populaire banks are “sociétés anonymes coopératives debanque populaire”governed by Art.L.512-2 et seq.of the Monetaryand Financial Code and the various legislative texts concerning theBanque Populaire banks, the Cooperative Movement Act ofSeptember 10,1947,Art. I to IV of book II of the Commercial Code(Code de commerce), the first chapter of section I of book V andsection III of the Monetary and Financial Code, the related enablinglegislation and by their individual bylaws.

Their bylaws were extensively amended to comply with theprovisions of the Corporate Governance Act of May 15, 2001.

To enable the production of consolidated financial statementsfor the Banque Populaire Group under the new IFRS accountingstandards, including IAS 32 regarding debt and equity

Distribution clout derivingfrom:brisk expansion of the branch network:- 131 new branches opened in 2005 (net increase of 115)successful integration of multi-channel access:- 87 million internet connections- overhaul of the internet client offering

Local and close relationships representa major factor determining clients'selection and loyalty to their bankIn local retail banking, the priority and original avenue of expansion chosen by Banque Populaire Group, variousaspects of proximity come into play:n geographic proximity through local coverage and the existence of spheres of influence (the “movers andshakers” need to be supported),n situational proximity to stay in close contact when the client has a project,n proximity of decision-making,n and lastly technical proximity through growing use of tools, such as the internet.

2005 ANNUAL REPORT

instruments, the Board of Directors of Banque Fédérale desBanques Populaires, meeting on December 15, 2004, requestedthe Banque Populaire banks with variable capital to make thechanges to their bylaws needed in order to allow the shares inthese banks to be recognized as capital instruments foraccounting purposes.

These changes to the bylaws were submitted to member-stakeholders at the Combined General Meeting held to approvefinancial statements for 2004.

The Banque Populaire banks are licensed to operate as creditinstitutions and are thus authorized to conduct the followingtransactions:

n all banking transactions with trading and manufacturingcompanies, small businesses, agricultural ventures, self-employedprofessionals, whether incorporated or unincorporated, as well aswith any other grouping or legal entity, which may or may not bemember-stakeholders.They may also provide services to personalcustomers, participate in any and all transactions guaranteed by themutual guarantee companies, make loans to holders of CEL(Compte Epargne Logement) or PEL (Plan Epargne Logement)home-savings accounts for the acquisition of a residential property,and collect deposits from private individuals and companies;

n all related transactions as defined in Art L. 311-2 of theMonetary and Financial Code, all investment services governedby Art. L. 321-1 and L. 321-2 of the Monetary and Financial Codeand all brokerage and insurance transactions;

n all real estate and securities investment transactions.They maypurchase any and all marketable securities, for their own account,and acquire equity interests in any and all companies, associationsand other unincorporated entities and more generally, carry outany transaction of any type related directly or indirectly to theircorporate purpose and likely to facilitate the development orachievement of this purpose.

Any individual or company is eligible to become a member-stakeholder of a Banque Populaire bank, regardless of whetherthey are clients of the bank.To become a member-stakeholderthey must be approved by the bank's Board of Directors and berecognized as creditworthy.

The bylaws of the Banque Populaire banks state that their Boardsof Directors are not required to explain the reasons for rejectingany application to become a member-stakeholder.

Member-stakeholders' liability for any losses of a BanquePopulaire bank is limited to the value of their shares in the bank.

All member-stakeholders are entitled to attend GeneralMeetings and vote on resolutions personally or by proxy, inaccordance with the applicable law and regulations, irrespectiveof the number of shares they own.

All member-stakeholders may vote by correspondence using apostal voting form addressed to the Banque Populaire bank inaccordance with applicable law and regulations.

As stipulated in Art. L. 512-5 of the Monetary and Financial Code,at General Meetings of the shareholders, no member-stakeholdermay exercise a number of voting rights – including proxy votes and

votes in respect of shares held indirectly – representing more than0.25% of the total voting rights attached to shares of the relevantBanque Populaire bank.

All shares of the Banque Populaire banks are issued inregistered form.They may not be sold or transferred withoutthe prior authorization of the Board of Directors.The capital ofall of the Banque Populaire banks (except for BRED BanquePopulaire) is variable. The capital is increased on issuance ofshares to new member-stakeholders or to existing member-stakeholders, in both cases with the prior approval of the Boardof Directors.

The Board of Directors may set a ceiling on the number ofshares that may be held by a single member-stakeholder.Different ceilings may be set for different categories ofmember-stakeholders.

The capital may be reduced by buying back member-stakeholders' shares. If the buybacks were to have the effect ofreducing the capital to less than three-quarters of the highestamount reached since the Banque Populaire bank was set up, theprior authorization of Banque Fédérale des Banques Populairesmust be obtained before the capital may be reduced. In addition,under no circumstances may the capital be reduced to below theminimum capital required under banking regulations.

The bylaws also stipulate that the dividends paid on shares, asdecided each year by the Annual General Meeting, may notexceed the average corporate bond yield as published by theFrench Ministry of the Economy (Art. 14 of the CooperativeMovement Act of 1947 and Art. L. 512-3 of the Monetary andFinancial Code).

Dividends on shares acquired or surrendered during the yearare paid pro rata to the number of full months for which theshares were held.The price at which shares are bought back bya Banque Populaire bank may not exceed their par value.Buybacks may be carried out no later than the thirtieth dayfollowing the Annual General Meeting held to approve theaccounts for the year in which the withdrawal of the member-stakeholder and the surrender of his or her shares wasapproved by the Board of Directors. In accordance with Art. 39of the bylaws, dividends are paid no later than nine months afterthe end of the financial year. The details of dividend paymentsare determined by the General Meeting or, failing that, by theBoard of Directors.

Banque Fédérale des Banques Populaires may authorize theBanque Populaire banks to capitalize a por tion of theirreserves. In this case, the related capital increase must be fordouble the amount concerned, with half being paid up bycapitalizing reserves and half in cash.

In addition, no more than half of the bank’s reserves may be socapitalized.

In cases where reserves are capitalized on several occasions, theportion that may be capitalized on each occasion may notexceed one half of the amount by which reserves have increasedsince the previous capitalization (Art. R.512-1 of the Monetaryand Financial Code).

02GROUP STRUCTURE


Banque Populaire banks at January 1, 2006

End-2005 figures, directors in office as a March 1, 2006Active employees

BANQUE POPULAIRE DES ALPES

ChairmanJEAN CLOCHETChief Executive OfficerALAIN ROGÈS

Number of member-stakeholders 96,354Number of employees 1,352Number of branches 148

Regulatory capital €506 mNet banking income €228 mNet income €38 m

1

www.alpes.banquepopulaire.fr

BANQUE POPULAIRED’ALSACE

ChairmanTHIERRY CAHNChief Executive OfficerDOMINIQUE DIDON



2

www.alsace.banquepopulaire.fr

BANQUE POPULAIREATLANTIQUE

ChairmanJEAN-PIERRE CAHINGTChief Executive OfficerYVES GEVIN



3

www.atlantique.banquepopulaire.fr

21 Banque Populaire banks

8

1

7

6 10

16

11

12

13

14

14

15

15

17

18

194

92

3

5

5

2005 ANNUAL REPORT

21 Banque Populaire banks

BANQUE POPULAIREOCCITANE

ChairmanJEAN-PAUL MALRIEUChief Executive OfficerALAIN CONDAMINAS



12

www.occitane.banquepopulaire.fr

BANQUE POPULAIREBOURGOGNE FRANCHE-COMTÉ

ChairmanJEAN-PHILIPPE GIRARDChief Executive OfficerBERNARD JEANNIN



4

www.bpbfc.banquepopulaire.fr

BRED BANQUE POPULAIRE *

ChairmanSTÈVE GENTILIChief Executive OfficerJEAN-MICHEL LATY


Regulatory capital €1,092 mNet banking income €651 mNet income €132 m

5

www.bred.banquepopulaire.fr

BANQUE POPULAIRECENTRE ATLANTIQUE

ChairmanJACQUES RAYNAUDChief Executive OfficerGONZAGUE DE VILLÈLE

Number of member-stakeholders 67,646Number of employees 966Number of branches 102


6

www.centreatlantique.banquepopulaire.fr

BANQUE POPULAIRECÔTE D’AZUR

ChairmanBERNARD FLEURYChief Executive OfficerJEAN-FRANÇOIS COMAS



7

www.cotedazur.banquepopulaire.fr

BANQUE POPULAIRELOIRE ET LYONNAIS

ChairmanHERVÉ GENTYChief Executive OfficerOLIVIER DE MARIGNAN



8

www.loirelyonnais.banquepopulaire.fr

BANQUE POPULAIRELORRAINE CHAMPAGNE

ChairmanMICHEL HELLENBRANDChief Executive OfficerJACQUES HAUSLER



9

www.lorrainechampagne.banquepopulaire.fr

BANQUE POPULAIRE DU MASSIF CENTRAL

ChairmanDOMINIQUE MARTINIEChief Executive OfficerCHRISTIAN DU PAYRAT



10

www.massifcentral.banquepopulaire.fr

BANQUE POPULAIREDU NORD

ChairmanJACQUES BEAUGUERLANGEChief Executive OfficerGILS BERROUS



11

www.nord.banquepopulaire.fr

02GROUP STRUCTURE


BANQUE POPULAIREDE L’OUEST

ChairmanPIERRE DELOURMELChief Executive OfficerYVES BREU



13

www.ouest.banquepopulaire.fr

BANQUE POPULAIREPROVENÇALE ET CORSE

ChairmanJEAN-LOUIS TOURRETChief Executive OfficerFRANÇOIS-XAVIER DE FORNEL



14

www.provencecorse.banquepopulaire.fr

BANQUE POPULAIRERIVES DE PARIS

ChairmanMARC JARDINChief Executive OfficerJEAN CRITON



15

www.rivesparis.banquepopulaire.fr

BANQUE POPULAIREDU SUD-OUEST

ChairmanJEAN-LOUIS D’ANGLADEChief Executive OfficerFRANCIS THIBAUD



17

www.sudouest.banquepopulaire.fr

BANQUE POPULAIRETOULOUSE-PYRÉNÉES

ChairmanMICHEL DOLIGÉChief Executive OfficerRICHARD NALPAS



18

www.toulousepyrenees.banquepopulaire.fr

BANQUE POPULAIREVAL DE FRANCE

ChairmanJEAN-PIERRE TREMBLAYChief Executive OfficerYVAN DE LA PORTE DU THEIL



19

www.bpvf.banquepopulaire.fr

CASDENBANQUE POPULAIRE **

ChairmanPIERRE DESVERGNES

Number of member-stakeholders 1,051,800Number of employees 431Number of branches 1


20

www.casden.banquepopulaire.fr

CRÉDIT COOPÉRATIF **

Chairman-Chief Executive OfficerJEAN-CLAUDE DETILLEUX



21

www.credit-cooperatif.coop

BANQUE POPULAIREDU SUD

ChairmanCLAUDE CORDELChief Executive OfficerFRANÇOIS MOUTTE



16

www.sud.banquepopulaire.fr

* BRED Banque Populaire is also present in the overseas departments and territories of Martinique, Guadeloupe, Guyanne, Mayotte and Réunion.

** Banque Populaire banks with national coverage.

2005 ANNUAL REPORT

BANQUE FÉDÉRALE DES BANQUES POPULAIRES

A bank with major responsibilities: promotingthe Group's development, developing strategy,and supervising, coordinating and managing

the Group.

In 2005, Banque Fédérale des Banques Populaires strengthenedits role as the driving force of the Group's dynamism, its centralbody and holding company. It introduced a new organization tocontend with the changes in the banking industry and to goeven fur ther towards meeting the Group's leadership andcoordination needs.

The Executive Committee Banque Fédérale des Banques Populaires' Executive Committeehas the following members:

Philippe DUPONT, Chairman and Chief Executive Officer

Michel GOUDARD, Deputy Chief Executive Officer

Bruno METTLING, Deputy Chief Operating Officer

Françoise BOURGEOIS, Senior Executive Vice President, Finance(1)

Francis CRÉDOT, Senior Executive Vice President, Legal Affairsand Compliance

Tanguy du CHÉNÉ, Senior Executive Vice President, HumanResources (2)

Chantal FOURNEL, Senior Executive Vice President, Logisticsand Organization

Bernard GOURAUD, Senior Executive Vice President,Technologies

Olivier HAERTIG, General Secretary

Pierre JACOB, Senior Executive Vice President, Group FinancialCommunication

Josianne LANCELLE, Senior Executive Vice President, Strategy

Martine LEFEBVRE, Senior Executive Vice President, InternalAudit and Risk Management

Patrick MAHEUT, Senior Executive Vice President, BusinessDevelopment

The Group Risks department was set up as part of BanqueFédérale des Banques Populaires' new organization structure.

Banque Fédérale des BanquesPopulaires' new organizationstructureThe major changes in the Group (mergers, creation of i-BP,integration of Coface, Crédit Coopératif and Crédit MaritimeMutuel, etc.) and in the landscape of the banking industry since2000 (Basel II, IFRS, new requirements introduced by supervisoryauthorities, ratings agencies, etc.) prompted Banque Fédéraledes Banques Populaires to review its organization structure tobetter meet its regulatory obligations, especially its risk andcompliance-related imperatives, and the additional expectationsof the Group.

This organization reflects Banque Fédérale des BanquesPopulaires' drive to step up its role and enhance its capabilitiesin its three key roles as the central body, holding company andhead of the network. Presented on November 16, 2005 toBanque Fédérale des Banques Populaires' Board of Directors,the new organization structure features the addition orstrengthening of six departments:

n a Strategy department organized into three units, responsiblefor Strategic Intelligence, Strategic Planning and Analysis ofacquisition and international expansion opportunities throughthe Partnerships and Shareholdings unit;

n a Finance department including Financial Management(optimization of the Group's ALM and refinancing), FinancialControl (monitoring and analyzing the performance of theGroup's various entities, especially its holding companyresponsibilities) and Accounting-consolidation (production andanalysis of the Group's regulatory submissions, drafting of therelevant annual report);

n a Group Internal Audit and Risk Management departmentresponsible for monitoring the coherence and efficacy of theGroup's internal control system, risk management and thefinancial condition of the Banque Populaire Group's banks. Itsrole includes regular audits of all the Group's units, coordinationof the internal audit function and reporting to authorities andinternal governance bodies;

n a Risks department, which is separate from Internal Audit andCompliance, with powers to monitor and manage the Group'srisks. It is organized into two units: Risk control and BFBPPermanent Control;

n a Legal Affairs and Compliance department, with a Complianceunit reporting to the Legal Affairs department to monitor andcontrol compliance failure risks of all types (legislative, regulatory,professional standards, code of conduct) within the Group;

(1) As of April 2006, Françoise Bourgeois is replaced by Alain David.(2) As of July 2006, Tanguy du Chéné is replaced by Bérangère Grandjean.

n Central body and guarantor of theGroup's liquidity and capital adequacy

n Natexis Banques Populaires' holding company

02GROUP STRUCTURE


n a restructured Business Development department, with thecreation of a new Research, Marketing, Distribution unit,alongside a Markets unit covering the various client markets, anda Communications unit handling corporate communicationscentered around the brand, commercial communications andsponsoring.

The scope of the other departments' responsibilities andorganization (Group Investor relations, General Secretariat,Human Resources, Technologies, Logistics and Organization)remains unchanged and they continue to perform the same dutiesas previously.

By expanding Banque Fédérale des Banques Populaires' role andresources, the Group has significantly boosted its leadership,coordination and analytical capabilities.

Representing the GroupBanque Fédérale des Banques Populaires is the central body ofthe Banque Populaire Group. It combines the functions of theformer Chambre Syndicale des Banques Populaires, namelyinternal guardianship and control functions and the role of thecentral body within the meaning of French banking law, and ofthe former Caisse Centrale des Banques Populaires, which in1999 refocused on the management of cash surpluses at theBanque Populaire banks and its role as holding company ofNatexis Banques Populaires.

A bank in its own right, subject to French banking law, BanqueFédérale des Banques Populaires plays a role that sets theBanque Populaire Group apart from other banking institutions.Banque Fédérale des Banques Populaires does not head theBanque Populaire Group, but rather operates at the heart of theorganization. It is responsible for determining Group strategy,coordinating the network, managing the mutual guaranteemechanism and supervising subsidiaries, notably NatexisBanques Populaires, for which it is the holding company.

Banque Fédérale des Banques Populaires’ decision-making body,the Board of Directors, consists of nine Chairmen and six ChiefExecutive Officers of Banque Populaire banks. The Board ofDirectors is the Group's main governing body, and its decisionsapply to the Group as a whole, as well as to all of its componentparts. In keeping with the Group's cooperative values and itsfederal structure, the members of the Board are elected bytheir peers for a three-year term. One-third of Directors retireby rotation each year.The Board of Directors plays an essentialrole in the Group's development, and Directors devote onethird of their time to Board matters, meetings of the BanqueFédérale des Banques Populaires Board, the Boards ofsubsidiaries and the Group Risk Management Committee.

A cooperative organizationThe active involvement of all Group banks also results in BanqueFédérale des Banques Populaires organizing regular workingparties and discussions: the Federal Committee, which bringstogether members of the Boards of Directors, Commission

Chairmen and senior managers; the Federal Conference, opento all Chairmen, Chief Executive Officers and other seniormanagers; and Federal Commissions, which consider varioustopics at the request of the Board of Directors and on therecommendation of the Chairman of the Group.

The cross-Group commissions contribute their views and theirexpert opinions in areas such as development, communication,technology and information systems, risk management andfinance, human resources and development in Europe andinternationally.

Federating strategic projectsPositioned at the heart of the Banque Populaire Group, BanqueFédérale des Banques Populaires continued in 2005 to initiatestrategic decisions affecting the Group and support theirimplementation. Banque Fédérale des Banques Populaires drivesthe Group’s planning processes, and is thus fully involved inidentifying and preparing key decisions for the future of the Group.

As par t of this role, it acquires (majority and other)shareholdings in foreign banks. Through Banque Fédérale desBanques Populaires, the Group is, for instance, the majorityshareholder in BICEC, the leading bank in Cameroon. BanqueFédérale des Banques Populaires also owns an interest of 1.98%DZ Bank (the central body of a network of close to 1,400German cooperative banks).

More recently, Banque Fédérale des Banques Populairesacquired a shareholding of 24.5% in the capital of VBI, a holdingcompany set up in partnership with ÖVAG (the central body ofthe Austrian popular banks) and DZ bank and WGZ Bank(German cooperative central banks).

VBI's subsidiaries are present in eight Central Europeancountries. Their sales and marketing activities are focused onlocal SMEs, local authorities and project financing.VBI already has150 offices and plans to open another hundred by 2008.

Banque Fédérale des Banques Populaires had previously initiatedthe strategic decision to acquire Coface, a global specialist incredit insurance and credit management services (via NatexisBanques Populaires, which now owns 100% of Coface's capital).Banque Fédérale des Banques Populaires also prepared theentry of Crédit Coopératif as one of the Banque Populairebanks, as well as the affiliation of Crédit Maritime Mutuel.

Banque Fédérale des Banques Populaires owns 65.8% of thecapital of MA Banque, a bank set up in conjunction withinsurance companies MAAF and MMA, which also have a stakeof 34.1% in MA Banque's capital.

Guaranteeing the BanquePopulaire Group's liquidity andcapital adequacyBanque Fédérale des Banques Populaires meets the requirementof French banking law that mutual banks should have a centralbody responsible for guaranteeing their liquidity and capital

2005 ANNUAL REPORT

adequacy and for supervising and controlling the activities of theGroup. Banque Fédérale des Banques Populaires is thus also in aposition to offer other banks and financial institutions seekingsuch a central body the opportunity to join the BanquePopulaire Group.

The guarantee system is backed by the capital of all the bankscovered, through a mutual support mechanism (see InternalFinancing Mechanisms, page 24). All Banque Populaire banks,together with the mutual guarantee companies guaranteeing theloans of these banks, are covered by this mechanism.

Through this system, Banque Fédérale des Banques Populairescan trigger the mutual support mechanism by calling on theother Banque Populaire banks to contribute capital within thelimit of their own resources. As a last resort, Banque Fédéraledes Banques Populaires will provide capital from its ownresources to ensure the continued liquidity and capital adequacyof the Banque Populaire banks. Thus the liquidity and capitaladequacy of the Banque Populaire banks is guaranteed by twocomplementary systems of protection.

The federal solidarity fund is a component of Banque Fédéraledes Banques Populaires' fund for general banking risks. It may callupon the Banque Populaire banks to top up the level of this fundshould the need arise.

Likewise, the regional solidarity funds perform the same role forthe Banque Populaire banks. These funds are par t of theirguarantee fund for general banking risks. In addition, all membersof the network contribute to the “Fonds de Garantie desDépôts” (deposit guarantee fund) set up in application of theDepositors' Protection Act.

Holding company of NatexisBanques PopulairesListed in compartment A of Paris Eurolist, Natexis BanquesPopulaires is the Banque Populaire Group's financing, investmentbanking and services bank. It is directly controlled by BanqueFédérale des Banques Populaires.

At December 31, 2005,Banque Fédérale des Banques Populairesowned 75% of Natexis Banques Populaires, including the 2.1%held by the Alizé Levier mutual fund.

Strategic decisions concerning the Group's investment inNatexis Banques Populaires are taken by the Board of Directorsof Banque Fédérale des Banques Populaires.

A credit institution in its own rightAs a credit institution licensed to conduct banking transactions,Banque Fédérale des Banques Populaires manages a cash poolfor the Banque Populaire banks and also meets their refinancingneeds. Banque Fédérale des Banques Populaires entrusts thebulk of responsibility for these tasks to Natexis BanquesPopulaires under a specific agreement.

More generally, as the Banque Populaire Group's centraltreasurer, Banque Fédérale des Banques Populaires is authorized

to conduct all types of banking transactions and to provide anyinvestment services designed to facilitate performance of theseduties.

Coordinating major Group projects The Directors of Banque Fédérale des Banques Populaires arealso tasked with planning projects and checking their overallfeasibility before handing responsibility for them over to otherGroup units for implementation.

This approach is applied both to products and projects shapingthe Group's activities.

During 2005, work continued on a number of major projects,such as preparations for the new capital adequacy Ratio (theMac Donough ratio) and IFRS accounting standards (the firstGroup-wide consolidation under IFRS was completed for theperiod ended June 30, 2005) and further migration to i-BP, theGroup's shared IT platform.

The i-BP project made considerable progress in 2005, with fiveregional banks migrating to the shared platform.These successfulmigrations were completed with no interruption to normalbusiness, ensuring that the same high level of service quality wasmaintained throughout.

In addition, Banque Fédérale des Banques Populaires participatedin efforts to bring the internal control system of the Group'sbanks into line with the requirements of Regulation 97-02, byformalizing operating rules for the Risk, Compliance and Auditfunctions.

02GROUP STRUCTURE


NATEXIS BANQUES POPULAIRES

N atexis Banques Populaires builds long-termpartnerships,on both the national and interna-tional level, with a client base of large and

medium-sized companies, institutional clients and theBanque Populaire network.

A major player in financing, investment banking and services,Natexis Banques Populaires, the Banque Populaire Group's listedvehicle, works with nearly all major French companies andinstitutions. Active in bancassurance and a recognized assetmanager, it is also a leading force in employee savings in France.Through its subsidiary Coface, it is one of the world's leadingproviders of credit insurance and credit management services.

Brisk pace of expansionAvenues of expansionNatexis Banques Populaires has started to deploy its medium-term plan, which rests on four major pillars:

- diversification of and capitalization on the revenues generatedby its large and medium-sized corporate and institutional clients;

- leveraging the expansion potential of the Banque Populairebanks and their client bases;

- optimization of the strong positions acquired in specializedbusiness lines;

- expansion of Natexis Banques Populaires' internationalpositions.

Efforts to implement these avenues of expansion led to a ramp-up during 2005 in cross-selling between corporate andinstitutional client segments and an increase in the synergiesharnessed between business lines; the new sales and marketingorganization introduced for these client segments also facilitatedcloser performance monitoring.

A new Strategy department is now tasked with updating andmonitoring this plan.At the same time, the bank strengthened itsstrategic management and internal control systems, as well as itstools for managing and controlling risks, including operationalrisks.

Furthermore, this plan is closely coordinated with the aims of theGroup's strategic plan, in which it is involved.

Strategic management and internal controlsystems strengthenedNatexis Banques Populaires defined an enterprise systemsdevelopment plan in 2005, with the aim of overhauling thearchitecture of the bank's financial and cost accounting, financialcontrol and risk management systems.Apart from its regulatory

aspects, this program aims to develop cross-functional strategicmanagement tools and to foster the development of synergiesbetween business lines, leading to a comprehensive clientapproach.

Natexis Banques Populaires has continued to build up its marketrisk management and supervision teams. The internal controlsystem was also strengthened in areas defined in the plan ashaving special ambitions, i.e. Natural Resources and RelatedIndustries, Global Debt & Derivatives Markets.

In 2005, deployment of the operational risk management projectcontinued. Launched by the Banque Fédérale des BanquesPopulaires, it aims to map operational risks and implementsystems to manage and consolidate them.

International expansion In line with its priorities, Natexis Banques Populaires continuedto strengthen its activities in Italy, Spain and Germany. Growth inthese countries was driven primarily by the capital markets,structured finance and leasing businesses.

In the US, during 2005, Natexis Banques Populaires adopted anew organization structure better suited to the business linesand client segments that it wants to expand in the region.Lastly, Coface actively continued to develop its receivablesmanagement businesses abroad.

The Group's drive to enhance the coordination andeffectiveness of its various foreign units prompted countrymanagers to be given a stronger leadership role, while variousfunctions were pooled to a greater extent in the United Statesand in the United Kingdom.

New partnerships Natexis Banques Populaires continued in 2005 its policy offorging long-term par tnerships in business lines employingadvanced technology.The IT platform used by MA Banks, a newbanking joint venture between the Banque Populaire Group(65.8% interest) and MMA/MAAF (34.1% stake), is beingdeveloped by Natexis Banques Populaires.

BNP Paribas and the Banque Populaire Group, for which NatexisBanques Populaires handles electronic banking, signed anagreement in December 2005 to create a common electronicbanking development platform in their retail banking units.Named Par tecis (PARTnership European Card InformationSystem), the unit is a 50-50 joint venture between the twobanking groups.

Close to 13,000employees

33% of net bankingincome deriving fromoutside France

117 internationaloffices

2005 ANNUAL REPORT

Finally, Natexis Altaïr now houses all of i-BP's mainframemachines (informatique-Banque Populaire) and delivers agrowing number of value-added services to i-BP and the BanquePopulaire regional banks. In particular, internet access commonto the entire Banque Populaire Group was implemented in 2005,ensuring a very high level of security.

Four core businesses for greatersales efficiency Corporate and Institutional Banking andMarketsServing both corporate and institutional clients, the Corporateand Institutional Banking and Markets core business proposessolutions for customer needs – be they in loans and cashmanagement, capital markets, employee savings or assetmanagement – by drawing on all the business lines of NatexisBanques Populaires.Two business development departments –

one dedicated to corporate clients, the other to institutions –provide strategic and marketing intelligence for these clientsegments and coordinate the salesforces of the specializedbusiness lines.

The Corporate and Institutional Banking and Markets corebusiness has been organized into six business lines since late2004: Corporate France, International department, NaturalResources and Related Industries, Global Debt & DerivativeMarkets, Equity Group and Mergers & Acquisitions.

Private Equity and Wealth ManagementThe Private Equity and Wealth Management core businessincludes Natexis Private Equity, Banque Privée Saint Dominiqueand Natexis Private Banking Luxembourg S.A.

Natexis Private Equity and its subsidiaries, which specialize inprivate equity business lines, play a role in every stage of acompany's development, from incorporation to pre-flotationfinancing via mezzanine financing. Natexis Private Equity buildsrelationships with investors and entrepreneurs based on its

Strong rise in 2005 results

2004: under IFRS excl. IAS 32-39 and IFRS 4(1) Including wealth management

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

NET BANKING INCOMEIN MILLIONS OF EUROS

2004

2005

2,7073,091

+14%

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

GROSS OPERATINGINCOMEIN MILLIONS OF EUROS

2004

2005

843

1,034

+23%

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTIN MILLIONS OF EUROS

2004

2005

488

695

+43%

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

TIER ONE RATIO

01/0

1/20

05

12/3

1/20

05

8.3% 8.3%

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

AVERAGE OUTSTANDINGLOANS IN BILLIONS OF EUROS

2004

2005

70.679.4

+12%

0,000000

21,280000

42,560001

63,840001

85,120001

106,400002

ASSETS UNDER MANAGEMENT (1)

IN BILLIONS OF EUROS31

/12/

2004

12/3

1/20

05

87.3

106.4

+22%

02GROUP STRUCTURE


values of commitment and entrepreneurship. Banque PrivéeSaint Dominique, dedicated to private asset management,personalizes its approach to managing wealth by combiningmanagement of a diversified investment portfolio with legal andtax advisory services. Natexis Private Banking Luxembourg S.A.is specialized in international estate planning.

Services With over 2,500 employees, the Services core business nowcomprises six business lines, ranging from asset management,insurance and employee benefits planning to financial services(custodial), banking services (electronic banking) and investorservicing.

It has two objectives.The first is to support the Banque Populaireregional banks and help them achieve their growth and newbusiness development goals through the design of products andsystems.The second is to enhance the range of services for non-Group client segments (corporate and institutional clients, retailbanks, specialized banks with or without networks and financialinstitutions).

Synergies between these business lines are leveraged to develophigh value-added industrial and technological processes, as wellas increasingly seamless information systems to provide aneffective range of products and services, designed for maximumbusiness coherence and profitability.

Receivables Management Receivables Management houses the combined resources andexpertise of Coface and Natexis Factorem. It enables companiesto optimize, in whole or in part, the financial management oftheir customer and supplier relationships. This core businesscomprises four business lines: company information, receivablesmanagement, credit insurance and factoring, enabling allbusinesses to manage, protect and finance their accountsreceivable. Natexis Banques Populaires is at the forefront ofthese four businesses in France and across the globe.

Coface offers corporate clients a broad spectrum of receivablesmanagement solutions through its own network spanning 58countries and through those of its partners in the CreditAlliancenetwork (insurance and service companies).

Natexis Factorem operates its business predominantly throughthe Banque Populaire Group's network.

This multi-network strategy is one of the strengths of theReceivables Management core business, enabling it to maximizethe volume of customer sales it handles.

2005 ANNUAL REPORT

THE GROUP’S INTERNATIONAL OFFICES

Present in 68 countries

To find out more, visit:www.banquepopulaire.fr

Natexis Banques PopulairesCofaceJoint network

(1) BISE: subsidiary of Crédit Coopératif(2) BICEC: subsidiary of Banque Fédéraledes Banques Populaires

ALICANTE

AMSTERDAM

BARCELONA

BERLIN

BIELEFELD

BIELLA

BIRMINGHAM

BONN

BRATISLAVA

BREDA

BRUSSELS

BUCHAREST

BUDAPEST

COLOGNE

DUBLIN

DÜSSELDORF

ESCHBORN

FRANCFURT

FREDERIKSBURG

HAMBURG

HANOVER

ISTANBUL

KARLSRUHE

KIEV

LA CORUÑA

LAUSANNE

LINZ

LISBON

LJUBLJANA

LONDON

LOUVAIN-LA-NEUVE

LUXEMBOURG

MADRID

MAYENCE

MILAN

MONACO

MOSCOW

MUNICH

NUREMBERG

OSLO

PRAGUE

RIGA

ROME

ST-PETERSBURG

SAN SEBASTIAN

SEVILLE

SOFIA

STOCKHOLM

STUTTGART

TALLINN

VALENCIA

VIENNA

VILNIUS

WARSAW (1)

WATFORD

ZAGREB

ZURICH

02


BALTIMORE

BOGOTA

BUENOS-AIRES

CARACAS

CHICAGO

EAST WINDSOR

FAIRFIELD

GLENDALE

GREENWICH

GUAYAQUIL

HOUSTON

LIMA

LOS ANGELES

MEXICO

MIAMI

MONTREAL

NEW HAVEN

NEW YORK

PANAMA

PIERREFONDS

QUITO

SAN JOSE

SANTIAGO

SÃO PAULO

ABIDJAN

ALGIERS

BAMAKO

BNEI-BRAK

CAIRO

COTONOU

DAKAR

DOUALA (2)

DUBAÏ

JOHANNESBURG

LOME

ORAN

OUAGADOUGOU

SANDTON

SETIF

ALMATY

BANGALORE

BANGKOK

BEIJING

HANOI

HÔ CHI MINH CITY

HONG KONG

JAKARTA

KUALA LUMPUR

LABUAN

MUMBAI

NEW DELHI

OSAKA

SECUNDERABAD

SEOUL

SHANGHAI

SINGAPOUR

SYDNEY

TAIPEI

TEHRAN

TOKYO

YANGON

GROUP STRUCTURE

2005 ANNUAL REPORT

Group Business Review

The Banque Populaire Group maintains a close relationship with its clients through itsdense network and its emphasis on listening to participants in the markets it serves andholds a leadership position in numerous areas.

€8,242 million in net banking income

€1,522 million in net income attributable to equity holders of the parent

8.5%Tier one ratio

PERSONAL CUSTOMERS

Client – and growth – orientedorganizationThe Banque Populaire banks, which have always been firmlyrooted in their region, have always maintained a closerelationship with their clients – both geographically and througha major emphasis on the human dimension.This proximity wasfurther heightened last year through an active policy of openingnew branches. During 2005, the Group opened around two orthree new branches each week, with a total of 131 newbranches over the year. Taking closures and transfers intoaccount, the Group's total branch portfolio grew to 2,807branches.

In addition, the Banque Populaire banks continued to recruitregularly and actively.The year was marked by a further increasein the number of personal banking advisors, with a rise of 422 inthe total number compared with year-end 2004.

Constant efforts to bolster the sales and marketing organizationacross all client segments paved the way for the successfulimplementation of continuous high-impact campaigns,most notably“Dual Auto”,“Dual Immo”,“Cap 100,000” and “Je m'installe.”

Resources devoted tostrengthening relationshipsTo reinforce its banking relationship with its clients, the Grouppursued a policy of investing the requisite resources to meet the

T he personal banking market was bolsteredduring 2005 by further major efforts made byBanque Populaire employees. This hard work,

backed up by the network's successful positioning, aswell as appropriate organization and resources,boosted the drive to win new and secure the loyalty ofexisting clients, which was launched several years ago.

new needs of its personal customers.This policy should enableemployees of the Group's branches to spend more time onhigher value-added advisory activities through the developmentof automatic and remote services handling the most mundanetasks.Aside from the extension of the ATM and banking terminalnetwork, with 182 new units added, the Group expanded itsinternet banking channel.The number of clients using the onlineservice rose by 37%. Consultations continued to increase, with anaverage of 1.6 million logins per week, bringing the annual total to87 million.

The 25 contact centers, which are designed to enhance adviceand increase the availability of personal banking managers,worked hard to make progress. They provide clients with aservice complementing their relationship with their branch, with780 staff on hand to take their call. They answered 9.5 millionincoming calls, made 660,000 outgoing sales-oriented calls andhandled 400,000 e-mails.

During 2005, a new online stock market platform was launchedunder the OIC banner. It encompasses LineBourse, the existingservice for clients managing their investment portfolio veryactively, and LineDefi, which is geared primarily for clients keen onchecking up on the current value of their stock portfolio.At year-end 2005, the Group had 65,000 securities accounts andprocessed 257,000 orders.

The Group also continued to expand communication via SMStext messages.The SMS+ service, marketed under the “6 11 10”banner and highly popular with young clients, informs clients oftheir bank balance, most recent transactions and credit cardspending via their mobile phone.

€52.0 billion in outstanding loans

€52.3 billion in customer deposits

€27.2 billion of life insurance in force

é+12%

é+6%

é+13%

6,130,000personal customers

03GROUP BUSINESS REVIEW


High-performance productsDespite a highly competitive environment, the network posted avery firm performance on the savings and deposits front, withstrong net new money inflows and new lending thanks to a briskpace of new business.

Growth in customer deposits ran at 6% in 2005 on the back ofstrong performances in both passbook savings accounts (growthof 11%) and in home savings accounts (5%).

Customer savings posted significant increases across all thevarious components. Success in life insurance led to an increaseof 11% in life insurance in force to B27.2 billion, with a 14% risein net new money to B3.6 billion.The growth in net new moneywas notably underpinned by the successful launch of the special“Odeis 2005” fund.

In pension funds, new clients were acquired regularly through thesale of 43,000 PERP plans, representing growth in excess of themarket average.

The volume of mutual funds managed on behalf of personalcustomers amounted to over B19 billion. The major shareplacements and the firm performance of the capital marketsprovided favorable conditions for PEA equity savings plans,whichposted a 32% increase in managed assets.

The development of services for the Banque Populaire banks'mass affluent clients (specialized departments and mass affluentbranches), plus the products and services marketed by BanquePrivée Saint Dominique provide our wealthiest clients with arange of high value-added investment products, backed up by abroad and detailed analysis of their asset por tfolio. AtDecember 31, 2005, the total volume of managed assets cameto over B5.3 billion.

The Group strengthened its positions in property and casualtyinsurance. Its teams swung into action, enabling the Group tomeet its initial sales targets of a 29% increase in gross productionfrom a total of over 500,000 policies.

The Banque Populaire Group is one of the only bancassurers tooffer a dedicated range of homeowners insurance for home-sharing, an increasingly common practice owing to the high levelof rents and the scarcity of properties for rent.

The “Dual Auto” and “Dual Immo” campaigns made a significantcontribution to these performances.These novel products com-prising insurance and a loan attracted extensive media interest.These new launches, which were attuned to client needs, wereinstrumental in the results achieved in both property andcasualty insurance and in consumer and mortgage loans.

Business trends in personal loans were particularly healthy andhelped to build the loyalty of existing clients and to win newclients.

Expansion in revolving credit continued, with the roll-out of thefull range of Novacrédit solutions.The drive to win new clientsby increasing penetration was spearheaded by the “RéserveBanques Populaires Aurore” and “Réserve Plus” cards, which arededicated to this type of revolving credit. In 2005, the number ofcards rose by 13% to 203,000, with outstanding loans moving up9% to B105 million.

During 2005, installment consumer loans also enjoyed expan-sion, with volumes outstanding moving up 5% to B8 billion andnew lending reaching B3.4 billion.

Spurred on by supportive economic conditions (strong demandand advantageous interest rates), new mortgage lending reached exceptionally high levels, with lending volumes rising15% to B13 billion. As a result, mortgage loans outstandingstood at B44 billion.

Assurbanque: Creation of MA BanqueThe Banque Populaire Group strengthened itspartnership with MAAF and MMA by creating the MA Banque joint venture in late 2005.

This balanced partnership, which reconciles the interestsof the producer with those of the distributor, helps both insurers to add banking services to their existingrange of insurance products.The new services aregeared to meeting the everyday banking needs of theirmember-stakeholders.

This bancassurance partnership has already yieldedpromising commercial results.The network of MMA's general agents sold 3,200 motor finance loans during the last five months of the year and opened 25,000 passbook accounts, generating €130 million in net new money over just two months.

A leading force in solidarity-based savingsThe 2005 survey of solidarity-based finance published inNovember by Finansol confirmed the Group's positionat the forefront of the solidarity-based savings segment.

With its extensive range of Finansol-approved products,Crédit Coopératif is a major player in solidarity-basedsavings. Likewise, Natexis Asset Management and NatexisInterépargne hold prominent positions in solidarity-based employee savings, with €150 million in managedassets at December 31, 2005 (growth of 52%).

2005 ANNUAL REPORT

Expansion momentumThe combination of a finely tuned organization plus resourcesand products geared to market expectations made 2005another year of expansion for Banque Populaire Group. Bysigning up 250,000 new clients, the Group increased thenumber of personal clients to 6.1 million. Gains wereparticularly strong among young people, with over 137,000new clients less than 25 years old joining the Group comparedwith at year-end 2004.

While striving to win new clients, the Group consistentlymaintained its efforts to serve existing clients and to supporttheir various projects.

Given the fierce competition prevailing, performance in thepersonal banking market during 2005 was first-class. Thisgrowth momentum helped to boost the Group's spontaneousrecall rate, which reached 39.6%, and to promote a positiveimage among consumers.

Younger clients served by an extensive rangeof products geared to their needsWinning young clients is one of Banque Populaire Group'spriorities, and it has implemented specific measures to attractthem.

Its marketing campaigns in this market revolve around the“special moments” in life and use cinema and internet-relatedthemes.

The Group offers children less than 12 years old their firstsavings account, the “Premier pas” passbook.

For young people less than 18 years old, “Passpop” offers acombination of available savings through the “Banque PopulaireLivret Jeune” passbook account and a debit card. A monthlyaccount statement enables accountholders to monitor theirspending.

Adults aged less than 25 can benefit from an exclusive productrange, with the “Equipage Horizon” package covering the dailyrunning of their account, as well as helping them to deal with themajor milestones in their life, such as moving into a new home.For instance, the “Je m'installe” (I'm moving in) package providesa rental guarantee to help them find accommodation, pays formoving-in costs and insures their home.

The Group also joined in efforts to promote the products set upby the authorities, including loans to buy laptop PCs (Prêt PC)for B1 and loans towards driving lessons (Prêt Permis) for B1.

Fresh impetus in the civil servant marketThe Group strengthened its position in banking services for civilservants through CASDEN Banque Populaire and Associationspour le Crédit et l’Epargne des Fonctionnaires (ACEF).

Together with the Banque Populaire regional banks, CASDENBanque Populaire decided to inject fresh impetus into its effortsto win new clients working for the French national education,research and culture systems. For the first time, they embarked

together on a nationwide campaign called “Cap 100,000”. Thiscampaign put them in contact with numerous prospects andboosted the pace of customer acquisitions at CASDEN BanquePopulaire.The key objective of the program is to consolidate andexpand the company's position as the leading player in thismarket. CASDEN Banque Populaire, a nationwide cooperativebank, is backed up by a network of 104 departmental offices,3,500 correspondents in schools and the 2,807 BanquePopulaire branches.

ACEF, which was set up to provide civil servants a range ofsavings and lending products on preferential terms, forged closerlinks with the Banque Populaire banks. Since it shares the samevalues of solidarity and cooperation, ACEF has aligned itsorganization with that deployed by the Banque Populaire banksto help win new members.

Successful IPOsThe Sanef, Gaz de France and EDF IPOs were allsuccesses for the Group.The Group's ability to mobilizeall the relevant teams for these IPOs at the BanquePopulaire banks, Banque Fédérale des Banques Populairesand Natexis Banques Populaires enabled it to land670,000 orders worth close to €900 million in total for the three flotations.



SMALL BUSINESSES

In 2005, the Banque Populaire Group consolidated its prominentposition by further enhancing its range of products and services.It built on its position as number two in the French small businessmarket, by securing a penetration rate of 20% in this market.(1)

A major forceFounded by tradespeople over one century ago, the BanquePopulaire Group is the leading bank for small trades-orientedbusinesses. It also caters to the needs of its other small businessclients, predominantly farmers, self-employed professionals andbusiness entrepreneurs. Number one in loans for starting oracquiring a business, and number one in franchise financing, theGroup is also the leading player in the cards market (for smallbusinesses) and the top bank in factoring for small businesses.

In addition, its longstanding partnership with the SOCAMA mutualguarantee companies has enabled the Group to develop somehighly innovative products, including “Prêt Express Socama” loanswithout personal guarantees for clients' equipment purchases and“Prêt Socama Transmission-Reprise” buy-in/buy-out financing.Theirgoals of facilitating access to credit and ensuring the successfulrepayment of loans,while protecting the business owner's personalassets make the Banque Populaire Group and SOCAMA uniquepartners capable of innovating consistently to offer solutionsgeared to meeting the most diverse needs of their clients.

A dedicated organization The Banque Populaire Group's marketing initiatives for smallbusinesses emphasize its close geographical relationships andsector-specific expertise, its long-term relationships with clientsand the strong ties forged with small business organizations andthe affiliated networks of the SOCAMA mutual guaranteecompanies and SOPROLIB (mutual guarantee companies forself-employed professionals).

The Banque Populaire Group is backed by one of the densestand most efficient networks in France, with over 2,800 branchesat year-end 2005.

At each branch, small business advisors, specializing in eachbusiness line, use their expertise to help each of their clients toexpand their business activities.

T he Banque Populaire Group is the leader in themain segments of the small businesses market.Thanks to the breadth of its expertise and the

special ties it has forged with small businessorganizations, it is able to support clients at every stageof their life, from the incorporation of a new businessto the transfer of businesses, by offering suitableproducts and services.

For instance, the Group has over 5,000 employees specializing inthe small business sector. In the farming segment, it boasts over100 experts and 400 advisors distributed across the branchnetwork, who are dedicated to serving this client segment.

In addition, the integration of Crédit Maritime Mutuel within theGroup, the leading bank for small fishing industry businesses, andthe affiliation of each branch with one of the Banque Populaireregional banks on the French coastline have increased theefficiency of the commercial network.

The Group has managed to build long-term relationships foundedon trust with its clients. A large number of tradespeople aremember-stakeholders and Directors of the Banque Populairebanks and thus provide them with the benefit of their experienceand professionalism.

The effectiveness of the Group's sales organization derives fromthe very close relationships it has built with affiliated networks,such as SOCAMA.To meet the needs of small businesses moreeffectively, the Banque Populaire Group is also backed by anetwork of 35 SOCAMA mutual guarantee companies (at year-end 2005). Led by their directors, who are business ownersrepresenting various different sectors, they facilitate access tocredit for small business through their business expertise and eachyear guarantee numerous projects. They also represent theinterests of trades-related businesses with their banking partnerand are the number one issuer of mutual guarantees in France.

The Group has also forged close relationships with all the smallbusiness organizations in France. These include Assemblée desChambres Françaises de Commerce et d’Industrie (ACFCI,federation of chambers of commerce and industry); l’AssembléePermanente des Chambres de Métiers (APCM, permanentassembly of chambers of trade); l’Union Professionnelle Artisanale(UPA, professional union of craftsmen), l’Assemblée Permanentedes Chambres d’Agriculture (APCA, permanent assembly ofchambers of agriculture) and Confédération Générale des Petiteset Moyennes Entreprises (CGPME, general confederation ofSMEs).

Firm roots Leadership position in the principal clientsegments

Leading bank for small trades-related businesses With one in three craftsmen and one in four shopkeeperscurrently Banque Populaire clients, the Group remains theleading bank for small businesses.

Effor ts continued in 2005 to penetrate all areas of thecommerce market. The Group has developed a number ofinitiatives over many years to improve its performance in thepar ticularly fast-growing franchise segment, with a view toadapting to changes in local trading patterns.

The Group's offering for franchisees encompasses a broad rangeof dedicated products from support and guidance through the

(1) CSA Pépites 2006 survey

2005 ANNUAL REPORT

partnerships forged with the principal franchise operators toSOCAMA-guaranteed loans and benefits for their employees(incentives, holiday vouchers, luncheon vouchers), as well as theirapprentices (special apprentice loans), not to mentioncomprehensive insurance solutions and retirement planning.

The second annual franchising survey (2) in 2005 confirmed theGroup's leadership in this major sector of retail commerce.TheBanque Populaire banks have consolidated their positions as thenumber one bank for franchisees. In addition, the BanquePopulaire Group is the first bank recommended by franchisorsto their franchisees.

In the small business sector, the Banque Populaire Group hastraditionally worked in par tnership with small businessorganizations and has created joint product ranges with them.

This strategy was pursued in 2005, to accelerate distribution ofasset management and investment products to this client base.For instance, it led to the development of the CNPA offering(Conseil National des Professionnels de l’Automobile) and theapprentice offering for young people in apprenticeship, designedin conjunction with the APCM and AFCFI.

Likewise, since July 1, 2003, the Banque Populaire banks havedistributed a loan to cover recurring capital expenditureswithout personal guarantees from the business owner or his orher family. Meeting longstanding demand from small businesses,the new “Prêt Express Socama” formula was developed withsupport from the European Investment Fund (EIF).

Number one in loans for starting or acquiring a businessEach year, the Banque Populaire Group lends to around one in threestart-up owners, i.e. 60,000 ventures, in partnership with the mosteffective support networks, notably the Chambers of Trade andChambers of Commerce and Industry.

With market share of 32% in 2005, the Banque Populaire Groupremains the number one distributor of business start-up loans inFrance.

This performance was achieved by the Banque Populaire regionalbanks by forging a tight network of relationships with all localbusiness organizations that support employment in mainlandFrance and overseas departments.

In particular, the regional banks have actively cooperated with anumber of well-known networks including local enterprise groups,ADIE (economic enterprise association), France Active, theEntreprendre network, Boutiques de Gestion and all enterprisebodies created by local authorities.

This marriage of skills, with the best professionals in supportingand working with business creators, has helped the BanquePopulaire Group to select the most robust opportunities.Workingtogether in this way is a key guarantee that the companies willsurvive and therefore ensures tight risk control.

The Banque Populaire banks have also developed real expertise inanalyzing risks related to this kind of business.This specific skill is akey factor for long-term success in this market niche, whichexplains why the risk profile on these loans has been kept at

satisfactory levels. Using public procedures for business start-uploans or guarantee systems for business loans also helps tomanage Group exposure actively.

Build on success

Key partners in the farm sector

The Banque Populaire Group has been established in the farmingmarket for 15 years and distributed over B530 million in loans tofarmers during 2005, representing an increase in a sluggish market.The steady increase in its market share each year illustrates theGroup's commitment to and success in this sector. Its penetrationrate now exceeds 10% of all farm businesses.

Drawing on its team of experts and client advisors, the BanquePopulaire Group is developing a three-pronged strategycommensurate with its cooperative values emphasizing long-termcommitment, close relationships with farmers and fishermen, andsolidarity in times of crisis.

The Group's presence in small business organizations and abilityto influence the authorities also facilitates the task of the BanquePopulaire banks in the field.The “Prix National de la DynamiqueAgricole et de la Pêche” (PNDA, national awards for dynamismin farming and fishing) introduced by the Group 13 years agoillustrates this strategy. Each year, this event brings together notjust farmers but also leading representatives of the agriculturaltrade unions, the FNSEA (French national federation ofagricultural workers’ unions) and the chambers of agriculture.Awards are presented to the eight farming projects and onefishing project judged to be the most effective and innovative.

In 2005, the Banque Populaire banks also continued to expandand diversify the range of products and services dedicated to thismarket, including the launch of “Optiplus Agri” (a precautionarysavings plan) and “Fructi Facilité Agri” (a plan covering treasuryloans in the event of death or disability).

Positions beefed up in the self-employedprofessionals segment

During 2005, the Banque Populaire Group developed newofferings for its self-employed professional clients catering totheir receivables collection, cash management and retirementplanning needs.

For instance, the Group promoted the deployment of itselectronic banking solutions for health industry professionals,which help clients secure guaranteed payment of theirprofessional fees, send in patient medical cost reimbursementforms and automate payments in several installments forretirement planning purposes. In 2005, the Group continued toroll out its “ES/PL PERCO” employee pension plans, which werea product of its par tnership with UNAPL (national self-employed professions union).

(2) Annual franchise survey – Banque Populaire, French franchising association, CSA.



An extensive and innovativeproduct rangeFacilitating payments The Group built further during 2005 on its number one positionin the issuance of payment cards to small businesses, primarilyVisa Business Electron,Visa Business and Gold Business but alsoBusinessCard, which is part of the MasterCard network.

At December 31, 2005, the Group had 257,131 cards incirculation, representing an increase of 16% compared with 2004.

At the same time, the Group confirmed its position as a leadingforce in electronic banking, with more than 170,000 merchantcontracts (increase of 2.64% compared with 2004).

Managing receivables more effectivelyA highlight of 2005 was the continued deployment of thecomprehensive receivables management range for smallbusinesses, including company information, credit insurance andfactoring.

In the factoring for small business segment, the Banque PopulaireGroup retained its leadership in 2005 and consolidated itsexpansion, with a rise of 32% in new business.

The factoring range for business start-ups “Créance Primo”enjoyed considerable success during 2005.

Motivating employees and improvingretirement planningThe Banque Populaire Group enables its entrepreneur clients topursue a genuine policy of welfare benefits not only forthemselves but also for their employees. To a great extent, thesuccessful expansion of these products probably stems from thefact that they make powerful tools available to motivate andenhance the loyalty of employees and guarantee the same taxand welfare benefits offered by large companies.

Having sold 17,700 “Fructi Épargne” company savings plans sincethese employee savings tools were opened up to individualentrepreneurs in 2001, including 3,355 in 2005 alone, theBanque Populaire Group is now the leading distributor ofemployee savings plans to small businesses.

This success was confirmed by the results achieved by the newPERCO (employee pension plan), with close to 4,300 plans soldsince its launch in mid-2004, including 2,900 in 2005 alone.

In 2005, the Banque Populaire Group capitalized on this positionand reaped the benefit of the growing interest among the Frenchpopulation in funded pension products.

Protecting businessesIn insurance, the policies sold by the Banque Populaire networkcover both risks linked to small businesses, such as property andutility vehicle insurance, financial protection and civil liability, aswell as the business owner him- or herself.

With a portfolio of 19,055 policies,Assurances Banque PopulaireIARD, the joint venture between Banque Populaire and MAAFAssurances has exceeded its initial targets. The two partnersnow wish to build on this success and accelerate the pace ofsales to the Banque Populaire Group's small business client base(see box).

Major campaigns of 2005 The “Prêt Socama Transmission-Reprise”formula with a personal guarantee of just 25%. In September 2005, the Banque Populaire Group launched the“Prêt Socama Transmission-Reprise” loan giving access tobusiness owners – either individual entrepreneurs or legalentities – to a loan of up to B100,000 and a personal guaranteeof just 25% of the size of the loan, regardless of their size andtheir sales.

Craftsmen, tradespeople, self-employed professionals and serviceproviders can thus secure funding enabling them to finance thepurchase of business assets, leasehold, equipment or securities ina company.

For such transactions, the “Prêt Socama Transmission-Reprise”loan carries a counterguarantee from the European InvestmentFund (EFI), which manages the program on behalf of theEuropean Commission as part of its multi-year plan for smallbusinesses.This loan product is an extension of the “Prêt ExpressSocama” without any personal guarantee formula marketed bythe Banque Populaire Group, also under a partnership with theEFI.

Impressive performance in non-life insuranceBuilding on the upbeat results recorded in late 2004,the Banque Populaire Group significantly increaseduptake of non-life insurance products by its smallbusinesses in 2005 (7,310 policies sold in 2005,representing an increase of 21.3% compared with 2004).As a result, the Group made progress towards its goal of a significant increase in the number of policies overthe next five years. Its clients and member-stakeholderscan thus secure protection for both their business and personal lives.

2005 ANNUAL REPORT

CORPORATE CLIENTS

In 2005, the Banque Populaire Group further stepped up thepace of its progress with a range of products and servicesconstantly fine-tuned to the new needs of its clients. Thismomentum enabled it to establish prominent positions in thecorporate market. The Banque Populaire Group thus ranks asthe leading corporate bank (source: Sofres survey of September2005). With its overall penetration rate of 42% amongbusinesses with between 10 and 1,000 employees, it hasestablished itself as a force to be reckoned with in this market. Itworks together with almost all the largest French groups.

Client-focused organizationThe Banque Populaire Group is building up its marketinginitiatives for corporate clients by leveraging the expertise ofNatexis Banques Populaires and the Banque Populaire banks, aswell as Coface's complementary expertise. Banque Fédérale desBanques Populaires, which lies at the heart of the Group, whichhas included Crédit Coopératif and Crédit Maritime Mutuelsince 2003, is responsible for making the Group's major strategicdecisions and running the network.

T he Banque Populaire Group is a leading playerin the corporate lending market.The breadth ofits complementary expertise enables it to

support corporates throughout their life cycle, fromincorporation through expansion to their sale or evenflotation. This approach, which is based oncomprehensively meeting its clients' needs, isunderpinned by long-term partnerships at bothnational and international level.

The Banque Populaire Group's sales and marketing organizationperfectly reflects this synergy, which guarantees a rapid responseto and a clear understanding of the specific needs of its corporateclients.The Group can thus draw on the 147 corporate branchesoperated by the Banque Populaire regional banks (up from 75 in2000, representing an increase of close to 100% over five years),as well as on Natexis Banques Populaires' regional offices acrossthe length and breadth of France.

The relationship manager, who is the real pivotal point in thecommercial relationship, can mobilize a network of expertise onbehalf of his clients at these centers and at the Banque Populairebanks in areas as diverse as structured and specialized financing,payments and capital management, employee benefit planning,international assistance and financial engineering. Alongside therelationship manager stands the asset management advisor, whocan offer business owners solutions geared to their propertymanagement, tax planning and corporate buy-ins/buy-outrequirements.

Crédit Coopératif is establishing a presence with cooperativeassociations and businesses. Mutual guarantee companies lie atthe hear t of this program, forming a par tnership with theassociations and federations, which represent these companiesand are member-stakeholders in the bank. The bank isrepresented among SMEs which have formed financialcooperatives, SCOPs (production cooperatives) with twomutual guarantee companies, and transport, trades and retailercooperatives, etc.

Within Crédit Coopératif, Banque du Bâtiment et des TravauxPublics is developing acknowledged expertise in theconstruction industry in partnership with such federations.

Payments processing and servicesContinuous improvements in payments processing Payments processing represents a top priority for corporateclients given the stricter regulatory standards, the frenetic pace ofadvances in technology and the inroads made by electronictransactions.The Banque Populaire Group constantly endeavorsto adapt its range of products and services to the changingexpectations of its clients in terms of speed, reliability and security.It offers businesses of all sizes national and international solutionscovering their payments and receipts, as well as their treasurymanagement requirements. Its innovative offering, combined withits emphasis on providing sales coverage, has enabled it to rankamong the leading players in this expanding market.

A leading playerThe Banque Populaire Group boasts flagship positions in each of its business lines.The Group is the second-largest lender to corporations with sales of less than €15 million and has nearly 11% market share. It is the fourth-largest lender to all French corporations, with aggregate market share of 8% of outstanding loans (leasing and factoringexcluded) during the third quarter of 2005 (source: Centrale des risques - Banque de France,Central Risk Database).The Group is also a prominent player in employee savings, with market share of 20.6%. It is the leading player in expansion capital and private equity for SMEs.Through itssubsidiary Coface, the Group is one of the world leaders in credit insurance and is French market leader in company information.

No.1 French operator in private equity in the SME market

No. 4 largest lender to corporate clients

No. 2placing agent in asset management

No. 4bookrunner inacquisition finance and syndicated loans

No. 3 worldwide in credit insurance



The Banque Populaire Group continued its brisk expansion inpayment media during 2005. The number of “Mission Plus”business cards recorded an annual increase of 22%. In addition,the Group renewed and enriched its “Cyberplus Paiements”secure online payment system to support the ramp-up in e-commerce and distance selling.

New payment processing systems were launched, such as the“Suite Entreprise 2005” teletransmission platform. Anotherhighlight of 2005 was the significant increase in business inelectronic certification arising from the obligation effectiveJanuary 1, 2006 for businesses with sales of over B1.5 million(compared with B15.2 million previously) to declare and pay VATelectronically.

To better meet the cash management expectations of itscorporate clients, the Group embarked on a complete overhaulof its range of its products and services to include the pooling ofreceipts (Fructiflux), cash pooling (Fructi 900) and businesstransfers at due date (Vircom). A simplified offering with richerfeatures will be launched during 2006 for businesses keen tooptimize management of their finances, enhance the visibility onrisks and reduce their administrative overhead.

Stronger leadership in receivables management Receivables are, by far, the largest item on the balance sheet ofFrench companies, accounting on average for 40% of their assets.Hence businesses need to manage, finance and protect theircommercial relationships with their clients and suppliers. Backedby the combined expertise of Natexis Factorem and Coface,the Banque Populaire Group offers a comprehensive andpersonalized approach to receivables management,which aims toprovide a suitable solution to the needs of each business. Thisunequalled expertise is underpinned by powerful sales coverage.Since January 2005, Natexis Factorem has made all thereceivables management offerings available to clients of theBanque Populaire regional banks and Natexis Banques Populaires.

In addition, they are delivered through Coface's distributionnetworks, which cover 58 countries, and through thoseoperated by its insurance and banking par tners in theinternational CreditAlliance network.Thanks to these extensivenetworks, the Banque Populaire Group has established primepositions in the corporate market. It is the number one player

in receivables management in France, number two in tradereceivables management in France and ranks in the top threeworldwide in trade receivables management and creditinsurance and in the top five worldwide in companyinformation. It also ranks third in the French factoring market.

In 2005, the Banque Populaire Group pursued its active policyof winning new clients and securing the loyalty of existingclients across all its business lines. To emphasize the synergiesbetween products in the receivables management range, theyhave all been given names beginning with the word CREANCE(French for trade receivable): “CREANCEinfo” for businessinformation, “CREANCEassur” for credit insurance, etc. TheGroup has also bolstered its network with the creation ofCoface Services on January 1, 2006.This new company, whichhouses the combined expertise of Coface SCRL and CofaceOrt, two of France's largest company information providers,was France's leading player in receivables collection andmanagement from its inception.

An integrated approach toreceivables managementThanks to the combined efforts of Natexis Factorem and Coface, the Banque Populaire Group is the onlybanking network capable of handling internally all thebusiness lines related to receivables management:

- credit insurance protects financial and non-financialcompanies alike against the risk of non-payment of their customer receivables;

- company information enables them to evaluate the financial condition of their business partners and their ability to meet their commitments (solvencyinformation) and to detect business opportunities withsolvent clients (marketing information);

- factoring enables companies to monetize their accounts receivable by transferring them to a third party,the factor, who takes responsibility for collecting them and may suffer potential losses owing to debtorinsolvency;

- recovery (management of unpaid receivables).

Network dedicated to corporate clients21 Banque Populaire banks Natexis Banques Populaires

147 corporate branches 16 regional offices

800 corporate account executives 555 relationship managers

117 international offices

4,500 correspondent banks outside France

2005 ANNUAL REPORT

In the very dynamic factoring market in 2005 (growth of 12%),the Banque Populaire Group focused its development on its innovative offering and high-quality services. NatexisFactorem, France's number three factoring company (source:French association of financial companies), was the first in theFrench market to secure service certification. Issued by BureauVeritas Quality International (BVQI), this certification bearstestimony to compliance with precise and quantifiedcommitments for all of Natexis Factorem's services. Thisquality-oriented program is backed up by new productintroductions, including the launch in 2005 of an offeringgeared specifically to the needs of large corporate clients:“CREANCEplus Délégué”(delegated factoring),“CREANCEexpert”(confidential factoring), and structured finance for receivables(balance acquisition).The SME client base also benefited fromthe overhaul of the “CREANCEplus” product, which notablyincludes contractual financing commitment within 24 hours.Lastly, the Group has tapped into fresh growth opportunitiesin Germany thanks to the success of VR Factorem, a 51%-ownedsubsidiary of Natexis Factorem and a joint venture with VRLeasing (subsidiary of DZ Bank). VR Factorem's businessmodel, which is focused on winning Volksbanken's micro-company and SME clients, is proving itself to be highlyeffective.

Financing and investmentClose client relationshipsThe Group provides solutions meeting all the needs of itscorporate clients in areas including lease financing, medium- andlong-term loans, structured finance and capital marketsproducts by leveraging the teams and branches of the BanquePopulaire banks, as well as Natexis Banques Populaires' regionaloffices.

Lease financing In equipment financing, its Natexis Lease subsidiary posted a gainof over 10%, with B1.1 billion in new business. New leases fromthe Banque Populaire regional banks, at Crédit Maritime Mutueland with Natexis Banques Populaires' corporate clientelecontributed to this performance.

Vendor programs were put in place. In particular, a partnershipwas signed with the Manitowoc Group (Potain) covering theFrench and Spanish markets. In energy management andenvironmental lease financing, Energéco is a leading player inwind farm financing.

In property leasing, Natexis Lease, which ranks second in France(source: French association of financial companies) posted B530 millionin new lease production. Internationally, Natexis Lease recorded asignificant rise in its business in Spain, two years after opening anoffice in Madrid. A new branch is to be opened in Barcelona in2006. In the fourth quarter of 2005, a branch was opened in Milan.Lastly, Natexis Lease created a leasing department at NatexisAlgérie.

Long-term lendingThe Banque Populaire Group is the number two lender tocorporate clients with sales of less than B15 million with marketshare of 10.93% in the third quarter of 2005 (source: Centrale desrisques - Banque de France, Central Risk Database).

In the large and medium-sized corporate segment, NatexisBanques Populaires' Corporate France department fine-tunedits organization to build even closer relationships with its clients.It strengthened its sales teams at both the regional offices, in thesectors and at the level of its Global Relationship Managers,which are responsible for a small number of clients generating alarge volume of business across a number of different businesslines. It continued to build up its sectoral expertise, especially inthe health, media, food, and the construction and environmentindustries. Each company is monitored by a “key banker” whoseprimary role is to initiate and coordinate relationships with allproduct lines.

With total market share of 11.5% of outstanding loans (leasingand factoring included) at June 30, 2005, the Banque PopulaireGroup is the fourth-largest lender to all categories of Frenchbusinesses (source: Banque de France).

Global Debt & Derivatives MarketsAll Natexis Banques Populaires' global debt and derivativemarkets activities recorded significant gains on the back of theextension of its range of higher value-added services.

The bank's borrowing platform, which brings together thefinancing, engineering and issuing businesses, offers globalborrowing, investment and risk hedging solutions, both forissuers and investors.

By bringing together a variety of products, the bank has beenable to strengthen its position as a prominent arranger ofstructured debt facilities. Clients receive turnkey financing, bothin France and abroad.

The new Financial Engineering unit also contributed to overallperformance owing to innovative, structured deals, such as thefinancing of the Colony fund's investment in Accor. Customizedsolutions backed by a variety of underlying assets, from equitiesto real estate, are also offered to corporate clients.

The Primary Markets and Securitization unit continued to grow,as customer targeting was enhanced. In France, despite an overalldecline in new issues, this unit focused on significant corporatemandates, such as SFR, Bouygues, Schneider and Alstom, and oninflation-indexed instruments (Cades and Réseau Ferré deFrance).The bank continued to gain stature in syndicated creditsin France, as a top-tier arranger and bookrunner (Gaz de France,Air France, Vinci, LVMH, Partouche and CMA CGM). It alsoplayed a significant role in the Europe, Middle East and Africa(EMEA) region.

The Capital Markets unit benefited from the combination ofcapital market and financing dimensions and a new organizationfostering more sophisticated products on each desk. Salesvolumes were boosted by the growing impact of cross-selling.



In 2005,Natexis Bleichroeder S.A. lead-managed two IPOs in themid-cap segment and took part in seven rights issues, lead-managing three of them. In conjunction with the BanquePopulaire regional banks, the subsidiary participated in threeprivatizations during the year (SANEF, GDF, EDF). It alsoconsolidated its leading position in securities borrowing andlending and in public offers with market share of 7% (source:Offers filed with the Autorité des Marchés Financiers).

issues managed, B371 million in capital invested and B161million in capital gains on sales.

In expansion capital, Natexis Private Equity strengthened itsstatus during 2005 as leading investment partner for unlistedFrench SMEs. Managed assets totaled B666 million and theamount invested B131 million.

In venture capital, five investments held by Spef Venture (sincerenamed Seventure) and Ventech were floated on the stockmarket, and 11 others were sold to industry players. Theseresults bore testimony to the exper tise of the bank'sprofessionals and the reasoning behind their investment andmanagement decisions.

French teams dedicated to buy-in/buy-out financing were very active in 2005. Natexis Industrie, Initiative & Finance andSpef LBO assisted companies such as Maisons du Monde(household furnishings), Elexience (distribution of electroniccomponents and scientific instrumentation), Européenne de laMer and Datavance (IT services, systems and networkengineering). These three subsidiaries also realized significantgains on asset sales, such as on Eau Ecarlate (householdcleaning products), Cibleclick (affiliate marketing), Holophane(vehicle lighting systems) and Médiascience (publisher ofteaching materials).

Through its role as an active sponsor of teams based inEurope, Asia and Latin America, Natexis Private Equity'sinternational commitment made a significant contribution tothe impressive 2005 results. International business postedfresh growth, with B752 million in funds under managementand sizable investments. For example, Finatem in Germanyinvested in JNS and Derby, Natexis Mercosul Fund invested inLupatech in Brazil, Natexis Cape invested in Phoenix in Italy,and Natexis Private Equity Asia invested in Suntech Power,which has since been floated on the New York StockExchange.

In 2005, Natexis Private Equity launched a new B500 millionfund of funds, Dahlia, in par tnership with the EuropeanInvestment Fund (EIF). Designed for institutional investors andinsurance companies, the fund draws on all the skills of its twosponsors to invest in all branches of private equity, at bothprimary and secondary levels.

Fund for personal customersDrawing on the strength of its expertise in its business lines,Natexis Private Equity also expanded its range of products forindividual clients of the Banque Populaire regional banks. Forinstance, Naxicap Partners launched three new “proximity”investment funds (Banque Populaire Proximité Sud-Est 2005,Sud-Ouest 2005 and Ile-de-France Nord Centre 2005). In themeantime, Spef Venture participated in the launch of its tenthinnovation mutual fund (Banque Populaire Innovation 10).

In addition, Banque Privée Saint Dominique clients enjoyspecial access to unlisted investments offered by NatexisPrivate Equity.

Natexis Banques Populaires,the number one LBO lender in 2005 In the LBO and acquisition financing market, NatexisBanques Populaires won the “LBO lender of the year”award in 2005(1) (debt and mezzanine).The prize wasawarded by a panel of 18 professionals for the numberand quality of arranger mandates.

Corporate financingThrough Natexis Private Equity, the Banque Populaire Groupwas again very active in expansion capital and buy-out/buy-infinancing. It also contributed to the surge in the venture capitalmarket, while making some very impressive exists from itsportfolio investments.

At the same time, it gave its investment teams what they neededto be competitive and for them to adhere strictly to corporategovernance principles. This commitment helps to guarantee ahigh level of performance for its partners. By working closelywith private equity regulatory and supervisory bodies (AFIC,EVCA, AMF) and by implementing a bona fide system ofcorporate governance, with internal controls, a complianceofficer, risk management, a supervisory board and othersafeguards, Natexis Private Equity is a conscientious sponsor,committed to responding to the demands of its investor andentrepreneur partners.

Private equityNatexis Private Equity and its subsidiaries(2), which specialize inprivate equity business lines, play a role in every stage of acompany's development, from incorporation to pre-flotationfinancing. Natexis Private Equity builds relationships withinvestors and entrepreneurs based on its values ofcommitment and entrepreneurship.

With 630 investments and B2.3 billion in assets undermanagement in its subsidiaries, Natexis Private Equitybolstered its position as a French specialist in private equitydedicated to small and medium-sized enterprises (SMEs).Business continued apace in 2005, with B252 million in equity

(1) Prize created by Private Equity Magazine.

(2) Seventure (formerly Spef Venture), Ventech (venture capital), EPF Partners, Natexis Investissement, Natexis Equity Management,Naxicap Partners, Providente created after December 31, 2005 (expansion capital), Natexis Private Equity InternationalManagement (International), Initiative & Finance, Natexis Industrie, Spef LBO (LBO financing).

2005 ANNUAL REPORT

Asset Management Number two placing agent in FranceNatexis Asset Management, the Banque Populaire Group's assetmanagement subsidiary, posted very strong expansion in theFrench market during 2005.Total assets under management rosefrom B82.8 billion at December 31, 2004 to B101.1 billion atDecember 31, 2005.

Natexis Asset Management ranked as the number two placingagent in France during 2005 (source: Europerformance atDecember 31, 2005). Total net new money soared to a recordlevel of B8.4 billion, breaking down into B6.2 billion channeledinto mutual funds and mandates, B1.3 billion into insuranceproducts and B800 million into employee savings.The managedand advised assets of Natexis Asset Square, a subsidiary ofNatexis Asset Management specialized in multi-managerinvestment, advanced by 71.4% during the year.

Of particular note during 2005 were the numerous successesscored in competitive bidding held by pension and personal riskinsurance funds, mutuals and businesses. Greater marketingsynergies with Natexis Banques Populaires' teams, the formationof a dedicated research and development team and efforts tostreamline the range of mutual funds were instrumental in thissuccess. In addition, Natexis Asset Management embeddedsustainable development into its strategic planning, itsorganization structure and all its products. The managementcompany embarked on the process of earning a non-financialrating, which culminated in the award of an “A++” by Europeanagency BMJ-Ratings.

Natexis Asset Management Immobilier, the fourth-largest REITmanagement company in France (source: Institut de l’EpargneImmobilière et Foncière, real estate savings institute) recordedB82 million in net new money and a 15% increase in its managedassets, giving it a 6.7% share of managed assets (source: AEIF atDecember 31, 2005).

Employee benefits planning

Expansion of revenue synergiesTwo years on from the creation of the PERCO (group employeepension plan) by the Fillon law in August 2003, there werevarious developments in the legislation concerning employeebenefits planning during 2005. Aside from the reform of thework-time management plan (Compte Epargne Temps) and thecreation of the “Universal prefinanced Chèques Emploi Service”(CESU), the Breton law of July 26, 2005 injected fresh impetusinto employee incentives and share ownership plans for SMEs.

To build on this momentum, the Banque Populaire Group pooledall of its expertise in corporate compensation and benefits. It canthus provide an integrated approach to employee benefitsplanning, which emphasizes the synergies between the solutionsavailable to corporate clients: employee savings (profit-sharing, PEEcompany savings plans, PERCO group employee pension plans,

employee share ownership, etc.), corporate pensions (Article 83,Article 39, the Madelin law), collective personal risk insuranceplans (end-of-career benefits) and service vouchers (restaurantvouchers, prefinanced “Chèques Emploi Service”vouchers, holidayvouchers, etc.).This strategy has paved the way for greater revenueand organizational synergies to be harnessed between NatexisInterépargne, Natexis Assurances and Natexis Intertitres andraised the quality of the services provided to corporate clients.

In 2005, the Banque Populaire Group retained its leadership ina booming employee savings market, which has more thandoubled in the space of seven years. Natexis Interépargneremains the number one administrator of employee savingswith close to 26,000 corporate clients and over 2.6 millionemployee accounts to its name at December 31, 2005.Following the absorption of Natexis Epargne Entreprise onJanuary 1, 2005, Natexis Asset Management has establisheditself as the leading financial manager of employee savings inFrance, with B13.8 billion in managed assets at December 31,2005, which raised its market share to 20.61% (source: Frenchinvestment management association at June 30, 2005).

Thanks to the combined efforts of Natexis Interépargne and the Banque Populaire regional banks, major industry-wideagreements were signed during 2005, notably including theProfessions du Bois (timber sector) in Alsace region, the Artisanatd’Alsace (craftsmen sector) and the Boulangers Val-de-France(bakers sector).These commercial success stories were facilitated bythe quality of the products designed by Natexis Interépargne, asreflected by the excellent reception afforded to “Fructi EpargnePlus” (a combined PEE and PERCO plan) for micro-companies.SMEs benefited during 2005 from the launch of “Fructi OptimumPerco”, an innovative product based on a socially responsibleinvestment formula.Last but not least, a new personal credit offeringmarketed under the “Fructi Libre” banner was designed foremployees of the corporate clients served by Natexis Interépargne.

The employee savings products include investment optionssuitable for pension savings and extend the range of productsmarketed by Natexis Assurances including “Madelin” tax-deductible plans and defined contribution pension savings.

Spurred on by changing lifestyles and consumer trends, theservice vouchers business has undergone a radical and rapidtransformation. Following on from the launch of the “ChèquesCadeau” (gift check) in 2004, new products were introduced

Recognized managementqualityThe quality of Natexis Asset Management's management is regularly acclaimed in the specialized press.For instance, in 2005,“Le Revenu” awarded it its Silvertrophy for the best range of sectoral equity funds over three years, as well as the Bronze trophies for best overall performance over three and ten years.



during 2005, such as the “Chèques Culture” vouchers and the“Universal prefinanced Chèques Emploi Service” (CESU).

The Banque Populaire Group holds a unique position in this marketthrough Natexis Intertitres, the first player authorized by the FrenchNational Agency for Personal Services to issue and distributeprefinanced chèques emploi service. The appeal of the productsmarketed by Natexis Intertitres, together with the Group'sdistribution clout,powered a brisk pace of growth during 2005.Withan issuance volume of 47.7 million vouchers (up 20% comparedwith 2004),Natexis Intertitres boasts market share of 8.26% (source:Centre de Règlement des Titres, voucher settlement center).

International expansionInternational markets, a source of future growth The Banque Populaire Group expanded its international initiativesduring 2005. It benefits from the expertise developed by theBanque Populaire banks and by Natexis Banques Populaires, as wellas Coface's complementary expertise.

In addition, it can draw on its partnership with DZ Bank inGermany and on the coverage provided by partner banks of theVBI network in Central and Eastern Europe.

The Group bolstered its positions in the United States and Europewhere new lending was again very brisk. In emerging countries,Natexis Banques Populaires focused most of its efforts on ten orso countries (while covering a total of 130 countries).

The aircraft financing business expanded its market share throughthe creation of Natexis Transport Finance, a new dedicated entity,and landed four “deal of the year” awards.

With acquisition financing for the Rinascente stores, NatexisBanques Populaires has now established itself as a prominent playerin the Italian real estate financing market. LBO, project and shippingfinancing also secured a regular stream of arranger and underwritermandates in international deals.

In the United States, 2005 was a key year for equitiesbrokerage. Natexis Bleichroeder Inc. distinguished itself asunderwriter and co-manager of primary market transactionsby leveraging Natexis Banques Populaires' corporate clientbase in the United States.

Lastly, the Group launched some ambitious plans to consolidate itslocal sales and marketing approach and to foster cross-selling,particularly in Europe and North America, with branches hiringstaff across various business lines.

Advisory services for International corporate expansionThrough Natexis Pramex International, a subsidiary specialized inadvisory services for international corporate expansion, theBanque Populaire Group continued to support its clients inexport markets.

During 2005, over 500 businesses decided to trust NatexisPramex International's expertise and it recorded an increaseof 16% in its net banking income, thereby bolstering itspositioning in and outside France. Having opened subsidiariesin Montreal and Bombay in 2005, Natexis PramexInternational plans to beef up its presence in Russia, Brazil andthe Persian Gulf in 2006. Through this expanded, 14-countrycoverage, it will be able to develop its corporate managementand delegated management services for its clients' foreignsubsidiaries.

It notably offers “Volontariat International en Entreprise” services(international voluntary action agency) under the charter itentered into with French ministry for foreign trade and itspartnership with Ubifrance.

Export credit insuranceThrough its Coface subsidiary (see Receivables Managementpage 53), the Banque Populaire Group ranks among the worldleaders in credit insurance and tops the national rankings interms of export credit insurance.

Coface's @rating represents a unique corporate rating systemwith worldwide coverage, which offers a link between itsbusiness lines. Coface also makes the public export guaranteesthat it manages on behalf of the government available to itsclients.

Coface is backed by the Banque Populaire Group's network (theBanque Populaire banks and Natexis Banques Populaires) andhas its own networks in 58 countries and those operated by itspartners in CreditAlliance.This multi-network strategy is one ofthe Group's strong points.

In 2005, Coface posted an 8% increase in sales to B1.2 billion.It has notably extended its range of products and services to20 additional countries. It has also strengthened itsinternational network through the acquisition of South Africa'ssecond-largest credit insurer CUAL and Lithuanian creditinsurer LEID, creation of credit insurance offices in Brazil andMexico, purchase of a majority shareholding in BDI, a major

Launch of the “ChèqueEmploi TPE” As the leading bank for small businesses, the BanquePopulaire Group naturally supported the launch of the “Chèque Emploi TPE”, a simplified salary voucher for very small businesses.This new system, which was enshrined in law by the order of August 2, 2005,significantly streamlines the recruitment formalities formicro-companies, France's leading source of new jobs.The system, which is intended for companies in allsectors with up to five employees, takes the place ofrecruitment formalities, contract of employment andpayslips. Natexis Intertitres, a subsidiary of the BanquePopulaire Group, actively participated in the launch ofthe system, which entered force on September 1, 2005.

2005 ANNUAL REPORT

Israeli provider of company information and an agreementwith Dubai insurer NGI.

International trade financingThanks to its highly organized and constantly enriched productand services range, the Group is a major force in trade finance.Natexis Banques Populaires forged closer ties with its bankingclients in emerging countries, particularly in Latin America.

Commodities Natexis Banques Populaires strengthened its presence vis-à-visall par ticipants – producers, traders, distributors and otherservice providers – in the energy, metals and soft commoditiesmarkets.

During 2005, the bank confirmed its position among the top10 worldwide arrangers of structured finance in emergingcountries (source: Dealogic). Its teams acted as mandatedarranger in 25 transactions, including an increasing number ofreserve-based lending deals, seven of which received “deal ofthe year” awards.

Management emphasizes local client relationships, withcommodities specialists present in its offices in Singapore,Hong Kong, São Paulo, Buenos Aires, Santiago de Chile,Moscow and Abidjan, as well as New York and Houston. In2005, a Kazakhstan office was added to the network.

A team dedicated to the mining sector was created in theMetals unit. In addition, the Natural Resources and RelatedIndustries department expanded its liaison role to offer itsspecialized clients financing and hedging solutions developed byother specialized departments, such as Equities, Capital Marketsand Project Finance. Natexis Commodity Markets Limited, oneof the principal accredited brokers on the London MetalExchange, enhanced its range of metals, energy, softcommodities products on organized exchanges and of OTCderivative products to its own client base and to support theGroup's clients.



INSTITUTIONAL CLIENTS

T he Group generally holds robust positionsacross all markets serving institutional clientsand the local public sector that were

established by various units, including CréditCoopératif, the Banque Populaire regional banks andNatexis Banques Populaires. The current changes inthe regulatory environment represent an expansionopportunity, with the faster pace of concentration inthe mutual sector and particularly mutual healthfunds, reform of decentralization and the opening oflocal public services to the banking sector.

Expansion stepped up ininstitutional segment The institutional market comprises insurance companies, mutuals,providers of personal risk insurance,pension funds,associations andother similar organizations, social agencies, trusts, training andcollecting bodies, and lawyers' pecuniary payment funds (CARPA),etc.

During 2005, the Banque Populaire Group stepped up itsexpansion drive in the institutional market by leveraging its veryextensive range of products and services. This offeringencompasses a full range of banking products and services, assetmanagement (Natexis Asset Management) and insurance products(Natexis Assurances), as well as employee benefits planningproducts (Natexis Interépargne and Natexis Intertitres).The newlycreated role of senior banker at Natexis Banques Populaires alsofacilitates global management of relationships with the leadinginstitutional clients.

For instance, an unprecedented wave of consolidation hasunfurled across the mutual health fund sector owing to thecombined effect of the new mutual code that introduceddraconian prudential rules and changes in the French socialsecurity system.The number of mutuals slumped from 6,000 in2003 to 700 in 2005. Efforts to harness productivity gains,especially on the payments side, have led to the systematic use ofcompetitive bidding. The Banque Populaire Group holds strongpositions in this segment (penetration rate of 25%), especially inpayments processing (mass-scale transfers, etc.). The Groupboasts the lion's share of banking services for the personal riskinsurance market (i.e. over 50%) and market share of around 15%in the CARPA (lawyers' pecuniary payment funds) market.

Crédit Coopératif is also a benchmark provider of banking servicesfor players in the social economy, including cooperatives, businessconsortia and their members, associations and other major public-interest organizations. The bank is very active in the health andsocial care sector with public-interest associations running hospitals,homes, retirement homes, centers for the handicapped and homehelp services. It operates in a wide variety of sectors, from retailingto sport and from culture to helping the long-term unemployedback into the world of work.

For more than 15 years, Crédit Coopératif has also been offering afull range of electronic data transmission and teletransmissionservices to help professional guardians fulfill their obligation to controland monitor the accounts of the people under their protection.

Opportunities for commercialexpansion in the local public sector The local public sector serves regional and local authorities(municipal, departmental, regional and intermunicipal authorities),their public or private law satellite organizations (low-cost housingagencies, private-public partnerships, etc.) and independent publicbodies such as chambers of commerce and hospital complexes.

The local public sector is currently in the throes of tremendousregulatory change,with further decentralization to local authorities,modernization and dematerialization of payment media, theloosening of the French Treasury's monopoly and authorizationunder certain conditions of deposits with banks.

The introduction of these various reforms represents a commercialexpansion opportunity for the Group, particularly vis-à-vis localauthorities with fewer than 10,000 inhabitants. Its strong reputationamong local officials via the CASDEN Banque Populaire and ACEF,the strong roots of the Banque Populaire banks in the regions andthe recognized experience of Natexis Banques Populaires havehelped it to establish itself in this market, where there is still furtherscope for it to bolster its presence.The Group aims to become adynamic partner for local agencies,with a comprehensive approachencompassing financing, employee benefits planning, electronicbanking and investments.

For instance, the Group has achieved progress in the developmentof banking services geared to the needs of the sector, includingshort-term loans, bridging loans, conventional finance, specializedfinance (computer equipment, vehicle fleet, environment, etc.) andinfrastructure financing (subway lines, air conditioning networks,incineration plants).

Crédit Coopératif strengthened its involvement in the low-costhousing sector, notably in partnership with the FédérationNationale des Coopératives HLM, (the French national federationof low-cost housing cooperatives).

Natexis Banques Populaires is also involved in various public-privatepartnerships with the French leaders in the construction industryin the justice, health and security sectors.

The electronic banking offering, including “Moneo” to simplifyadministrative formalities for citizens and the “Mission Plus”businesscards for the professional expenses of local officials and agents, willbe rounded out in 2006 by the “Carte d'Achat” for localauthorities' day-to-day purchases.

Lastly, the Group uses the expertise of its Natexis Intertitressubsidiary to distribute a full range of service vouchers to publicagents and citizens, including, restaurant vouchers, gift checks,Interservice vouchers and from 2006 onwards the prefinanced“Chèques Emploi Service” vouchers (CESU).

2005 ANNUAL REPORT

BANKS AND FINANCIAL INSTITUTIONS

T hrough its Natexis Banques Populaires listedvehicle, the Banque Populaire Group offers awide variety of services dedicated to the banking

sector.These products and services for all the Group'scompanies also meet the back-office needs of numerous non-Group banks and financial institutions.

The services for banks and financial institutions are housed inNatexis Banques Populaires' Services core business and arestructured around two business lines: banking services forelectronic banking and payment transactions, and financialservices for all services related to account keeping and securitiescustody.

Banking services Banking services provide access to national and internationalclearing systems, with complete transaction processing.

This business line performs three functions: electronic bankingthrough Natexis Paiements, checks and clearing systems, andpersonal banking services.

During 2005, the payment media management units wereintegrated within Natexis Paiements. As a result, it is now a well-organized and coherent entity capable of rising to the challengesposed by increasingly fierce competition.This asset transfer wascarried out with several goals, notably including the poolingwithin the Group of technological investments, as well as anorganizational target for the development of synergies betweenall the payment media activities.

The par tnership between BNP Paribas and the BanquePopulaire Group represents a novel direction for the electronicbanking business. Under this agreement, a joint electronicbanking software development platform will be set up for theretail banking businesses of both groups. Initially, it will use theplatform developed by Natexis Banques Populaires.

To see this project through to completion, the PARTECIS 50-50joint venture was set up by the banks.

As part of the project, all the “production” electronic bankingapplications will be pooled to enable both groups to enhancetheir electronic banking performance across all client segments(personal, small business and corporate clients).

Personal banking services, the other area of banking services,played a role in the creation of MA Banque.

Financial services The Banque Populaire Group's financial services offering is gearedto the needs of two complementary market segments: retail andsingle-branch banks, and asset management companies andmutual funds.

The three key service lines in these markets are account-keepingand securities custody, depositary controls and issuer services.

The major “Cap 2005” redeployment and restructuring planinitiated in 2003 was completed successfully.

It put financial services back on a trajectory of profitable growththrough efforts to refocus on the core business, business processreengineering, a reorganization and improvements to managerialcapabilities.

The return to profitability marked the culmination of severalinitiatives:

n asset disposals, including the closure of the subsidiaries inMonaco, the shutdown of the account keeping business foronline brokers and multiple clearing,

n streamlining of online portfolio management with the OICinternet client offering marketed under the “LineBourse” and“LineDefi” banners,

n selection of a global custodian (The Bank of New York) for allassets deposited with foreign depositaries. This transfer to asingle intermediary lowers operational risks and custody costsoutside France, while expanding coverage by providing seamlessaccess to over 100 markets,

n transfer of offshore funds deposited abroad to a single platform(Fundsettle/Euroclear).This program lowers operational risks andmakes for more fluid processing.

n implementation of new control and monitoring tools,

n steep reduction in IT production costs,

n design of a new information system development plan.

Concomitantly with the final phase of the “Cap 2005” plan, anagreement was sealed with Ofivalmo, a recognized player in third-party asset management. This deal involved the transfer of thedepositary and account-keeping activities to the financial servicesunit.

5.6million cards managed

10%of the electronic banking market in France(source: GIE - Bank cards)

€429 billion in assets in custody

04SUSTAINABLE DEVELOPMENT


Sustainable development

The Banque Populaire Group’s commitment to sustainable development stems from thevalues on which it was founded and determines the way the Group conducts its internalaffairs and its external actions.

No. 1 in micro-loanrefinancing (source:Adie)

No. 1 in solidarity-based savings(source: baromètre Finansol - November 2005)

Given the challenges posed by sustainable development, thecooperative values of entrepreneurship, audacity, humanity andlong-term vision represent the cornerstone of Banque PopulaireGroup’s commitment.

Set up to bring to life entrepreneurial projects shunned by esta-blished banking channels, the Banque Populaire banks now playa major role in the economy and in society at large.The princi-ples of active cooperation that drive them forward are every bitas relevant in today’s world.

The Banque Populaire Group acknowledges that it has particu-lar responsibility for mobilizing the capabilities of its member-stakeholders so that they are able to pursue their personal, busi-ness and citizenship projects. Since its inception, it has enjoyedthe benefits of its geographical, personal and cultural proximityto its clients and its employees. It has thus been able to build upan extraordinary level of trust. It undertakes to enrich this even further by adhering to the human values that have sustained it:an optimistic view of mankind, respect for individuals and diffe-rences and mutual commitment.

For the Banque Populaire Group, social responsibility is foundedon close relationships between the Banque Populaire regionalbanks and member-stakeholders, clients, employees, suppliersand key figures in their local communities. For clients and member-stakeholders, it means transparent and easily accessible informa-tion about the performance of the bank. It also means supportfor member-stakeholders’ community and voluntary projects.For employees, the Group’s social responsibility necessitates asocial policy built on paying attention to individuals, training andemployability.

An organization dedicated to sustainable developmentIn 2004, the Board of Directors of Banque Fédérale des BanquesPopulaires made the decision to set up an organization char-ged with coordinating and overseeing the Group’s sustainable development policy.

This organization was introduced during 2005 through theappointment of a person in charge of sustainable development.He reports to Banque Fédérale’s Secretary-General and is responsible for organizing and managing sustainable develop-ment right across the Banque Populaire Group. One of his dutiesis also to make sure that the Banque Populaire Group puts intopractice the principles of sustainable development in its dealingswith its clients and member-stakeholders. This approach is notably giving rise to the distribution of environmentally friendlybanking solutions, such as “PREVair” and “CODEVair”.

At the same time, a network of sustainable development officers,all reporting to a member of the Executive Committee, was setup at all the Banque Populaire regional banks and principalGroup entities.This network will facilitate the sharing of informa-tion and best practices between banks.

This commitment underpins the day-to-day actions of theBanque Populaire Group’s network. It guarantees a very closerelationship with local communities and direct involvement indeveloping the regional economy. Numerous regional initiativesprovide evidence of this proximity in its day-to-day activities andthe diverse range of measures taken to promote sustainabledevelopment by the Banque Populaire Group’s units.

Commitment founded upon the Group’s values of Entrepreneurship, Cooperation and HumanityThe Banque Populaire Group’s commitment to sustainable deve-lopment is in keeping with its practices and its history. It embo-dies its cooperative values, which make it fully committed to itsstakeholders and the regions in which the Group operates.Thislong-term commitment has always been encapsulated itsemphasis on human relationships, the intensity of its recruitmentand the breadth of training available to its employees.

The Banque Populaire Group’s patronage is overseen by its owncorporate foundation, which plays a talent-spotting role in its

THE BANQUE POPULAIRE GROUP’S COMMITMENT

2005 ANNUAL REPORT

three areas of activity. It provides critical support to young artiststaking the first steps in their career. It brings to life personal orbusiness start-up projects launched by the disabled, volunteerworkers and creative people. Over the last ten years, 70% of theprojects financed were completed successfully – a success ratewell above the average for business start-ups thanks to the com-mitment and expertise of the prizewinners. Lastly, theFoundation has since 2004 supported the projects sponsored byassociations protecting or enriching sea and freshwater heritage.

During 2005, the Banque Populaire Group Foundation gaveawards to ten young musicians (composers, pianists, clarinetist,cellist, flutist, violinist and a string quartet). It financed 19 projectsled by disabled people and ten projects to enrich the nationalaquatic and maritime environment.The Foundation supports itsprizewinners over the long term, generally for three consecutiveyears.

Natexis Banques Populaires’strong involvementThe Banque Populaire Group’s commitment to sustainable deve-lopment is also shared by listed subsidiary Natexis BanquesPopulaires.The implementation in late 2004 of a dedicated teamof specialists in social and environmental matters and in assetmanagement helped to raise employees’ awareness considerablyand to factor sustainable development gradually into businesslines.This project was implemented by numerous subsidiaries inconjunction with the Banque Populaire Group.

Recognized commitmentRated by Vigeo for the third year in a row, Natexis BanquesPopulaires saw a major improvement in its rating between 2004and 2005.The bank made significant progress in all areas and isamong the top-ranking banks for human resources, relations withcustomers and suppliers and its investment in society.The bankis also a member of the “ASPI Eurozone” index comprising the120 Eurozone companies with the best social and environmen-tal responsibility performance as defined by Vigeo.

Since 2002, the “Comité Intersyndical de l’Epargne Salariale”, anorganization created by French labor unions to representemployees in employee savings plan negotiations, has given“Fructi ISR” its stamp of approval every year.

Enhanced credit analysis In July 2005, credit committees began requiring an environmen-tal score on all proposed financing to ensure that environmentalimpact is taken into consideration. Regardless of the amounts atstake, these scores take into account the project’s impact (A, Bor C depending on the sector or country), the extent to whichregulations are adhered to, the conclusions of the environmentalreport and the risk of opposition to the project.Thanks to thisinformation, now systematically provided by relationship mana-gers who have received training in this area, environmentalimpact studies have become part and parcel of project analysis.

Greater emphasis on eco-managementThe scope of consumption monitoring (water,energy, raw materials,etc.), previously restricted to central offices, was extended with theinclusion during 2005 of regional subsidiaries and offices.

During 2005, 2,400 Natexis Banques Populaires employeesmoved into the new 50,000 m2 “Liber té 2” building atCharenton-le-Pont.

A dedicated intranet site was set up for the move, with answersto employees’ questions, a description of the new building,practical tips for the move, concrete measures concerning trans-portation, rehousing, etc. An information leaflet was also distri-buted to all the employees, and 120 visits to the new buildingwere organized, enabling 1,200 employees to familiarize them-selves with the site prior to the move.

The “Liberté 2”building was designed to offer the highest comfortstandards to its occupants, while minimizing the impact of its operations on the environment. It also meets certain criteria laiddown in the French HQE (high environmental quality) standards.

By joining Ademe’s “Planète Gagnante” club, Natexis BanquesPopulaires supported the energy-saving message of Ademe’s (1)

publicity campaign. The campaign aims to make the generalpublic aware of the environmental problems caused by greenhouse gas emissions and encourage people to controltheir energy consumption. Natexis Banques Populaires alsoinformed its employees of the implications of the everydaybehavior of individuals, who generate half of all greenhouse gasemissions. By making changes to their personal travel, heatingand lighting habits, both at home and at work, they have significant scope for improvement. Using the Climact test, avai-lable on the bank’s intranet site, employees can measure andlearn how to reduce their own greenhouse gas emissions in afew minutes.

Natexis Banques Populaires also launched the “Gestes verts”(green tips) campaign. A questionnaire sent to employees helped to collect their suggestions concerning ways of reducingthe environmental impact of their activities. The “Gestes verts”adopted for 2006 include the widespread introduction of selec-tive waste sorting, a study of a car-sharing system and develop-ment of green product purchasing.

In fulfillment of its end-2004 commitments, the bank embed-ded sustainable development criteria into its various calls fortender. The Purchasing department now follows this proce-dure systematically. To accomplish this, the bank called uponthe exper tise of Ademe’s eco-design and sustainableconsumption department, which made it possible to chooseproducts with less impact on the environment over theirentire life cycle. Official eco-labels have been widely used tothis end. For marketing publications, for example, the bank turned to printers carrying the “Imprim’vert” label, used natu-ral, vegetable inks and replaced all previously used varnishesand coatings with acrylic varnish.The bank also adopted recy-clable envelopes carrying the NF Environnement seal of qua-lity for sending out various client statements, as well as usingrecycled cartridges for its printers.

(1) Ademe is the French environment and energy management agency.



An Ethics, Compliance and Sustainable Development depart-ment was created in 2005 with dominion over all Coface activi-ties. Its mission is to make sure that Coface’s practices are inkeeping with the principles of sustainable development, to propose improvements where necessary, and to involve eachemployee directly in the company’s commitments by creating acode of conduct for all Coface employees in the 58 countrieswhere it has a direct presence.

Commitment in all aspects of sustainable developmentRaising awareness and informing stakeholders about sustainabledevelopment is a top priority. The 1992 Conference of theUnited Nations on Environment and Development placed greatemphasis in its Agenda 21 on the role of education for achievingdevelopment that respects and protects the natural environ-ment. It stressed the need for education to play an orientationand reorientation role to promote environmentally friendly attitudes. Several Banque Populaire banks, which are activelyinvolved in their environment, took the initiative by launchingactive and eye-catching educational campaigns.

Banque Populaire d’Alsace held the fifth edition of its “Trophéesde l’Environnement” (environmental awards) for the 2005-2006school year, in conjunction with CASDEN Banque Populaire, theStrasbourg regional school authorities and the Alsace regionaleducational documentation center. The theme of this competi-tion, which is open to pupils in the first three years of secondaryschool, is the protection of links with the environment in thecontext of local issues. Participants are asked to illustrate thissubject however they wish by producing a mini-exhibition onthree or four boards.This helps teachers broach the subject ofsustainable development as part of a multi-disciplinary frame-work. The panel of judges comprises representatives from the

French education system, CASDEN Banque Populaire, theeducational authorities and Banque Populaire d’Alsace.

CASDEN Banque Populaire, a key partner of civil servants working for the French education system, works together witheducational teams to produce a number of exhibitions to mobi-lize teachers on the theme of sustainable development-relatededucation. During 2005, several exhibitions were set up, inclu-ding one about EU expansion as a crossroads for education and training and another about the four seasons of time.

In pursuit of the same educational target, Banque Populaire desAlpes and Banque Populaire Loire et Lyonnais recently signed anagreement with Rhônalpénergie-Environnement to support twoprojects working in parallel.The first is an educational programconcerning the use of energy for primary school pupils. Thesecond proposes dedicated services for municipal authorities toenhance the economic efficiency of the buildings they manage.Buildings (homes and offices) account for 40% of demand forenergy in Europe.

In October 2005, Banque Populaire Provençale et Corse andBanque Populaire Côte d’Azur organized the presentation of the“Pavillon Bleu” environmental education awards at the InstitutEuroméditerranéen des Métiers in Marseille (French Office of theFoundation for Environmental Education).The top award went toMarc Camus, Director of the La Ciotat harbor, who designed ananti-pollution kit for amateur sailors.

In 2002, the Banque Populaire Group launched a partnershipwith Médecins Sans Frontières (MSF). Two campaigns to raiseawareness about humanitarian emergencies and to support newcustomer introductions and solidarity-based commitment wereheld during 2005. The emergency assistance mobile exhibitionand the humanitarian assistance hotspots mini-exhibition werepresented in Banque Populaire branches in 19 towns and cities.Five Banque Populaire banks (Alpes, Atlantique, BourgogneFranche-Comté, Alsace and Lorraine Champagne) participated

Banque Populaire Atlantique, a new HQE* head office for the Banque Populaire GroupThe Banque Populaire Atlantique’s head office is the second building in the Banque Populaire Group, after the Sausheim office in the Haut-Rhindepartment, to embark on a HQE*program.

Several innovations helped to achievethese goals.The external elliptic double facade guarantees excellentsound-proofing, high standards ofthermal comfort within the offices and maximum natural lighting.The external laminated glazing and the insulating interior double glazinghelp the building to adapt to different

weather conditions.This “double skin”creates a buffer zone that is heated in winter and naturally ventilated in summer, which thus saves energy.In both situations, hot air is channeledby convection towards the colderareas, further enhancing the system.Blinds increase the insulation andprotect people working there in the evening or at the weekend.They enhance the efficiency of thedouble skin and thus yield energysavings. Centralized management of the technical installations helps to minimize energy consumption.

Plants are grown on the head office’sroof terraces and the entrance square to slow down the run-off of rainwater, which is directed into a vast buffer basin.This system meetsthe requirements of the new legislationon rainwater management.

Servicing and maintenance were built into the design process to ensure effective management of the installations.

*High Environmental Quality

2005 ANNUAL REPORT

in this program, which was a major success.The emergency assis-tance exhibition attracted close to 26,000 visitors, 2,400 ofwhom became members of “Médecins Sans Frontières”.

During Sustainable Development Week, between May 30 andJune 5, 2005, Natexis Banques Populaires set up a mobile exhibition to inform its employees about the key priorities ofsustainable development, including a definition of the concept,the urgent need for action, the players involved and the implica-tions for banks (solidarity-based savings, investments linked tothe Kyoto Protocol, financing for renewable energies). This exhibition was staged at the Banque Populaire Group’s principaloffices until September 2005.

Involvement in the internationalbattle against corruption The Banque Populaire Group ensures that all its units conformto all legal requirements regarding the detection and preventionof money laundering and corruption, in accordance with thetenth principles of the “Global Compact” signed and adhered toby the Group.

The “Global Compact” is predicated on a partnership betweenthe United Nations, NGOs and the world of business. It aims tocouple the power of the markets with the moral authority ofuniversally held beliefs and to promote awareness of the socialand environmental effects of globalization.

Natexis Banques Populaires stepped up its efforts to preventcorruption.The teams working in pursuit of this objective werestrengthened and reorganized, and the anti-money-launderingtraining was well-attended. In addition, specific training moduleswere put in place for certain business lines (correspondent ban-king, Corporate France and Natural Resources and RelatedIndustries).

Breakfast meetings on “how to prevent corruption” are heldeach quarter. Sixty employees of Natexis Banques Populairesand its subsidiaries listen to a talk given by a guest speakerconcerning a specific aspect of money laundering.

Monitoring systems were implemented, with filtering software-screening entities on French and European anti-terrorism watchlists now installed on transaction clearing platforms. Furthermore,the bank acquired behavioral analysis software that can detectsuspicious transaction flows with regard to the anti-money laun-dering regulations in the accounts of businesses, correspondentbanks and personal customers.

Lastly, an “unusual” transaction report, i.e. a transaction likely tofall within the scope of the anti-money laundering legislation, is,where appropriate, sent to the corruption prevention team,which conducts the necessary investigations and may report anysuspicions to the relevant authorities (Tracfin). A corruptionsupervisory committee meets every month together with thesupervisory units and representatives from the business lines toreview any difficult cases and to bring its internal system into linewith the latest regulatory changes.

HUMAN RESOURCES

Safeguarding jobsThe Group decided to make jobs a priority, firmly positioning itshuman resources policy as part of a forward-looking approachto skills management. In return, each employee can develop hisor her own expertise to the full within a supportive environ-ment.

n In 2005, the size of the Group’s workforce increased again, at amodestly slower pace than last year of 2.3% (vs. 3% in 2004).Thenumber of active employees came to 45,530, representing anincrease of 1,021, compared with 2004 driven primarily by theGroup’s organic expansion.



n The Banque Populaire banks,which comprise the Banque Populaireregional banks, CASDEN Banque Populaire, Crédit Coopératif andCrédit Maritime Mutuel (affiliated institution), account for 29,948employees, up 1.6% over the previous year (1.7% last year).

Another merger between Banque Populaire regional banks tookplace during 2005 (between Banque Populaire du Midi and BanquePopulaire des Pyrénées-Orientales, de l’Aude et de l’Ariège), liftingthe number of such combinations to 11 over the past six years andincreasing the average number of employees to 1,500 per new bank.

In local retail banking, another key development during 2005 wasthe transfer of 41 employees from Société Centrale du CréditMaritime, following the link-up between its regional banks and the

Banque Populaire banks.The mobility program implemented by theGroup ensured that almost all these employees were offered aconcrete position internally commensurate with their professionaldevelopment.

n In the Group’s financing, investment and services business, the sizeof the workforce of Natexis Banques Populaires and its subsidiaries,i.e.13,432, increased by 3.9%,a stronger rise than that seen across theGroup as a whole (2.3%). Various employee transfers took placewithin this segment, especially between the French subsidiaries.Natexis Paiements recorded an increase of 154 employees over oneyear, while Natexis Investor Services recruited around 60 newemployees. In addition, the number of Coface’s employees outsideFrance continued to grow (increase of 269 employees over the year).

Banque Populaire Group’s active employees (1)

12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005

Banque Populaire regional banks + CASDEN Banque Populaire 25,218 25,725 26,528 27,054 27,441Crédit Coopératif 1,425 1,486 1,509 1,548Total Banque Populaire banks 25,218 27,150 28,014 28,563 28,989 Crédit Maritime Mutuel 959 918 959Banque Fédérale des Banques Populaires 430 443 453 463 484Natexis Banques Populaires and subsidiaries (excluding Coface) 7,589 7,681 8,151 8,311 8,590Coface 3,765 4,076 4,619 4,842Total Natexis Banques Populaires and subsidiaries 7,589 11,446 12,227 12,930 13,432IT platform(2) 807 759 761 770 814Other structures(3) 767 780 810 865 852

Group Total 34,811 40,578 43,224 44,509 45,530

(1) Active employee numbers show on full-time equivalent basis employees on the register of employees at the end of each month on permanent or fixed-term contracts (including perma-nent retraining contracts and return-to-work contracts). Employees working part-time and those under fixed-term contracts are included prorata to their hours worked during the month.

(2) 12/31/2002: the active employees of CTR Metz-Troyes were included with those of Banque Populaire Lorraine Champagne.

(3) MA Banque (formerly SBE), BICEC, CAR-IPBP, Click & Trust, seconded banking staff in following subsidiaries: BRED Banque Populaire, Cofilease, M+X, a subsidiary of Banque Fédéraledes Banques Populaires.

Natexis Banques Populaires’ active employees

12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005

Parent company 4,349 4,375 4,391 4,434 4,395French subsidiaries (excluding Coface) 2,612 2,616 2,698 2,739 2,979Employees outside France (excluding Coface) (1) 628 690 1,062 1,138 1,216Coface France 1,921 1,872 2,217 2,171Coface outside France 1,844 2,205 2,402 2,671

Total Natexis Banques Populaires 7,589 11,446 12,227 12,930 13,432

(1) Including Natexis Bleichroeder New York.

2005 ANNUAL REPORT

Group’s employees outside France

12/31/2003 12/31/2004 12/31/2005

Africa 668 17.5% 716 17.5% 780 17.6%Europe 2,105 55.3% 2,301 56.4% 2,470 56.0%Asia 371 9.7% 406 9.9% 444 10.0%North America 552 14.5% 480 11.8% 499 11.3%South America 110 3.0% 178 4.4% 226 5.1%

Total 3,807 100% 4,081 100% 4,419 100%

As a result of Natexis Banques Populaires’ organic growth andacquisitions outside France (at Coface), the number of theGroup’s employees outside France continued to grow, with an

additional increase of 335 (rise of 8.2%). The Group’s work-force, which is present in 68 countries, breaks down as followsby region:

Of the 4,419 employees outside France, 60% work for theCoface network, 27% for Natexis Banques Populaires and 13%for the Group’s subsidiary in Cameroon (BICEC). Internationalemployees now account for 9.7% of the total, compared with1.7% in 1998.

Attracting, integrating and retaining employeesRecruitment continues to get a boost from the transfer of responsibilities from one generation to the next. In line with itshuman resources management policy, the Banque PopulaireGroup applies several key principles: attracting, integrating andretaining employees. These represent top priorities for theHuman Resource departments of its various units.

n In 2005, the Banque Populaire Group hired over 4,000 newemployees in France on permanent contracts, 27% of whomhave management-level status. Of these new recruits, one in twowere women. Considering the Banque Populaire regional banksin isolation, 82% of the 2,500 new hires in 2005 joined thebranch network.This active recruitment policy helps to keep aconstant flow of talent around the Group and to replenish theGroup’s skills base.

The trend towards a reduction in the average age of Groupemployees seen since 1998 remained intact, with under 25saccounting for 41% of new hires. Planning ahead for futuredepartures, the Group has been working to rebalance its age distribution for several years.As a result, under 35s now accountfor 34% of its total employees, compared with 30% in 2001. Atthe same time, the Group’s recruitment policy is to increase thelevel of qualification among its new hires. In 2005, 39% of newhires had spent at least four years in higher education, whereasthe overall figure for its workforce stands at just 23%.

n In its search for young talent, the Banque Populaire Group andits units have adopted a high profile at recruitment fairs for students and graduates, participating in over 250 events at targetschools and universities during the year. During 2005, its onlinerecruitment site had an average of 160 job offers. The Groupcontinued to support the integration of young people into business life, by providing internships to over 4,600 students

during 2005. It demonstrated its support for combined work-study programs (433 apprentices and 291 job-training programsat December 31, 2005), with Chairman Philippe Dupont signing,on October 7, 2005, the Apprenticeship Charter for CAC 40companies and large public and private companies.

n “Change life, without changing Group”

Support for internal transfers and communication about theGroup’s business lines were stepped up during 2005. Everyeffort is made to retain employees, who receive extensive infor-mation about the diversity of the Group’s business lines and thegateways between them, especially since the expansion of theGroup’s scope is leading to the emergence of new business lines.The campaign to inform employees about the Group’s businesslines continued during 2005, with the organization of two days ofmeetings between employees working for units in Paris and thesurrounding region (September 27 in Paris) and between thoseworking for units in Eastern France (November 24 in Nancy), i.e.a total of over 360 employees. With this greater emphasis ongeographical mobility, the Group’s promise of “Changing life,without changing Group” is now a reality, as indicated in theguide bearing the same name distributed to human resourcesdepartments of the Group’s units during 2005.

Developing employees’ skills and optimizing their professionalcapabilities The Banque Populaire Group has a proud tradition of investingin employee training. It endeavors to implement a policy enablingits employees to develop their skills in line with their expecta-tions and with the Group’s operational needs.

In 2004, the Banque Populaire Group provided 1,509,691 hoursof training to over 33,300 employees, i.e. 87.5% of employees. Itdevoted 6.2% of its payroll costs to training, a proportion well inexcess of its legal obligations.

n Under its Annual Marketing and Communication Plan, theGroup continued to hone the business skills of its salesforceacross its various markets through Group-wide initiatives. For ins-tance, 1,320 salespeople received training in selling to businesses



as part of the CiblEntreprise program, another 700 received training in wealth management over the past four years, while abasic training program called “coeur de l’épargne financière” (theheart of financial savings) provided training for 330. In addition, aspecial training plan for certain categories of self-employed pro-fessionals was set up in March 2005 and is currently being rolledout across the banks.The Group also has an international qualifi-cation program (150 specialists trained to date). Further initiati-ves are planned in 2006, in particular for farming and smallbusiness client advisors.

At the same time, the Group continues to encourage itsemployees to gain professional banking qualifications as a meansof developing their potential. A total of 143 employees wereawarded qualifications during 2005, representing 23% of theindustry total.

n The year saw the gradual deployment of training reforms andthe launch of a strategic review to formulate a revitalized Grouptraining policy, with the creation of a dedicated federal commis-sion. Chaired by Bernard Jeannin, Chief Executive Officer ofBanque Populaire Bourgogne Franche-Comté, the federal com-mission has emphasized the need to rise to the challenge of life-long training geared to the development of skills and the strategyof the business. It has defined five priority employee categories:senior managers, high-potential managers, local management,seniors and young recruits.

Against the backdrop of rapidly changing regulations, the Groupstepped up its efforts to combat money laundering. The newtraining program to combat money laundering and the financingof terrorism designed by the French Banking Federation was dis-tributed to all branch and department staff.

n Further training tools were developed to foster skills. TheGroup set up the “e-tinéraires” distance-learning platform forits 45,500 employees. It will help to promote the developmentof its employees’ skills thanks notably to dedicated career deve-lopment plans. The distance learning modules, which willshortly be available on the internet, represent a major compo-nent of the training program because they cover a wide rangeof areas and are readily available.To the same end, the Groupset up its first business line portal in June 2005 specializing inwealth management.

Securing the transition from the current generation of seniormanagersThe Group encourages the recruitment of men and women froma wide range of backgrounds and seeks to value and nurture thetalents of all its employees. With an eye toward training theGroup’s senior managers of the future, it endeavors to developand refine on a continuous basis a set of managerial initiatives.

During 2005, new training modules were offered to seniormanagers as part of the Executive cycle.The Mastership programfor management supervisors was continued, with the total number of employees having received this training since its

inception increasing to over 3,000.A new intake for the Group’smanagement training institute (Centre de Perfectionnement auManagement) aimed at future senior managers was arranged inOctober 2005, taking the total number of managers to havecompleted the training to 410.

The Group also encourages the continued development of itssenior managers and the sharing of best practices. Over 110 Chairmen, Chief Executive Officers and Vice Chairmenreceived training in topical issues. The third Group Directorssummer school was attended by 350 participants and focusedon the theme of Society and Performance.These seminars,whichprovide ideal conditions for discussions, represent one of thekeys to mutual enrichment.

Improving HR managementmethodsHuman resources management is the area in which greatestefforts are being made to contribute to sustainable develop-ment.The size of the Group’s businesses and the challenges theyface (demographics, higher professional standards, etc.) haveprompted it to take a fresh look at the roles and resources allocated to the human resources function.

A specific program, HR organization and performance, waslaunched during 2005 with a view to improving the quality of services provided in this area.The initial conclusions aim to raisethe awareness of the “HR community” to boost the function’sperformance and its level of involvement in the strategy of thebusinesses.

At the same time, implementation of forward-looking skillsmanagement based on a dynamic approach to human resour-ces continues at the Group’s units. Following on from the “jointskills base” developed in 2004, the Group’s businesses benefi-ted in 2005 from a new joint initiative – the annual review –which incorporates the requirements of the training reformand forward-looking skills management.The year also saw thecreation of the “Observatoire des métiers” (observatory forbanking professions).

At the same time, modernization of the Group’s humanresources information system reached a new milestone withdeployment of the architecture planned five years ago beingcompleted and initial steps towards the new target architec-ture for 2010 being implemented.

Motivating employees As far as possible, the Group is committed to keeping its employeesmotivated by offering attractive compensation packages, devisedjointly by human resources executives and local managers.

Compensation and benefits For the Group as a whole, average salary levels are comparablewith market rates in the banking industry. As a general rule, 92%of an employee’s compensation is fixed, the remainder is variable.

2005 ANNUAL REPORT

Additional pay elements in 2004

Amount (in thousands of euros) % of total pay

Profit-related bonuses 115,542 10.0%Employee profit sharing 78,653 6.8%Bonuses 126,672 10.9%Company top-up payments 20,335 1.7%

Total 320,867 29.4%

Profit-related bonus payments over the last five years

In thousands of euros2000 2001 2002 2003 2004

87,740 96,128 85,960 98,595 115,542

Salary increases depend largely on the policy of the individual banks,which have full responsibility for determining how they reward individual and collective performance.Across-the-board pay settle-ments are negotiated at industry or Group level taking into accountthe economic situation, overall pay levels and the competitive envi-ronment. In 2005, a new Group-level salary agreement was signedwith three trade unions (CFDT, CFTC, SNB). It granted allemployees covered by the banking industry collective employmentagreement a permanent 1.8% pay rise, with a minimum of B450.

As in the previous year, variable remuneration (profit sharing,profit-related bonuses, incentives and company top-up pay-ments) represented a significant share of total employee com-pensation. A link is gradually being introduced between part ofthe compensation and benefits paid to employees and their individual and collective performance. In 2004, the variable portion of compensation accounted for an estimated average of29.4% of total pay.

Additional benefits Nearly all of the Banque Populaire banks, Natexis BanquesPopulaires and most of its subsidiaries, and Banque Fédérale desBanques Populaires have profit-related bonus, profit sharing andcompany savings scheme agreements.

Profit-related bonuses All the Group’s profit-related bonus schemes allow for bonuspayments based on the results of the relevant entities. In the vastmajority of cases, the calculation formula also takes into accountgains in market share and increases in return on equity.

Productivity, as measured by the improvement in the cost/incomeratio, and quality of business, as reflected by the decrease in loanloss provisions and the number of client defaults, are also used insome cases. More than half of the schemes’ bonuses are paid onlyif a certain profitability target is reached. This trigger may be stated in terms of growth in gross operating income, growth inreserves, improvements in the return on equity and so on.

The distribution of bonuses is generally in proportion to basicpay. Some Group companies offer flat-rate bonuses and manybanks combine the two approaches in varying proportions.

Profit sharing

Some Group companies apply profit sharing calculation formu-lae that are more generous than those prescribed by law. Somewaive the 1/2 coefficient, while others reduce the amountdeducted from the calculation base in respect of return onequity. Some Group companies use an altogether different formula, basing profit sharing directly on a percentage of taxableor book income.

Company savings schemes

The majority of these schemes have been set up by Groupcompanies under agreements with employee representatives.Where companies make additional voluntary top-up payments

and grant profit-related bonuses, the percentage they pay generally varies according to the size of the payment, withamounts of less than B150 or B300 being matched up to 100%in certain cases. Half of the Group’s employees are members oftheir company’s company savings scheme.



Maintaining a healthy and activedialog with employeesThe Group has pursued a high-quality dialog with its employeesover a long period of time. Employee relations are structured atdivisional, Group and bank level.

n As an associate member of the French Banking Association(AFB), the Group is an active participant in industry negotiations.Its input has grown following the appointment of its Director ofHuman Resources as Chairman of the Joint Banking Commissioneffective September 1, 2005.

The key events of 2005 included the signature of several industry-wide agreements concerning training, pay and pensions.The agreement of February 25, 2005 on pensions for bankingindustry professionals notably cleared up certain outstandingissues concerning the status of the banking industry pension fund(management of residual pension rights when the banking sec-tor elected to join the AGIRC and ARCO funds).This agreementis due to be adopted at Group level.

The agreement of March 29, 2005 now allows employers toput an employee into retirement prior to the age of 65 whenhe or she has the number of annual credits required for a full-rate pension. This agreement provides for compensatorymechanisms in terms of jobs and training, as well as proceduralguarantees.

The pay agreement of February 4, 2005 on minimum industrywages also led to a change in pension benefits, with the introduc-tion of an increase after 30 years of service. Lastly, the industrysigned a continuous training agreement on July 8, 2005 entitlingemployees to receive training throughout their banking career.A key aspect of professional training policy, this agreement represents progress in terms of employee training in the bankingsector, including the right to training and credit for life and workexperience.

n At Group level, dialog with employees led to numerousmeetings with national employee representatives of thevarious negotiating and discussion bodies, with an average oftwo meetings per month.

The signature on May 2, 2005 of the pay deal (permanentincrease of 1.8% in industry wages) helped to ease the tension,which had built up during the spring.

Early in the autumn, employee representatives and managementagreed to review all the Group’s representative bodies as part ofthe current renegotiations of the industry-wide agreement.Thegoal is to structure more effectively the respective responsibili-ties of the representative bodies and resources devoted by theGroup to dialog with its employees. Talks were also initiatedregarding reform of the Banque Populaire Caisse Autonome deRetraite (CAR) pension plan to bring it into line with the Fillonpension reform law.

Furthermore, in keeping with the industry agreement, the Groupset about adapting the employment and professional trainingagreement of December 1, 2003 to the legislative and regulatorychanges that took place during 2004 and 2005.

At the same time, the Group equipped itself to deal with the plethora of new regulations and their implementation deadlines(January 1, 2006).Against this backdrop, it holds information andinduction training sessions concerning the new reforms,especially concerning health insurance (law of August 13, 2004)and the disability act of February 11, 2005. In addition, it is developing new services to raise the standards achieved by localmanagers in their management of human resources.

n Dialog with employees is constantly being enriched at locallevel. Employee representatives and management regularly reachagreements entitling employees to benefit from special financialor labor-related arrangements (profit-related bonuses, profit-sharing, working hours, health, etc.). What’s more, they have tocontend with new negotiation obligations, particularly in termsof equal opportunities and occupational health.

2005 ANNUAL REPORT

The Banque Populaire Group puts its values and its expertiseinto practice in financing and assistance for environmental protection projects, as well as in the solidarity-based economy.

Across France as a whole, the Banque Populaire Group is thenumber one bank when it comes to financing the solidarity-based and environmental components of sustainable develop-ment projects for individuals and businesses(1). Its network isheavily involved in the distribution of solidarity-based savingsproducts and financing for solidarity-based projects, eitherdirectly or by reallocating gifts from participation products withassociations or solidarity-based financial organizations.

Furthermore, the Banque Populaire Group was also a partner ofthe Solidarity Savings Week campaign in the Ile-de-France (Paris)region. Lastly, Crédit Coopératif, Natexis Asset Management andNatexis Interépargne took part in the fourth edition of theSolidarity Savings Week organized by Finansol, which was heldduring 2005 in the Ile-de-France region.This campaign is inten-ded to raise public awareness about the advantages of solidarity-based savings and to present ambitious concrete projects basedon this type of investment: back-to-work and job creation activi-ties, solidarity-based housing projects, and renewable energiesventures, to cite just a few examples. The Banque PopulaireGroup units taking part in this event passed information on to

their employee savings clients and employees, inviting them toseminars about solidarity-based employee savings.

Crédit Coopératif, with its 11 solidarity-based savings productscarrying the Finansol seal of quality, and Banque Populaired’Alsace, with its “CODEVair” passbook account, make theBanque Populaire Group the bank offering the widest choice ofsolidarity-based savings products in France. To better meetsavers’ needs, Crédit Coopératif constantly breaks new groundby offering a range of solidarity-based savings products (pass-book accounts, mutual funds, current accounts, etc.) benefiting agrowing number of solidarity-based organizations.

In 2004, its savings volumes posted the strongest growth in thesector (30% vs. an average of 14% across the solidarity-basedsavings sector).

Natexis Interépargne is the French market leader in employeesavings. It is also the bank that has shown the highest level of commitment to promoting solidarity-based savings to businesses.

In this market segment, which was worth a total of B613 millionat the end of 2004, including B130 million in solidarity-basedemployee savings, Natexis Asset Management and NatexisInterépargne are market leaders, with solidarity-based employeesavings of B93 million under management at December 31,2004, or a 71% market share. Managed assets advanced signifi-cantly again in 2005 to reach B150 million.

The bank owes its first-tier position to the complementaryexpertise of two Natexis Banques Populaires subsidiaries.

Natexis Interépargne has introduced specific training in solida-rity-based savings for its corporate clients and their employees.It currently channels savings inflows into three solidarity-basedfinancial organizations: Adie, Habitat et Humanisme, and FranceActive.

In terms of the Banque Populaire regional banks, BanquePopulaire d’Alsace has offered the “CODEVair” passbook savingsaccount since 1999.This product, which carries the Finansol sealof quality, helps to collect solidarity-based savings for environ-mental protection projects. At year-end 2005, Banque Populairedes Alpes and Banque Populaire Loire et Lyonnais also signed upto this program.

Number one in micro-loans in FrancePeople in a precarious situation find it very hard to secure bankloans, which tends to exacerbate their situation. Micro-loans pro-vide a practical solution to their problems.

Guarantees represent a key factor helping to improve access tocredit. The French Ministry of Employment, Labor and SocialCohesion set up a guarantee fund as part of legislation to promote social cohesion.This fund facilitates micro-loans, whiletaking all the requisite measures to prevent borrowers becomingover-indebted.

(1) Source: Adie and Finansol.(2) The Finansol seal of quality helps to identify solidarity-based savings products. It guarantees transparency, high ethical standards and solidarity-based aims of the savings products on which it appears.

Number one in thesolidarity-based savingsmarket in FranceIn 2005, the “Baromètre Finansol”(2) survey of solidarity-based financing again found the Banque Populaire Groupto be the leading player in this segment in France.This leadership was achieved thanks to the combinedefforts of several banks, including Natexis BanquesPopulaires, the Banque Populaire regional banks andCrédit Coopératif.

The Banque Populaire Group is the leading bank in France for collecting solidarity-based savings thanksnotably to the efforts of various business units, such as Natexis Asset Management, Natexis Interépargne,Crédit Coopératif and Banque Populaire d’Alsace.NEF, a bank affiliated with Crédit Coopératif, is the leading solidarity-based player in collecting solidarity-basedsavings products (€63 million in 2004) thanks to its range of eight products carrying the Finansol seal of quality.

This leadership is backed up by Caisse Solidaire duNord-Pas-de-Calais, a Crédit Coopératif affiliate that is France’s leading regional collector of solidarity-basedsavings, with three solidarity-based savings productscarrying the Finansol seal of quality.

ENVIRONMENT AND SOLIDARITY



The social cohesion fund, which is to be set aside by the FrenchGovernment over five years and is managed by the Caisse desDépôts et Consignations, covers two types of loans: professionalmicro-loans fostering the creation of new businesses and com-panies by or for people in difficulty, and social loans facilitating thesocial and professional integration of low-income individuals.

Since November 22, 2005, the Banque Populaire Group hasbeen one of the first banks to receive approval from COSEF, theadvisory committee monitoring use of the fund, to use the gua-rantee fund for social micro-loans.

The Banque Populaire Group has received an initial commitmentof B150,000 (enabling it to grant B1,200,000 in social micro-loans) from the Social Cohesion Fund guaranteeing 50% of loanvolumes, the purpose of which must solely be to finance perso-nal micro-projects linked to:

n access to housing, education or training;

n employment and mobility;

n household equipment;

n family-oriented and other social cohesion projects;

n spending necessitated by a major change in personal circums-tances (illness, handicap, unemployment, divorce).

The plan presented by Banque Populaire Group is underpinnedby the system put in place by Crédit Coopératif and tested on apreliminary basis by Banque Populaire des Alpes.This recognitionof the Group’s commitment strengthens initiatives already imple-mented in support of organizations combating social inequality.

“Crédit Coopératif and Unicef France” also launched in 2005 anew ethical and solidarity-based investment product.To supportinternational campaigns in favor of a school education for girls,Unicef receives 50% of the income distributed on an annual basisby the mutual fund in the form of a gift.

Crédit Coopératif Agir Unicef has received the Finansol seal ofquality, which guarantees the transparency, reliability and use ofthe savings for solidarity purposes.

A pioneer in environmental funding in FranceIn 2005, the Banque Populaire Group continued supporting ban-king initiatives devoted to financing environmental and renewa-ble energy projects.

Two Banque Populaire regional banks announced the launchduring 2006 of the “CODEVair” passbook account. Savings col-lected are assigned to “PREVair”, which funds environmentally-friendly property projects. Banque Populaire Loire et Lyonnaisand Banque Populaire des Alpes are thus the first banks in theregion to offer both a solidarity-based savings system geared tosustainable development and a specific type of loan for financinginvestments intended to improve the quality of the environment.

Their client approach is backed up by partnership initiatives tosupport regional sustainable development programs. For instance,Banque Populaire Loire et Lyonnais and Banque Populaire des

Alpes signed a partnership agreement with “Rhônalpénergie-Environnement” to promote and use renewable energies (timber,solar power, geothermal energy, etc.) in the Rhône-Alpes region.They gave their backing to two Europe-wide projects led by theregional energy and environment agency in the Rhône-Alpesregion.The first is an educational program concerning the use ofenergy for primary school pupils. The second aims to developenergy efficiency services for municipal authorities to reduce theenergy consumption of the buildings they manage or own.

Banque Populaire d’Alsace is pursuing its partnership with theAlsace regional authorities and ADEME’s (French environmentand energy management agency) Alsace office, which is gearedto distributing subsidized housing eco-loans for individuals andfor individual solar-powered water heaters.

These efforts broke new ground in France in terms of financingfor environmental projects.They paved the way for a reconside-ration of the role of banks as the financial instruments of publicsustainable development policies.They brought into clear focusthe benefits of subsidized eco-loans for achieving equipment ins-tallation objectives helping to combat the greenhouse gas effect.

To reconcile regional and environmental development, CréditMaritime d’outre mer and BRED Banque Populaire set up a “Sofipêche” unit on Réunion Island, in conjunction withCoopération Maritime. This product, which was called“SOFIRUN 2005” and has B4.9 million in capital, aims to widenownership of new fishing vessels by young fishermen setting upa business for the first time.

Number one lender to ADIEThe Banque Populaire Group is the number one lender to ADIE (French association for the right to economic initiatives), having committed a global credit line of over €5 million to the organization.

ADIE (Association pour le droit à l’initiativeéconomique) is a voluntary network providing support and assistance to project leaders excluded from traditional borrowing channels.The goal is to help people create their own small businesses. Such is the professional approachdemonstrated by ADIE, both in its relationship with project leaders and in its credit risk management,that the legislative authorities and the bankingsupervision body have authorized it to make directbusiness start-up loans to the unemployed and recipients of social security payments.ADIE has turned to its banking partners, including the Banque Populaire Group, for refinancing to help it cope with this decisive stage in its development.

In 2005, Banque Fédérale des Banques Populaires made it easier for the Banque Populaire regional banks tocontribute to ADIE’s local units, which should also help to increase the use of funding at national level.

2005 ANNUAL REPORT

The efficacy of this initiative in the relevant geographical environ-ment was underlined in the statement outlining commitment tothe Réunion fishing industry signed jointly by the FrenchAgriculture and Fishing Ministry and the Chairman of the Island’sregional authorities in December 2005.This plan is particularlysignificant for Réunion’s small fishing industry, which accounts for87% of the island’s fishing fleet and close to 50% of its sailors.

Natexis Banques Populaires is aware that its significant contribu-tion to sustainable development is predicated on its businesslines (financing, investment, asset management, etc.). During2005, it continued to establish itself as a major force in the renewable energies sector (hydro, biomass, wind energy), sociallyresponsible investment (SRI) and solidarity-based lending.

Natexis Banques Populaires is also fostering the emergence ofthe emissions permit trading and derivative products (carboncredits, Kyoto projects, etc.). Since the Kyoto Protocol becameeffective in 2005, the bank has started to position itself as anintermediary in the CO2 quotas market. A dedicated team cannow execute orders to buy or sell negotiable emissions permitson the Amsterdam stock exchange on behalf of clients.

Natexis Banques Populaires is continuing its reflection so that itis able to offer its customers a wide range of products and ser-vices linked to carbon-related constraints, ranging from supportfor clients affected by the CO2 quotas in France, to financingKyoto-projects in developing countries.

To raise businesses’ awareness about the dangers of global war-ming, Natexis Banques Populaires also signed up to the CarbonDisclosure Project during 2005.This questionnaire was sent by155 investors to the world’s top 500 businesses based on theirmarket capitalization, asking them for details about their green-house gas emissions. During 2005, 70% of businesses consultedresponded to the questionnaire, up from 58% in the previousyear.

Quest to identify novel sustainabledevelopment solutionsTo reduce the impact of our business activities on climatechange and the environment, we need to deploy a whole rangeof innovative technologies. Providing financial support for thedevelopment of these eco-technologies necessitates the crea-tion or strengthening of dedicated financial instruments.

The Banque Populaire Group kicked off the process by introdu-cing the first subsidized eco-loans. It also supports investmentfunds dedicated to eco-innovation. Natexis Banques Populairescontributes to the FCPR 3E (Emertec Energie Environnement)venture capital mutual fund, which provides seed capital tofinance innovative businesses at the cutting edge of technologyin the energy and environment sectors. Five Banque Populaireregional banks contributed to the FIDEME fund developed byAdeme to support businesses operating in renewable energiesand the environment sector.

Aside from implementing a growing number of fragmentedinitiatives, the need for investment and financing for environ-mental equipment is such that integrated planning of how tofinance the demands of sustainable development is now requi-red. The ETAP program (Eco-Technology Action Plan), whichhas drawn up plans for “green” financial funds to be developedto support environmentally friendly technical solutions, repre-sents one of the responses to this imperative at Europeanlevel.

Eco-innovation funds are due to be set up during 2007 as partof Entrepreneurship and Innovation Program project.Preallocation of the funds has focused on eco-innovation, in support of implementation of the Eco-Technology Action Plan(ETAP). Some of the funds will be channeled into financial instruments managed by the European Investment Fund, inconjunction with banks and investment funds.

The proposed Entrepreneurship and Innovation Program alsoprovides for support measures for innovation in businesses,including the initiatives contained in the INNOVA program laun-ched by the European Commission (Enterprise ExecutiveManagement) in 2005.The goal is to introduce sectoral innovationmonitoring units (ten or so sectors, including eco-industries, havebeen identified), financing networks and sector-specific innovationmanagement systems. All in all, some 800 innovation experts areinvolved. Over the 2007-2013 period, this initiatives are expectedto receive additional funds, to prompt eco-innovation, amongother goals.

Leveraging its pioneering experience in France with the“CODEVair” passbook account,which helps to provide “PREVair”financing, the Banque Populaire Group decided to support thisapproach by strengthening the EPE’s (European Partnership forthe Environment) working par ty. Led by the RABOBANKcooperative bank, it works together with the Banque PopulaireGroup, the French and Dutch Ministries of the Environment,ADEME and various European regions, such as the Rhône-Alpesregional authorities, to offer incentives for the development ofgreen financial funds.

Sharp increase in wind farm financingIn 2005, Energéco, a subsidiary of Natexis Lease,contributed €99 million in loans to the financing of 25 wind farms.This represented a significant increaseover the €57 million in financing and 18 wind farmsassisted between 2001 and 2004.With market share of around 30%, Energéco strengthened its position as one of the leaders in arranging and financing projects of this kind in France. Natexis Banques Populairesdoubled the size of its project portfolio through its involvement in financing 10 new wind farms in France, Spain, Portugal, Morocco, the UK and the US.Financing amounted to €115 million for a total capacityof 1,100 MW.



The organization in Lyon on April 20, 2006 of a seminar tolaunch these public-private discussion forums is intended to helpassist the regions, departments, cities, Banque Populaire banks,Chambers of Commerce and competitiveness unit managers togear up as a network for the 2007-2013 EU programs suppor-ting SMEs pursuing eco-innovation and natural resource mana-gement projects.

Support for innovation in the Rhône-Alpes regionThe Banque Populaire des Alpes joined forces with the “Energies Environnement 74” association and will contribute to the financing of a House for the planet at Meythet in Haute Savoie.This project will be a replicable prototype for corporate real estate that should make for substantial energy savings.

Through this partnership, Banque Populaire des Alpesintends to promote the use of renewable energies to conserve resources and protect the environment.

Ethical savings: The saver takes into account not just thereturn of a product, but also non-financial factors, such asthe intended use of the savings collected (e.g. for social orenvironmental projects).

Solidarity-based savings: Created at the instigation ofcooperative banks, this type of savings is used to financeprojects considered as solidarity-based owing to the natureof the activities funded, such as ecological (e.g. the “CODEVair”passbook account) or social projects, which do not meetconventional borrowing criteria.When some of the incomefrom solidarity-based savings is distributed to a not-for-profitorganization, such as Crédit Coopératif ’s “CODESOL”passbook account, this is known as a solidarity-sharingproduct.To help potential savers get their bearings,FINANSOL, an association encompassing organizations and qualified personalities in solidarity-based financing,has awarded a seal of quality since 1997 identifying solidarity-based investment products according to transparencyand solidarity criteria.

Socially responsible investment (SRI): Investment in a Mutual Fund on the strength of the responsible behavior by the businesses in which the fund invests the savings itcollects. For instance, Natexis Asset Management, which hasbeen involved in socially responsible investment since 2002,currently offers a range of three funds spanning the entirerange of asset classes:“Fructi Développement DurableActions”, an equity fund,“Fructi Développement DurableObligations”, a fixed-income fund, and “Fructi DéveloppementDurable Monétaire”, a money-market fund.

Solidarity-based SRI: A Mutual Fund, part of whosecollective funds (5-10%) is invested in solidarity-based social or environmental financing ventures.The “Fructi ISR Solidaire” is an example of this type of fund.

Glossary

2005 ANNUAL REPORT

PatronageThe budget for the Foundation, the key component of theGroup’s patronage, is split between all the Banque Populaireregional banks, Natexis Banques Populaires and Banque Fédéraledes Banques Populaires. The Banque Populaire GroupFoundation’s activities are focused in three areas:

n culture, by supporting young musicians (classical instrumenta-lists and composers) in the early stages of their career;

n solidarity, by helping young disabled people to pursue a life-changing project or to rejoin the business world;

n preservation and renovation of the national maritime andaquatic environment.

The Foundation takes a long-term approach since prizewinnersmay be assisted for three years in succession, depending on howtheir project progresses. Almost 300 prizes and bursaries havebeen awarded since the Foundation was set up in 1992.

In 2005, the Water Heritage panel of judges selected 10 projects,most of which were submitted by associations:

n the restoration of a water mill at Réthoville (Manche department);

n restoration of the water supply channels to the La Borie cultu-ral centre (Limousin region);

n renovation of outbuildings at the Stiff lighthouse in Ouessant;

n refurbishment of a “Barque de Patron” boat that was used onthe Canal du Midi;

n organization of an exhibition about the coastlines of France atthe Palais de la Découverte in Paris;

n restoration of the waterwheel, which maintained the supply ofseawater to the “Salins Les Pesquiers” (salt marsh) in Hyères;

n restoration of a Paris river police patrol boat dating back to thebeginning of the 20th century;

n reconstruction of a scute (a very old type of boat) on the Loireriver ;

n refurbishment of karstic sites in the Quercy, Causses andPyrenees regions;

n restoration of waterwheels at Isle-sur-la-Sorgue (Vauclusedepartment).

Likewise, the panel of music judges selected 10 young musicians(composers, pianists, clarinetist, cellist, flutist, violinist and stringquartet). Assistance from the Foundation will enable them tocontinue their artistic education by taking classes and masterclasses, participating in international competitions and makingtheir first CD recordings.

The partnerships forged over several years with music festivalswere renewed in conjunction with the Group’s banks. Over 40prizewinners performed at concerts at highly reputed events.Likewise, the Villefavard master class in the Limousin region,which was held for the sixth year in a row, was attended by 12musicians and directed by famous pianist Jean-Claude Pennetier.Thanks to this initiative, the Foundation afforded its prizewinnersan exceptional opportunity to work together and to play cham-ber music.

The results of a 2005 survey of all the musicians that had wonbursaries since 1993 showed that 93% had actually achieved theobjectives for which they had asked support from theFoundation and are now making a living from their art and theirtalent.

A total of 19 prizes were awarded by the Disability panel of jud-ges based on the quality of the individual personal or professio-nal integration projects.The Foundation’s bursaries have enabledthem to pay for the requisite technical and IT equipment, pursuehigher education or specialized training, meet the costs of sportstraining for international disabled sport competitions or installspecial equipment enabling them to drive business vehicles.

PATRONAGE AND SPONSORING

Restoration of Isle-sur-la-Sorgue’s waterwheels The Banque Populaire Group Foundation selected Isle-sur-la-Sorgue’s project, which is intended to conserve and exploit the historical and ecologicalheritage of the canal that surrounds it by rebuildingthree waterwheels, with a view to:

- using clean energy from the Sorgue river by hooking up one of the wheels to a generator, which will generatesufficient power to illuminate the surrounding banks;

- retaining the town’s character by reinstalling the wheels at their former locations;

- revitalizing water-related craftsmanship by entrusting a local master craftsman with the manufacture of thenew wheels.

This project was submitted by the Sorgue area “ClubDéclic” of Banque Populaire Provençale et Corse,which took part in the effort to highlight local heritageand has fully embraced the Foundation’s efforts to protect aquatic heritage. Its subsidy will cover the wheel and access footbridge manufacturing costs.



Based on a survey carried out in 2004, almost two-thirds of prizewinners since 1993 successfully achieved the goals of theirprojects, with health problems being the primary cause of failure.

The Banque Populaire Group thus demonstrated its commit-ment to those with an entrepreneurial spirit and a driving enthusiasm for community or personal projects. Several of themwere presented by the Group’s banks and by Banque Populairemember-stakeholders’ clubs, which work hard to ensure thatlocal initiatives come to fruition.

Relationships with the Group’s banks are facilitated by the network of correspondents built with a view to involving thebanks closely in the Foundation’s activities by making them asource of new projects and applications.

Other patronage initiatives within the Group Various patronage initiatives are undertaken by the BanquePopulaire banks.

For instance, Banque Populaire Côte d’Azur and BanquePopulaire Provençale et Corse teamed up with the “PavillonBleu” (Blue Flag) initiative to recognize coastline communitiesand pleasure ports that have factored the environment into theirefforts for holidaymakers.

Banque Populaire Toulouse-Pyrénées continued the “HôpitalSourire” (Hospital Smile) campaign alongside ACB (French bankcustomers’ association). The goal is to support children throu-ghout their illness by creating a fun and cultural environment.Since 1995, this association has helped the 30,000 children from

the Midi-Pyrénées region spending time in Toulouse’s children’shospital each year.

Banque Populaire des Alpes was heavily involved in downhillskiing competitions through its role on ski committees and clubs,reflecting its attachment to and support for winter sports. In2005, it was the official partner of the 50th “Critérium de laPremiège neige” ski event in the Isère department. The “Ta première Coupe du Monde” (Your first World Cup) campaign,which was launched at the same time, gives young people anexceptional experience since they join a team helping to orga-nize the Critérium event and can rub shoulders with the world’sbest skiers.

In 2005, the Crédit Coopératif Foundation again co-producedthe “Festival Orphée”, Europe’s leading theatrical and disability festival, along with associations. The goal of the festival is toenable disabled artists to demonstrate their talents and theirprofessional abilities.

Natexis Banques Populaires joined efforts during 2005 to com-bat malaria – something of a forgotten disease, which kills overtwo million people every year.To this end, it began by pledgingits support to the Franco-African day of action against malaria onApril 25, 2005, which was organized by the “Plan France” NGO.With the support of its subsidiaries, it also funded an initial program to raise awareness and distribute mosquito nets toaffected populations in Cameroon.

What’s more, two projects to combat malaria led by otherNGOs received the support of Natexis Banques Populaires inyear-end 2005, including one brought to light by an employee ofBanque Populaire Toulouse-Pyrénées, who chairs the “Lesenfants de l’Aïr” association.This project aims to distribute mos-quito nets and to raise awareness among inhabitants living closeto Agadez in Niger.

Lastly,Natexis Banques Populaires continued its cultural patronagepolicy.As part of its “Patrimoines d’hier,Trésors d’avenir”patronageprogram, launched two years ago, it helped promote knowledgeabout the Coronelli terrestrial and celestial Globes and financedtheir exhibition at the Grand Palais (Paris) in September 2005.Theglobes are due to join the permanent collection of the“Bibliothèque Nationale de France” (BNF), the French nationallibrary, in autumn 2006.

Sponsoring: an exceptional 2005season for the “Sailing Bank”In 2005, the Banque Populaire Group extended its partnershipwith the French Sailing Federation (FFV), which was first signedin 2000. Confirming its credentials as the “Sailing Bank”, it step-ped up its involvement in developing a sport whose values it sha-res by supporting the Federation’s activities through to theBeijing Olympic Games of 2008.

Alongside this commitment, the Banque Populaire Group decided to support Faustine Merret, the Olympic windsurfingchampion at the Athens games, in her bid to win another goldmedal at the next games in China. Faustine will be supported by

Awards for the QuatuorModigliani Founded in 2002 by four musicians with an average age of 22, the Quatuor Modigliani string quartetunanimously landed the top prize at the ConservatoireNational Supérieur de Musique’s 2003 awards in Paris.

In 2004, it proved to be a revelation at the internationalstring quartet competition in Eindhoven, where it landedthe top prize, the audience’s award, the young people’sprize and the contemporary work interpretation award.

The Quatuor Modigliani was unanimously selected by the Foundation’s panel of judges, which has helped it to cover the costs of its participation at internationalcompetitions, classes and master classes, as well as of bows and music scores.

In the meantime, it landed the Top prize at the Rimbotticompetition in Florence during September 2005 and was the first French string quartet to win top prize at the “European Young Concert Artists awards” in Paris during October 2005.

2005 ANNUAL REPORT

the Banque Populaire Group as she prepares for the Beijingevent as effectively as possible. During 2005, the champion, whohails from Brest, familiarized herself with her new board, theRS:X at the world championships in Cadiz, during which sherecorded the best performance in the world.

In 2005, the par tnership with the Association Eric Tabarly reached cruising speed. The Pen Duick yachts were used byvarious Group entities for sailing trips with clients. They also participated in two events, which helped to raise the profile ofthe Banque Populaire banner : the Tall Ships Race (500,000 visitors in Cherbourg) and the “Voiliers Mythiques” (MythicalSailboats), an event organized by Banque Populaire du Nord(60,000 visitors).

A sports season dominatedby a series of firstsJeanne Grégoire, during her first full season on board the Figaro Banque Populaire, established herself among the leaders in this category. After finishing sixth in the Trophée BPE, the single-handed transatlantic race from Saint-Nazaire to Cienfuegos de Cuba, Jeannecompeted in the “Solo Generali” race during June and the “La Solitaire du Figaro” race during August. Shefinished in eleventh and twelfth position respectively inthese events.Thanks to these encouraging results, theConcarneau-based skipper ranked among the top ten on the Figaro circuit and was the best-placed woman.

Meanwhile, Pascal Bidégorry had a tremendous season on board the Trimaran Banque Populaire, his first asskipper. He scored two major victories for the Group,winning the “IB Group Challenge” (Lorient to Nice) at the start of the season, followed at the end of theseason by the “Transat Jacques Vabre” race from Le Havre to Salvador de Bahia, when he set a newcourse record. Between these two impressive victories,the Basque skipper took part in five Grands Prix,frequently contesting the top positions, together withthe Team Banque Populaire.

It was thus perfectly logical for him to become WorldChampion in the Open 60 foot class.These veryencouraging performances, which received extensive press coverage, helped to raise the media profile of the Banque Populaire (close to 600 radio reports and 400 television reports, including 21 on news bulletins).

05FINANCIAL INFORMATION


2005 Financial informationMANAGEMENT REPORT 78 Group overview in 2005 78 Risk management 86 Directors’ compensation 98 Subsequent events 101

RECENT DEVELOPMENTS 102 CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2005 104 Consolidated balance sheet 104 Consolidated income statement 107 Consolidated statement of changes in equity 108 Consolidated cash flow statement 111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 112 I. Impact of first-time adoption of IFRS 112 II. Basis of presentation 128 III. Consolidation methods and principles 128 IV. Scope of consolidation 135 V. Notes to the balance sheet 149 VI. Notes to the income statement 178 VII. Risk management 185 VIII. Payroll costs, number of employees, employee

compensation and benefits 191 IX. Segment reporting 195 X. Commitments 201 XI. Related parties 203 XII. Financial statements based on French GAAP 205

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 215

Financial information

2005 ANNUAL REPORT

2005 Financial informationMANAGEMENT REPORT

1 - Group overview in 2005

1.1 - Comparability of results 1.1.1 – Changes in Group structureThe consolidated financial statements presented below coverthe full Banque Populaire Group.Changes in the Group structurecompared with 2004 were insignificant and do not require thepreparation of proforma financial statements.

Local retail banking

n Consolidation under the equity method of VBI (VolksBankInternational AG), which comprises the Group’s retail bankinginterests in Central and Eastern Europe. Banque Fédérale desBanques Populaires holds a stake of 24.5% in partnership withÖvag (51%) and DZ Bank (24.5%).


n consolidation of Natexis LLD;n sale of OFIVM on December 31, 2005;n acquisition of CUAL, Coface’s insurance subsidiary in SouthAfrica, in February 2005;n acquisition of LEID, Coface’s insurance subsidiary in Lithuania,in April 2005.

Furthermore, in accordance with IFRS, non-trading real estatecompanies (SCIs) and mutual funds dedicated to insurance com-pany investments are now full consolidated.

1.1.2 – Accounting standardsAlthough the Banque Populaire Group, which is unlisted, is notrequired to adopt IFRS, the Board of Directors of BanqueFédérale des Banques Populaires has decided that the consolida-ted financial statements of the Banque Populaire Group shouldbe prepared in accordance with IFRS as of January 1, 2005.

This decision was made with the intention of improving transpa-rency and comparability with other major French banks, andrepresents a major step for the Group and all parties directlyconcerned by its financial information.

Consequently, the Group’s results are presented in accordance withIFRS including IAS 32-39 and IFRS 4 (EU IFRS) for the 2005 financialyear and under IFRS excluding IAS 32-39 and IFRS 4 (2004 IFRS) forthe 2004 financial year.The impact of the application of IAS 39 onresults for the period is insignificant, increasing consolidated net ban-king income by B9 million and net income by B1 million.

The new standards for the presentation of statements of intermediatebalances comply with CNC recommendations,the main effects being:

n the reclassification of exceptional items as net banking incomeor operating expenses, depending on whether they are positiveor negative;

n the reclassification of gains and losses on the disposal of fixedassets as net banking income, apart from capital gains or losses onthe disposal of investment properties and consolidated interests;

n the reclassification of interest on preference shares from minorityinterests to net banking income.

1.2 – Business and results overview12/31/2005 12/31/2004 % change

in millions of euros EU IFRS 2004 IFRS

Net banking income 8,242 7,646 +7.8%Operating expenses, depreciation and amortization (5,390) (5,105) +5.6%Gross operating income 2,852 2,541 +12.2%Impairment charges and other credit provisions (436) (477) -8.7%Operating income 2,416 2,064 +17.1%Share of income of associates 15 7Net gain or loss on disposals of fixed assets 117 6Change in value of goodwill 3 (43)Income tax (855) (736)Net income 1,696 1,298 +30.6%Minority interests (174) (103)Net income attributable to equity holders of the parent 1,522 1,195 +27.3%


79THE BANQUE POPULAIRE GROUP IN 2005 79

Consolidated net banking income totaled B8,242 million in2005, an increase of 8%. All Group businesses contributed to thisgrowth. Outstanding customer loans (excluding pensions) roseby 15% during the year to B138.4 billion and inflows into savingsaccounts (excluding pensions) increased by 11.9% to B98.0 billion.Total managed savings, including customer savings, stood atB216 billion at December 31, 2005, an increase of 17%.

Operating expenses increased by 6% to B5,390 million. Thismoderate increase was due to the level of investment, particu-larly in human resources.The cost/income ratio improved by afurther 1.4 points to 65.4%.

Gross operating income rose by 12% to B2,852 million.

Impairment charges and other credit provisions totaled B436million, a decrease of 9% compared with 2004.The charge forthe year represented 0.27% of risk-weighted loans comparedwith 0.34% in 2004.

Operating income rose by 17% to B2,416 million.

Net gains on the disposal of other assets relate primarily to a capi-tal gain on a property sale by Natexis Banques Populaires.The taxcharge rose to B855 million,mainly due to the increase in earnings.

Net income (before minority interests) came to B1,696 million, anincrease of 31%. After deducting minority interests of B174 million, net income came to B1,522 million, an increase of 27%.(The results of Crédit Maritime Mutuel are now fully consolidated).

Return on equity (ROE) after tax stood at 13.5%, an improve-ment of 1.6 points (including Crédit Maritime Mutuel in thescope of consolidation).

The Group’s financial structure remained extremely solid. Totalregulatory capital rose by 17% to B19,334 million, with Tier Onecapital rising by 18% to B14,634 million.This growth was mainlythanks to earnings for the period, as well as the issue of sharesby the Banque Populaire banks and of super-subordinated notesby Natexis Banques Populaires.

The Cooke Tier One ratio stood at 8.5%, one of the highestlevels in the sector.

1.3 – Analysis of income statements 1.3.1 – Contribution of business lines to net banking income (NBI)

12/31/2005 12/31/2004 % changein millions of euros EU IFRS 2004 IFRS

Local retail banking 5,194 4,973 +4.5%

Natexis Banques Populaires (3,039) 2,678 +13.5%

Federal activities 9 (5)

Total 8,242 7,646 +7.8%

Local retail banking is principally conducted by the 19 BanquePopulaire regional banks, Crédit Coopératif, CASDEN BanquePopulaire, Crédit Maritime Mutuel, SBE and Bicec in Cameroon.

Natexis Banques Populaires is structured around four corebusinesses:

n Corporate and Institutional Banking and Markets, which com-prises Corporate France, International, Global Debt &Derivatives Markets, Equity Group, Natural Resources & RelatedIndustries and Mergers & Acquisitions;

n Private Equity and Wealth Management, which comprises private equity, private banking and international estate planning;

n Services, which comprises Insurance, Employee BenefitsPlanning, Fund Management, Financial Services, BankingServices and Investor Servicing, formed from the creation in2005 of the Natexis Investor Servicing subsidiary, which groupstogether around 160 employees from the different Servicesactivities and is responsible for a number of services intendedfor asset management companies;

n Receivables Management, which comprises Coface andNatexis Factorem.

The breakdown of net banking income within the Groupremained relatively stable in 2005, with almost two-thirdscoming from local retail banking (63%) and one-third fromNatexis Banques Populaires (37%).

The contribution from federal activities, chiefly conducted byBanque Fédérale des Banques Populaires in its role as centralbody for the network and holding company of Natexis BanquesPopulaires, is not material.

2005 ANNUAL REPORT

1.3.1.1 – Local retail banking – net bankingincomeIn the local retail banking business, 95% of net banking income isderived from retail banking activities on behalf of clients. Theremaining 5% comes from interbank and money market opera-tions, chiefly conducted by BRED Banque Populaire.

Net interest income

On the basis of the same accounting standards, net interestincome grew by 4.1%, driven by a strong increase in volumes,despite a drop in the gross interest rate spread to 3.3%, down23 basis points compared with 2004.

In a climate of falling interest rates and tough competition, theaverage margin on customer loans fell by 27 basis points to 5.0%,while the average margin on customer deposits fell by 6 basispoints to 1.7%.

Overall and excluding resale agreements, outstanding customerloans rose by 10% and deposits by 6.7%.

Outstanding customer loans

Outstanding customer loans rose by 10%, all segments combi-ned, to B97.5 billion. The biggest increases were in equipmentfinancing (up 8.8% to B33.6 billion) and home loans (up 13.7%to B44.0 billion).

Outstanding customer loans

12/31/2005 12/31/2004 % changein billions of euros EU IFRS 2004 IFRS

Personal loans 51.9 46.3 +12.3%

Short-term loans 8.0 7.6 +4.7%

Home loans 44.0 38.7 +13.7%

Business loans 42.8 40.1 +6.7%

Short-term loans 9.2 9.2 +0.0%

Equipment financing (1) 33.6 30.9 +8.8%

Other loans 2.8 2.2

Total customer loans (2) 97.5 88.6 +10.0%(1) Including lease financing.

(2) Excluding resale agreements.

12/31/2005 12/31/2004 % changein billions of euros EU IFRS 2004 IFRS

Personal deposits 52.3 49.3 +6.1%

Demand deposits 11.3 10.3 +9.4%

Special savings accounts 38.8 37.0 +4.9%

Time deposits 2.2 2.0 +11.2%

Business deposits 26.8 23.8 +12.4%

Demand deposits 22.2 19.7 +12.3%

Time deposits 4.6 4.1 +13.0%

Retail certificates of deposit and savings bonds 6.4 7.1 -8.8%

Total customer deposits (1) 85.5 80.2 +6.7 %(1) Excluding repurchase agreements

Loans to corporate and small business clients increased by 6.7%. In line with Group strategy, activity in the personal banking marketwas strong, with loans to personal clients rising by 12.3%. Personal loans accounted for 53.3% of total loans distributed by the Groupcompared with 52.2% in 2004.

Customer deposits

Customer deposits for local retail banking rose by 6.7% to B85.5 billion.

Among this total, demand deposits amounted to B33.5 billion, up 11.3% at nearly 40% of the total.



Fees and commissions

On the basis of the same accounting standards, net fees and commissions from client transactions (excluding interbank and moneymarket operations) rose by 6.0% and accounted for 36.3% of net banking income from client transactions, up 90 basis points.

12/31/2005 12/31/2004 % changein millions of euros EU IFRS* 2004 IFRS

Accounts and services 756 741 +2%

Loan management 278 269 +3%

Electronic banking 276 250 +10%

Financial activities 482 430 +12%

Total 1,792 1,690 +6,0%

* Fees and commissions before application of the provisions of IAS 39 relating to the amortized cost method.

Fees and commissions on accounts, banking services (account operation, payment incidents etc.) and loan management saw limitedgrowth.The increase in net fees and commissions from client transactions was mainly due to the increase in fees and commissions onelectronic payments (up 10%) and financial activities (up 12%, including a 9% increase in securities trading).

1.3.1.2 – Natexis Banques Populaires – net banking income


Corporate and Institutional Banking and Markets 1,259.3 1,159.0 +9%

Private Equity and Wealth Management 264.0 187.7 +41%

Services 724.4 610.9 +19%

Receivables Management 781.3 683.0 +14%

Other (1) 10.0 37.4

Total 3,039.0 2,678.0 +13.5%

(1) Net banking income from non-core businesses and elimination of intragroup transactions between Natexis Banques Populaires and Banque Populaire banks.

Other net banking income

Other net banking income comprises interbank operations,money market operations, insurance activities (via BREDBanque Populaire subsidiaries Prepar-Vie and Prepar-IARD)and capital gains realized on the securities portfolios of theBanque Populaire banks. It also includes revaluations of finan-cial instruments following the adoption of IAS 39, as well asprovisions for risks relating to regulated homebuyers’ savingsschemes.

These items, which in total account for just 5% of net bankingincome from local retail banking, increased by 29% to B261 million, mainly due to significant capital gains realized on the

investment portfolio of the Banque Populaire banks (B101 millioncompared with B54 million in 2004).

The effect of revaluations of financial instruments in accordancewith IAS 39 was immaterial in local retail banking (increase ofB10 million, including B8 million relating to the ineffective portion of hedging instruments). Provisions for risks relating to homebuyers’ savings schemes resulted in a net charge of B6 million, increasing the total level of provisions to B306 million.Provisioning of PEL and CEL mortgage savings schemes amoun-ted to 1.66% at December 31, 2005, compared with 1.56% atthe end of 2004.

Corporate and Institutional Banking and Markets

The Corporate and Institutional Banking and Markets core businesswas created in late 2004 to meet the bank’s goals of taking anincreasingly client-centric approach, providing its corporate and institutional clientele with a comprehensive product offering tailo-red to their needs, and fully exploiting synergies between its variousbusiness lines. Its growth strategy is to capitalize on its existing corporate and institutional business franchise, particularly throughcross-selling and developing high value-added business lines.

Corporate and Institutional Banking and Markets generated netbanking income of B1,259 million in 2005, an increase of B100million or 9% compared with 2004.The adoption of IAS 32-39as of 2005 had a negative impact of B29.9 million. On the basisof the same accounting standards, net banking income wouldhave increased by 11%.

Thanks to high new business volumes, Corporate France sustained just a limited decline in net banking income, despitethe decline in margins, while International benefited from the

2005 ANNUAL REPORT

growth in momentum of foreign branches. Global Debt &Derivatives Markets, Natural Resources & Related Industriesand Equity Group delivered an excellent performance, with

growth of 12%, 18% and 24% respectively, despite unfavorablemarket conditions in terms of interest rates and lending in thefirst half of the year.

Corporate and Institutional Banking and Markets accounted for 41% of total net banking income generated by the core businesses.


Corporate France 385.0 401.1 -4%

International 127.6 123.1 +4%

Global Debt & Derivatives Markets 458.8 410.4 +12%

Natural Resources & Related Industries 108.7 92.1 +18%

Equity Group 156.0 125.6 +24%

Mergers & Acquisitions 6.5 5.8 +12%

Other 16.7 0.8 ns

Total 1,259.3 1,159.0 +9 %

Private Equity and Wealth Management

Private Equity and Wealth Management delivered an excellent performance in 2005, with a 41% increase in net banking income. PrivateEquity was the main contributor, with an increase of B76.6 million compared with 2004.

Private Equity and Wealth Management contributed 9% of total net banking income generated by the core businesses.


Private Equity 221.1 144.5 +53%

Wealth Management 42.9 43.2 -1%

Total 264.0 187.7 +41%

Private Equity produced net banking income of B221 million, a rise of B76.6 million compared with 2004.This was mainly thanks tothe B74.5 million increase in unrealized capital gains on the invested portfolio in accordance with IAS 39 in 2005.

Services

Total net banking income from Services rose by 19% to B724.4 million.The impact of the transition to EU IFRS was limited to B7.2 million.

Services contributed 24% of total net banking income generated by the core businesses.The six departments making up the corebusiness contributed to this performance:


Insurance 202.1 160.6 +26%

Employee Benefits Planning 74.7 68.1 +10%

Fund Management 166.8 144.4 +15%

Investor Servicing 3.4 2.7 +26%

Financial Services 148.3 128.9 +15%

Banking Services 129.1 106.1 +22%

Total 724.4 610.9 +19%

In mid-December, BNP Paribas and Banque Populaire Group signed an agreement to create a shared e-banking software platform for retailbanking.The two groups plan to form a joint venture called Partesis in early 2006.This project entails the sharing of all IT developmentsand will be based principally on the Natexis Banques Populaires platform at the outset.



Receivables Management

Net banking income increased by 14% to B781.3 million, accounting for 26% of total net banking income generated by the corebusinesses.


Coface 674.2 580.8 +16%

Factoring 107.1 102.2 +5%

Total 781.3 683.0 +14%

Coface continued the worldwide roll-out of its product range. In the 58 countries in which it is present, business information servicesare now provided in 51 countries compared with 43 the previous year, with receivables management services available in 32 countriescompared with 25 the previous year.

2005 was characterized by acceleration in revenue growth, maintaining a good loss ratio of 50%, and favorable conditions in thefinancial markets, allowing for a sharp increase in income on the investment portfolio.

1.3.2 – Operating expenses and cost/income ratio Operating expenses totaled B5,389 million, an increase of 5.6%.

The total breaks down into B3,195 million in payroll costs (59%),up 7%, and B2,194 million in other operating expenses (41%),up 3.6% overall.

Employees

The total number of full-time equivalent employees (FTEs) roseby 2.3% in 2005 to 45,530, an increase of 1,020 compared withDecember 31, 2004, including 365 within the scope of NatexisBanques Populaires.

Trends in operating expenses

The local retail banking business saw controlled growth in opera-ting expenses, in line with the Group’s policy of sustained develop-ment in this business. Operating expenses totaled B3,385 million,an increase of 3.3%, including a 5.3% increase in payroll costs (comprising an 18% rise in costs related to incentive and profit-sha-ring plans).This also includes investments by the Banque Populaireregional banks, in particular in IT and sales and marketing.

The Banque Populaire banks continued their strategy ofstrengthening the network’s commercial capability, with theopening of 131 branches in 2005, corresponding to a rate oftwo to three new branches a week.This brought the total to2,807 at the year-end.

At Natexis Banques Populaires, operating expenses came toB1,994 million, up 9.5% compared with 2004, as a result ofinvestment in human resources and systems operated by thebank as part of its strategic development plan, as well as highercosts relating to incentive and profit-sharing plans and variableperformance-related compensation.

Cost/income ratio

The Group’s cost/income ratio stood at 65.4%, an improvementof 1.4 points over the previous year.

Local retail banking posted a cost/income ratio of 65.2%, animprovement of 0.7 points and one of the best in the Frenchretail banking sector.

1.3.3 – Impairment charges and other creditprovisions and operating income Impairment charges and other credit provisions amounted toB436 million in 2005, a decrease of 8.7%.As a percentage of risk-weighted loans, impairment charges and other credit provisionsfell sharply to 27 basis points compared with 34 basis points atend-2004 and 43 basis points at end-2003.

In local retail banking, impairment charges and other credit provisions decreased by 5.7% to B355 million, representing0.35bp of risk-weighted loans compared with 0.41bp in 2004.Provision coverage of non-performing loans stood at 70.3%, inline with 2004, before IFRS. Collective provisions for performingloans remained stable at B377 million.

For Natexis Banques Populaires, impairment charges and othercredit provisions were down 20% to B81 million. This figurecomprises a net charge to collective provisions of B37 million.The value of non-performing loans decreased slightly in absoluteterms, despite a sharp rise in customer loans. In relative terms,the proportion of non-performing loans decreased by 2.1%.Coverage of non-performing loans by specific and collective provisions remained at a high level of 90.4%.

Operating income totaled B2,416 million, an increase of 17.1%compared with 2004.

1.3.4 – Income before exceptional items and tax Income before exceptional items and tax totaled B2,551 millionversus B2,034 million in 2004, an increase of 25.4%. This includes:

n B15 million contributed from companies accounted for by theequity method;

2005 ANNUAL REPORT

n B117 million in net gains on disposals of fixed assets versusB5 million in 2004, mainly due to the B95 million capital gain(B67 million after tax) realized by Natexis Banques Populaireson the sale of the “Liberté 2” building in Charenton.

Furthermore, individual analysis of consolidated goodwill did notshow any need for impairment in 2005, as projected cash flowfrom the core businesses exceeded goodwill for each of thebusiness lines significantly.

1.3.5 – Net incomeThe Banque Populaire Group achieved its highest ever consolidated net income of B1,522 million, an increase of 27.3%, after :

n a tax charge of B855 million, up 16%, proportional to the Group’s earnings growth;

n minority interests of B174 million, corresponding mainly to minority interests in Natexis Banques Populaires, of which 19.1% is notowned by the Group.

Breakdown of income before exceptional items and tax

All Group businesses achieved strong growth in income before exceptional items and tax in 2005:


Local retail banking 1,483 1,325 +12%

Natexis Banques Populaires 1,075 720 +49%

Corporate & Institutional Banking and Markets 472 404 +17%

Private Equity & Wealth Management 159 84 +89%

Services 282 187 +50%

Receivables Management 223 164 +36%

Other (1) (60) (120) -

Federal activities (7) (11) -

Total 2,551 2,034 +25%

(1) Net banking income from Natexis Banques Populaires’ non-core businesses and elimination of intragroup transactions between Natexis Banques Populaires and Banque Populaire banks.



1.4 – Shareholders’ equity and capital adequacyCapital stockIn 2005, the consolidating entity increased its capital stock byB226 million by issuing new members’ shares in the BanquePopulaire banks and the mutual guarantee companies tomember-stakeholders.

Furthermore, as a result of the consolidation of Crédit MaritimeMutuel following the linking of the Regional Banks of CréditMaritime Mutuel to the Banque Populaire banks in coastalregions mid-year, their members’ shares were also included in theGroup’s capital stock, representing B180 million.

Regulatory capital and international capital adequacy ratio At December 31, 2005, the Group’s total regulatory capitalrose to B19.3 billion from B16.5 billion one year earlier on alike-for-like basis, i.e. after the adoption of IFRS and prudentialfilters as defined by the French Banking Commission.

In total, restatements relating to the first-time adoption of IFRSas at January 1, 2005, had a negative impact of B1.1 billion

compared with regulatory capital under French GAAP as atDecember 31, 2004.

Tier 1 capital totaled B14.6 billion, up from B12.4 billion the previous year on the basis of the same accounting standards.Theincrease was mainly due to earnings capacity generated duringthe period, after taking account of dividends and interest payableon members’ shares, as well as issues of members’ shares in the Banque Populaire banks (increase of B226 million) and a B300 million super-subordinated notes issue by NatexisBanques Populaires in January 2005.

Tier 2,Tier 3 and other regulatory capital rose by 13% to B4.7 billion,mainly due to the positive net balance between new redeemablesubordinated notes issued and redeemed during the period.

Risk-weighted assets amounted to B164.8 billion, an increase of17.6%, just above the level of growth in customer loans (15.1%),due to a 23% rise in guarantee commitments recognized as off-balance sheet items. Market risks were up 6% to B7.2 billion,representing 4% of total risk, which came to B172 billion.

The international capital adequacy ratio stood at 11.2%, includinga Tier 1 ratio of 8.5%, versus 11.2% and 8.4% respectively atDecember 31, 2004, on the basis of the same accounting stan-dards and regulations.

European capital adequacy ratio Since 1996, French financial institutions have been required tomeasure and comply with an overall capital adequacy ratiocovering not only counterparty risks but also market risks suchas interest rate and currency risks.

It is defined as the ratio of available capital to the capital require-ment for counterparty and market risks. It must be higher than100%.

As of December 31, 2005, the ratio is based on banking activi-ties alone, i.e. excluding capital relating to insurance activities andassociated risks.

At December 31, 2005, the Group’s ratio stood at 143%, inclu-ding a Tier 1 ratio of 106%, compared with 143% and 105% res-pectively in 2004, on the basis of the same calculation method.


Regulatory capital

Tier 1 capital 14,634 12,366 +18%

Total regulatory capital 19,334 16,518 +17%

Risk-weighted assets

Credit risks 164,799 140,149 +18%

Market risks 7,185 6,760 +6%

Total consolidated risks 171,984 146,909 +17%International capital adequacy ratio

Tier 1 ratio 8.5% 8.4% +0.1

Total ratio 11.2% 11.2% +0.0

2005 ANNUAL REPORT

2 - Risk management

2.1 – Risk managementorganization The Group is exposed to four main categories of risk:

n credit risks arising from customer transactions;

n market risks arising from capital markets transactions;

n interest rate, currency and liquidity risks arising from retailbanking transactions;

n operational risks, including non-compliance risks.

In accordance with standard CRBF 97-02, implemented in 2005,each bank has set up risk management and monitoring structu-res that are independent from operating units.

All Group banks have also set up their own systems of exposurelimits and decision-making procedures, complying with the rulesestablished at Group level, as set out in the credit risk manualupdated in June 2004, the interest rate and liquidity risk manualupdated in April 2004 and the operational risk manual updatedin November 2005.

Each bank’s risk policy is determined by the bank’s executivemanagement and approved by its Board of Directors.The banksare also responsible for exercising continuous control over risks,in accordance with the rules laid down by the Board ofDirectors of Banque Fédérale des Banques Populaires – dealingin particular with the role of the Group Risk ManagementCommittee – and by the Banking Regulator.

At the end of 2003, the Banque Populaire Group establishedcomprehensive rating systems that comply with future pruden-tial requirements.These systems are based on the use of homo-genous methods throughout the Group and centralized ratingapplications dedicated to the principal client segments.

The Group’s central body is responsible for assessing risk policiesand management procedures according to standard principlesand criteria.

Risks are monitored at Group level, as follows:

n Banque Populaire banks on a consolidated basis;

n Banque Fédérale des Banques Populaires subsidiaries on aconsolidated basis;

n Crédit Maritime Mutuel on a consolidated basis.

In addition to this consolidated risk monitoring system, theGroup Risk Management Committee performs monthly assess-ments of material individual exposures at Group level or at thelevel of individual banks. Responsibility for performing creditreviews and the credit rating process may be delegated to theBanque Fédérale des Banques Populaires Risk ManagementDepartment. All Group entities are informed of the decisionsmade by the Group Risk Management Committee.

Risk diversification presents a fundamental risk management ruleand is governed by external and internal guidelines. As required

by the Group’s risk management manuals, each bank sets inter-nal risk concentration limits based on its own specific characte-ristics, which are lower than the limits authorized under bankingregulations. In 2005, a single maximum level below the regulatorythreshold was implemented, which will apply to all Group bankson a consolidated basis as of June 30, 2006.

The organization of risk monitoring procedures is described inthe “Chairman’s Report on Internal Control Procedures” inclu-ded in this annual report.

2.2 – Credit portfolio analysis In 2005, global economic growth – driven by the United States– held up against rising oil prices, natural catastrophes andcompetition from China, although frequently at the cost of highnational deficits.

Thanks to a more favorable second half of the year, GDPgrowth in the Eurozone came to 2% compared with 1.4% theprevious year, with unemployment remaining high. New EUmember states in Eastern Europe do not yet have a significantenough presence to drive European growth.

Following a bleak first half of the year, France achieved growth ofclose to 1.6% in the second half, as a result of low consumerspending and a 3.3% increase in business investment.

Inflation remained controlled at 1.8%, despite the rise in oil pri-ces, while the savings rate decreased by 1.4% and householddebt increased by 17.9% in two years.

The slight fall in the euro at the end of the year should favorexports, while the European Central Bank’s decision of a mode-rate rate increase in December 2005 is unlikely to curb growth.However, public expenditure represents 54.4% of GDP inFrance, compared with the eurozone average of 48.6%, whilepublic debt stands at 66% of GDP.

Thanks to its strong risk management culture and commitmentsto particular industries and regions, the Banque Populaire Groupis in a favorable position to avoid any severe consequences relating to these uncertainties.



2.2.1 - Total risks

12/31/2005 01/01/2005 % changein billions of euros EU IFRS EU IFRS

Total customer loans 146.6 129.5 13.2%

Sound loans 144.7 127.8 13.3%

Lease financing 8.7 8.2 5.9%

Other loans and receivables 115.3 99.6 15.8%

Trade receivables 3.6 3.5 3.2%

Export loans 1.2 1.1 5.3%

Short-term and consumer loans 24.3 20.1 21.0%

Equipment loans 33.8 30.1 12.3%

Home loans 44.1 38.8 13.7%

Other customer loans 8.2 6.0 38.4%

Customer overdrafts 8.5 7.5 12.3%

Factoring 3.5 2.7 29.3%

Unlisted fixed income securities 2.9 3.0 -0.9%

Collective provisions (0.7) (0.7) 8.5%

Other 6.7 7.5 -11.2%

Non-performing loans 1.9 1.7 9.9%

Total interbank loans 55.7 39.6 40.9%

Customer loans increased by around 13%, notably in the Group’s main strategic growth axes such as retail banking.

2.2.2 - Interbank risks

Change in outstanding loans and utilized commitments to credit institutions (in billions of euros) *

20

25

30

20.6

22.222.9

25.2

29.3

DEC. 01 DEC. 02 DEC. 03 DEC. 05DEC. 04

* Management data

Growth in outstanding loans and utilized commitments to credit institutions accelerated in 2005 to 16.3%.

2005 ANNUAL REPORT

Interbank counterparties by country *

Counterparties include a large number of banking institutions inOECD countries.The weighting of Western European counter-parties rose from 35% to 41%, ahead of France representing

37%. Loans and commitments to foreign banks involve the lea-ding banks in each country, 82% of which are investment grade.The concentration of risks remains stable.

0

10

20

30

40

50

01020304050

France WesternEurope

North America

Asia (excl Japan) &Oceania

North Africa & Middle East

LatinAmerica &Caribbean

Japan Sub-Saharan

Africa

Supranationalborrowers

Central &EasternEurope

n Dec. 2003

n Dec. 2004

n Dec. 2005

%

* Management data

* Management data

Change in interbank commitments by credit rating*

The global banking industry continued to improve in 2005. Banking counterparties rated AA (see note 2-4) or equivalent continued torepresent the largest category.

0

5

15

25

35

45

-5

-5515253545

1 2 - 4 5 - 7 8 - 10 11 - 16 > 16 Not rated

n Dec. 2003

n Dec. 2004

n Dec. 2005

%



0

20

40

60

80

100

020406080100

01020304050607080

0

10

20

30

40

50

60

70

80

A1 A2 A3 A4 B C D NR

n Dec. 2004

n Dec. 2005

%

2.2.3 - Sovereign risks Sovereign risk is the risk of a Government (and/or Central Bank) being unable to honor its debts. Sovereign borrowers almost neverdefault on their loans; instead, they initiate negotiations with lenders, frequently leading to the waiver of interest and/or part of theoutstanding principal.

Sovereign risks by geographic area

Western Europe North America

Central& Eastern Europe

Latin America &Caribbean

AsiaAfrica

Nearly 83% of the Group’s sovereign loans concern Western Europe. Exposure to other regions has decreased significantly.Africa nowrepresents only 2.7% of the total, while Latin America – the highest risk area – accounts for 1.3%.

The quality of the Group’s sovereign exposures is measured by the Coface short-term @rating, which allows virtually all risks to berated (less than 1% are not rated - NR): 97% of sovereign exposures are investment grade ranging from A1 to A4, including 73% ofwhich are A1 rated. Only 3% of sovereign borrowers are non-investment grade with a rating from B to D, including 1% of which areD rated, reflecting the Group’s marginal exposure to foreign sovereign risks.Total sovereign exposures decreased by 10%.

Change in sovereign loans by Coface credit rating

%

n Dec. 2003

n Dec. 2004

n Dec. 2005

2005 ANNUAL REPORT

2.2.4 - Customer risks

Breakdown by industry

2005 2004

Industry €M % %

Real estate 22,735 17.4% 14.7%

Holding companies & diversified 19,014 14.5% 17.3%

Finance & insurance 10,161 7.8% 4.3%

Services 9,261 7.1% 6.0%

Construction & public works 8,589 6.6% 7.2%

Consumer goods 7,020 5.4% 5.9%

Food 6,251 4.8% 5.0%

Basic industries 5,793 4.4% 5.0%

Retailing 5,483 4.2% 4.6%

Mechanical & electrical engineering 5,191 4.0% 4.1%

Transport 4,913 3.8% 4.1%

Tourism, hotels & restaurants 4,088 3.1% 2.6%

Pharmaceuticals & healthcare 3,748 2.9% 2.3%

Government 3,354 2.6% 3.1%

Media 2,660 2.0% 2.8%

Technology 2,439 1.9% 2.4%

Utilities 2,220 1.7% 1.6%

Not applicable 6,104 4.7% 4.6%

Energy 1,091 0.8% 1.1%

Investment companies 632 0.5% 0.3%

Total 100% 100%Source: Management data

In real estate, which comes top of the list, half the loans concerned are to non-trading real estate companies (SCIs).The main changeconcerns the increase in exposure to the Finance & Insurance and Services sectors, while the relative weighting of the Construction &Public Works and Manufacturing sectors decreased.

Concentration by borrower

2005 breakdown Risk-weighted 2004 breakdown% loans as a % %

of capital

Largest borrower 0.7% 7.6% 1.1%

Top 10 borrowers 5.1% 57.9% 6.7%

Top 50 borrowers 11.4% 129.6% 14.4%

Top 100 borrowers 13.7% 155.8% 17.1%Source: Management data

Significant concentrations of risks decreased in 2005.Their weighting relative to the Group’s capital has fallen compared with 2004.Thebanks’ internal limits are expressed relative to capital and the Group’s 100 largest exposures (on- and off-balance sheet) represented155.8% of capital, while balance sheet exposures alone represented 144.9% of capital at December 31, 2004.



High-risk industries

Gross on and off-balance sheet exp. (in millions of euros) 12/31/2005 12/31/2004

Aerospace 1,218 1,102

Insurance 2,572 1,517

Poultry sector 139 109

Telecommunications services 957 986

Tourism, hotels & restaurants 4,179 2,187Source: Management data

Total exposure to these sectors increased in 2005. Although exposure to telecommunications was reduced further, exposure to thetourism and insurance sectors increased significantly.The Group still has limited exposure to the poultry sector.

2.2.5 - Non-performing loans Impairment charges and other credit provisions totaled B436 million, a decrease of 8%.The total breaks down into B355 million forlocal retail banking and B81 million for Natexis Banques Populaires.The decrease reflects an improvement in the economic climate andprogress in the active management of positions.The highly conservative provisioning policy continued.

Specific provision coverage of non-performing loans amounted to 68% at December 31, 2005, bearing witness to this conservativepolicy.

12/31/2005 01/01/2005in millions of euros EU IFRS EU IFRS

Gross Provi- Net Provision Gross Provi- Net Provisionsions coverage sions coverage

% %

Interbank loans 108 (61) 46 57% 109 (60) 49 55%

Customer loans 5,782 (3,919) 1,863 68% 5,626 (3,930) 1,696 70%

Customer loans excl. lease financing 5,552 (3,839) 1,713 69% 5,376 (3,845) 1,530 72%

Lease financing 229 (80) 150 35% 250 (84) 166 34%

Total 5,889 (3,980) 1,909 68% 5,735 (3,990) 1,745 70%Collective provisions 0 (796) (796) - 0 (748) (748) -

Interbank loans 0 (47) (47) - 0 (58) (58) -

Customer loans 0 (749) (749) - 0 (691) (691) -

Total (incl. collective provisions) 5,889 (4,776) 1,113 81% 5,735 (4,739) 996 83%

Breakdown by client category

at December 31, 2005 Non-financial Small Personal Otherin % of loans corporates businesses customers

Customer loans and lease financingSound loans 58% 7% 32% 3%Non-performing loans 65% 16% 17% 2%Provisions for non-performing loans 68% 16% 15% 2%

The breakdown by client category and the breakdown of non-performing loans remain stable compared with 2004.

The breakdown by country shows that in the local retail banking business, over 99% of defaults concerned clients in France.

For Natexis Banques Populaires, the breakdown by country shows a slight reduction compared with 2004 in terms of both exposureand provisions. However, the breakdown shows a moderate increase in exposure in North America and in provisions in Africa and theMiddle East.

2005 ANNUAL REPORT

Breakdown of Natexis Banques Populaires exposures and provisions at December 31, 2005in millions of euros

Geographic area Specific Country Industry Total Specific Provisions Provisions Totalcredit risks risks risks credit provisions for country for industry Provi-

risks risks risks sions

France 874 - 5,074 5,948 527 - 69 596

Rest of Western Europe 176 - 3,578 3,754 135 - 91 226

Eastern Europe 25 44 1,081 1,150 17 1 5 23

North America 152 - 1,795 1,947 81 - 94 175

Central & Latin America 90 973 180 1,243 46 37 3 86

Africa & Middle East 25 1,510 192 1,727 13 91 11 115

Asia & Oceania 54 653 518 1,225 18 12 5 35

Credit risks and provisions 1,396 3,180 12,417 16,993 837 140 278 1,256

2.3 – Market risks

Market risks primarily concern Natexis Banques Populaires,whose market risk management system is described below.

2.3.1 - Natexis Banques Populaires’ marketrisk organization and management Natexis Banques Populaires’ market risk management systemcovers the capital markets activities conducted by NatexisBanques Populaires and its subsidiaries. The improvement pro-gram launched by Natexis Banques Populaires in 2002 continuedduring 2005. Improvements concerned organization, proceduresand risk measurement.

Control over market risks is the responsibility of the middleoffice, Risk Management Department and the Internal ControlDepartment. Internal Control and Risk Management report tothe General Secretariat, while the middle office reports to theCorporate and Institutional Banking and Markets core business.

Natexis Banques Populaires’ Executive Management distributedthe directive SGA no. 1748, formalizing the structure of the dif-ferent teams involved in managing market risks.This directive setsout the works carried out in 2004 to determine each depart-ment’s duties in terms of controlling market risks.

2.3.1.1 - Roles of the different parties involvedThe major responsibilities of each control entity are as follows:

n First tier controls are carried out by the middle office, whichplays an operational role through the applications it manages anduses daily. Its key duties are:

– producing and analyzing results and risks on a daily basis;– producing and analyzing provisions on a monthly basis;– ensuring the reliability of market parameters used to calculateresults and risks;– proposing methods to calculate reserves while ensuring thatthey are exhaustive and correspond to the nature of risks;– developing the system of delegated limits and method of calculating risk, in conjunction with Risk Management;– monitoring and reporting any limit violations.

n Risk Management is responsible for the financial component ofsecond tier controls, in particular overseeing market risks andmodels. Its key duties are:

– validating the proposals made by the middle office, ensuringtheir consistency throughout the Group and making recommen-dations where necessary;– monitoring market risks at the various consolidation levels andparticularly at Group level;– ensuring internal and external reporting on market risks;– validating internally-developed models and software modelsused to value products.To do this, the pricer and model vali-dation char ter was distributed by the Risk Managementdepartment in July 2005,This charter sets out the duties of theRisk Management department in validating models and pri-cers, as well as the documents that must be provided by otherdivisions (Research and MO);



– validating the various delegated authorities and limits reques-ted by Corporate and Institutional Banking and Markets andproposed by the middle office;– making recommendations on the risk management system;– leading Market Risk activities at Natexis Banques Populairessubsidiaries and branches.

n Internal Control is responsible for the operational componentof controls:

– ensuring that adequate procedures are in place and periodi-cally assessing their appropriateness, particularly with regard tobusiness activities and regulations;– ensuring that procedures are properly and correctly followed;– making recommendations on the risk management system;– more generally, ensuring that procedures governing themanagement and monitoring or market risks are respected.

This structure is completed by:n a New Products Committee,enabling capital markets activities tolaunch new products safely, after identifying and analyzing the diffe-rent risk factors that may impact the value of the product.The NewProducts Committee meets every six weeks and is completed byworking parties that meet every week.The committee examinesthe different risks inherent to a new product, in particular market,counterparty, legal, accounting, tax and non-compliance risks;

n a Market Risks Committee, which meets monthly and compri-ses the heads of the various control levels together with frontoffice managers. It is chaired by the head of capital markets activities.The committee validates new limits, proposes changesto limits and reviews any identified limit violations;

n a Risk Monitoring and Supervision Committee, which meetsquarterly, comprising front office and middle office managers, theRisk Management department and the Internal Control depart-ment to present new methods for measuring risks and divide updevelopments for their implementation.

The Board of Directors validates overall risk limits for all entities.In addition, the Internal Audit departments of Natexis BanquesPopulaires and Banque Fédérale des Banques Populaires perio-dically conduct specific audit assignments.

2.3.1.2 - Market risk measurement The market risk management system is based on a risk metricsmodel that measures the risk run by each Natexis BanquesPopulaires entity. The current model consists of a number ofstandard metrics and VaR calculations.

Standard metrics

n The key standard metrics used are:

– sensitivity to a +/- 1% change in interest rates (overall and bymaturity);– yield curve exposure expressed as the potential loss;– currency exposure;– equity exposure;– sensitivity to a +/- 1% change in implied volatilities in the equity,foreign exchange and fixed income markets (overall, by maturityand by strike);

– sensitivity to a change in delta of an underlying (equities, fixedincome and currency);– sensitivity to dividend levels;– sensitivity to change in government security/swap spreads;– sensitivity to change in issuer spreads;– sensitivity to change in correlations;– monthly and annual loss alerts.

n New metrics and limits were implemented in 2005:

– deployment of the methodology for interest-rate risk measu-rement: yield curve risk indicator ;

– specific indicators relating to product developments giving riseto new types of risk (correlations). All of these new products havebeen subject to the “new products” procedure and model valida-tion;

– further improvements to limits for interest-rate products andhybrid derivatives;

– significant increase in assets authorized for money marketsecurities, with deployment of the spread risk measurementmetric (Xsi) for this portfolio;

– launch of high-yield activities;

– increased sensitivity to yields on short-term treasury instruments;

– increase in limits for long/short equity, capital structure arbitrageand convertible bonds from Natexis Arbitrage;

– tightening of loss alert levels.

Limits

Maximum sensitivity of interest rate maturity schedules to a+/-1% shift in the yield curve is B100 million.

The currency risk limit is B3 million expressed in terms of aone-day potential loss with a 99% confidence level.

Maximum sensitivity to a change in issuer spreads in the secon-dary bond market trading book is B10 million, expressed interms of a one-day potential loss and a 99% confidence level.

Volatility limits for interest rate, currency and equity options are:

n B2.5 million for a 1% change in interest rate volatility;

n B1.35 million for a 1% change in equity volatility;

n B0.683 million to B0.975 million per currency for a 1 pointchange in foreign exchange volatility.

These overall metrics are supported by more precise measure-ments by underlying, maturity and strike price.

2005 ANNUAL REPORT

VaR

In addition to these standard metrics, Natexis BanquesPopulaires also uses the Value at Risk (VaR) method. It usesRiskmanager software developed by Riskmetrics to perform historical VaR calculations designed to quantify the risk of lossesfrom capital markets activities, using conservative assumptions.VaR calculations are based on:

n one year’s historical data;

n a one-day potential loss horizon;

n a 99% confidence level.

The scope of VaR calculations is as follows:

n trading and investment portfolios of the Corporate andInstitutional Banking and Markets core business, excluding the“structured equities” portfolio;

n trading portfolios of Natexis Bleichroeder S.A.;

n trading portfolios of Natexis Arbitrage;

n trading portfolios of Natexis Commodity Markets;

n the investment portfolio of the Finance department.

For the Corporate and Institutional Banking and Markets corebusiness, VaR calculations are conducted daily by the middleoffice and monthly by the Risk Management department ofNatexis Banques Populaires.

Natexis Commodity Markets’ VaR calculations are conducteddaily using local Riskmanager software and monthly by the RiskManagement department.

Data is inputted into Riskmanager primarily using automatic inter-faces developed between the front office/middle office systems andthe software.These interfaces supply the characteristics of an ope-ration, enabling the software to understand the various operations.

Market data are provided by Riskmetrics on the basis of infor-mation from Reuters and are subject to a data managementprocess by Riskmetrics.

Date Total VaR Interest rate VaR Forex VaR Equities VaR Commodities VaR

Jan-05 7.28 4.47 1.80 6.44 0.17

Feb-05 8.24 5.14 2.39 7.23 0.27

Mar-05 6.97 5.31 1.98 5.10 0.37

Apr-05 5.82 4.47 0.91 4.38 0.44

May-05 4.95 3.98 0.50 3.34 0.17

Jun-05 4.52 4.06 0.96 3.18 0.28

Jul-05 5.05 5.45 1.14 2.07 0.31

Aug-05 4.33 4.69 0.35 2.15 0.30

Sep-05 4.91 4.72 0.39 2.00 0.19

Oct-05 5.31 5.16 0.54 3.11 0.26

Nov-05 6.44 5.33 0.65 2.90 0.32

Dec-05 5.67 4.78 0.48 3.34 0.34

in millions of euros Total VaR scope 2005

Total VaR

Global Debt and Derivatives Markets

Equity Group

Natural Resources & Related Industries

Finance department

Confidence level: 99% Horizon: 1 dayHistory: 1 year non-weighted

Historical Natexis Banques Populaires' VaR consumption



For the US subsidiary Natexis ABM Corp., which trades in themortgage-backed securities market, stress tests are performedbased on a uniform 100 bp distortion of the yield curve and itsimpact on the market (in the shape of early repayments, increa-sed volatility etc.).

At December 30, 2005, the impact of the worst-case scenariowould be an $18.31 million fall in the value of the portfolio.

2.4 – Interest rate and liquidity risks The Banque Populaire Group’s financial risk management systemaims to:

n define the best strategy to develop net interest income whilealso controlling risk;

n check that the bank’s business development reflects its finan-cial structure in terms of both interest rate risks and liquidityrisks;

n limit exposure to interest rate risk through adequate hedging;

n validate the organization and control rules of balance sheetmanagement;

n define and periodically monitor internal risk limits.

The risk management policy of each Banque Populaire bank fallswithin the framework of the Banque Populaire Group’s risk guidelines, which sets out the management and reporting rules

adopted at Group level in terms of balance sheet management.In particular, it includes interest rate and liquidity risk limits.

2.4.1 - Interest rate risk In the first three quarters of 2005, interest rates fell to theirlowest ever level in the Eurozone. The year ended with the flattening of the yield curve, which can be detrimental for retailbanking.The spread between 3-month Euribor and 10-year CMSnarrowed from an average of 208 bp in 2004 to an average of129 bp in 2005 and 91 bp at the start of 2006.

Interest rate risk limits Limits are set as a percentage of projected net interest income on a“dynamic”balance sheet basis (i.e. including business projections) andearnings capacity on a “static” balance sheet basis (i.e. previousbalance sheet) on a four-year horizon,based on predefined scenarios.

Each Banque Populaire bank is free to set its own limits, providedthat they are expressed in terms of Group metrics.

Sensitivity of earnings capacity on a constant balancesheet basis (“regulatory” vision)

The calculation is based on four matrix-based scenarios (temporaryshocks):

n fall and rise in market interest rates: (+/-200 bp);

n changes in the yield curve: short-term rates +/-100 bp, long-term rates -/+100 bp.

Total VaR in 2005

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05

Total VaR

2005 ANNUAL REPORT

Earnings capacity sensitivity has to comply with two limitsexpressed as a percentage of earnings capacity and in absoluteterms as “minimum required capacity”.

Sensitivity of net interest income on a dynamicbalance sheet basis

The calculation is based on projected (progressive) scenarios “ofNatexis Banques Populaires economists”, “deduced from theyield curve”,“of falls in interest rates”,“of a rise in interest rates”and of “a turnaround in interest rates”.

In each of the four years analyzed, net interest income must behigher than in the previous year to which a multiplying coefficientis applied.

Hedging instruments n Cash flow hedges (CFH)

Cash flow hedges are used by the Group’s entities to hedgefuture variable-rate borrowings (mostly interbank borrowings)and private or public issues, as well as future variable-rate loans(commercial loans, interbank loans).

The use of this type of hedging is justified by the maturities of thevariable-rate instruments hedged, which can take account ofrenewal assumptions of the assets or liabilities concerned.

n Fair value hedges (FVH)

Fair value hedges are used by the Group’s entities to hedgefixed-rate assets (securities held for sale and loans) or fixed-rateliabilities (interbank loans, forward customer savings, private orpublic issues).

n Effectiveness testing

Prospective testing

For the hedging of a single asset or liability, prospective testingconsists of verifying that the financial characteristics of thehedged item and the hedging instrument are the same.

In the case of hedging of a group of assets or liabilities, prospec-tive testing is done on a constructive basis, depending on thetype of documentation used:

n a schedule of cumulative amounts of variable-rate liabilities andfixed-rate borrower swaps (CFH);

n a schedule of cumulative amounts of variable-rate assets andfixed-rate lender swaps (CFH);

n a schedule of cumulative amounts of fixed-rate liabilities andfixed-rate lender swaps (FVH).

Hedging is demonstrated if for each maturity category of the tar-get repayment schedule, the nominal amount of items to be hed-ged is higher than the notional amount of hedging derivatives.

Retrospective testing

Retrospective testing is used to ensure, at least at each accoun-ting date, the effectiveness of hedges.

During each test, changes in the fair value excluding accrued inte-rest of hedging instruments since the previous accounting date

or the date the hedge was implemented are compared withchanges in the value of hedged items over the same period.Theratio of these changes must be between 80% and 125%. Outsidethese limits, the hedging relationship would no longer be justifiedunder IFRS.

To carry out retrospective testing, hedged items are representedby:

n a hypothetical asset or liability that can be used to isolate therisk component(s) hedged in the case of fair value hedging;

n a hypothetical derivative financial instrument representing fullhedging of the hedged items in the case of cash flow hedging.

Recognition of ineffective portion

The ineffective portion of the hedge is recognized in the incomestatement under “net gains or losses on financial instruments atfair value through profit or loss”. At December 31, 2005, the ineffective portion of cash flow hedges amounted to B7 millionand the ineffective portion of fair value hedges amounted to -B30 million.

Results

Local retail banking

n Interest rate risk

An increase in the sensitivity of net interest income to a declinein interest rates and a downturn in the yield curve over the fouryears of analysis.

On a dynamic balance sheet basis, the sensitivity of net interestincome to a 200 bp fall in interest rates increased from -9% in2004 to -24% and sensitivity to the flattening of the yield curveincreased from -4% to -7%.The projected (progressive) scena-rios of falls in interest rates and a downturn in the yield curve areless likely to impact net interest income on a four-year horizonover the first two years of downturn (-5% in 2006 and -4% in2007 compared with 2005).

On a static balance sheet basis, average earnings capacity sensi-tivity over four years to a 200 bp fall in interest rates increasedfrom -29% to -58%. In the event of a turnaround in short-termand long-term rates, the increase would be just -15% rather than-19%.


n Sensitivity

In terms of sensitivity, Natexis Banques Populaires’ main expo-sure is to a rise in short-term interest rates.

Credit derivatives Apart from securitization transactions, credit derivatives held bythe Banque Populaire Group were insignificant at December 31,2005, representing a nominal amount of around B2.5 billion,principally in Credit Default Swaps (CDS) held for trading.

Most of these credit derivatives are held by Natexis BanquesPopulaires,which wanted to develop a credit derivatives businesswithin its capital markets activities. As par t of a cautious



approach, the Group has implemented trading limits in severalstages:

n January 2004: creation of a credit derivatives trading portfolio.In January 2004, the Risk Committee delegated authorization totraders to trade CDS within the framework of the base position(cash/CDS);

n April 2004: delegation of the trading desk was extended todirection positions in CDS.This authorization is granted subjectto a volume restriction, allowing for tight control of the opera-ting process;

n September 2004: the non-government bonds portfolio isauthorized to trade in CDS.The delegated limits are fairly restric-tive and the volume restriction also applies to transactions initia-ted by traders on this desk;

n October 2004: as the operating process is considered satisfactory,the volume restriction is lifted;

n Since December 2004: transfer of CDS trading positionswithin the scope of non-government bonds, which will now bein charge of trading in CDS.The idiosyncratic risk is measuredusing the Xsi indicator (Natexis Banques Populaires indicator),which is set monthly based on the historic levels of JP Morganbond indices.An Xsi base measurement is also made in order tolimit the base cash risk versus CDS.

The authorized credit derivatives are “vanilla” credit default swaps.

One restriction applies to trading positions: piling up of positionsis not allowed – in order to close a position, the trader either hasto cancel or assign the transaction.

2.4.2 - Liquidity management

Liquidity limits are expressed as gaps in relation to residualassets. They are measured on a dynamic balance sheet basis(including commercial projections) and calculated for normaland crisis scenarios.

A second metric is calculated on the basis of earnings capacitysensitivity to a 50 bp increase in the short-term rate spread andmeasured over a six-month period for a normal scenario on adynamic balance sheet basis.

Risk is not affected by an increase in the customer assets-liabilitiesratio.

The liquidity gap on a dynamic balance sheet basis for all BanquePopulaire banks over six months excluding CDN decreasedsignificantly from B5 billion to B0.8 billion thanks to the increa-sed level of refinancing in liabilities. Over four years, the dynamicliquidity gap excluding CDN rises from B21 billion to B22 billion,still representing 16% of residual assets.

Liquidity indicators show that business development is undercontrol, even more so than in the past.The slight increase in theassets-liabilities ratio shows that this has been accompaniedmore by borrowing rather than by increasing customer liabilities.All Banque Populaire banks comply with regulatory ratios.

2.5 – Operational riskThe Group’s methodology is based on the risk guidelinesadopted by the Board of Directors of Banque Fédérale desBanques Populaires in 2005, a list of business activities coveredand a reporting system.

The definition of operational risk corresponds to that used byregulators: the risk of loss due to inadequacies or deficiencies inprocesses, people and systems,or to external events.The BanquePopulaire Group has created mapping of these risks in accor-dance with this definition, dividing risks into four main categories:Systems and Processes, Fraud and External risks, Legal andCompliance Risks, and Strategic Risks.

In 2004, the Group launched a project, overseen by BanqueFédérale des Banques Populaires, to create a coherent operatio-nal risk management system by providing all Group entities withstandardized manuals for identifying key activities and informa-tion systems, as well as guidelines for establishing business conti-nuity plans.Work on the project continued throughout 2005 andhas resulted in the implementation of business recovery plansbased on best practices.

In 2005, the efforts of the operational risk division resulted in theadoption of the operations charter, which governs relationshipswith the Group as of January 1, 2006.

2.6 – Insurance and risk coverage Like other banking groups, the Banque Populaire Group insuresits major risks through specific insurance coverage with insurersand reinsurers.

The 2005 insurance program completes the system coveringthe Group’s material risks. It includes insurance for professionalliability, directors’ and officers’ liability, liability for losses resultingfrom fraud and embezzlement, as well as the vast majority ofGroup information systems infrastructures and premises ormajor sites such as head offices and information systems cen-ters. These policies also include business interruption andconsequential loss cover for each Group entity.

As in 2004, the entire program was renewed for 2005 ongenerally better terms than the previous year. All cover hasbeen taken out with leading insurers that are recognized fortheir claims-paying ability.

2.7 – Legal risks2.7.1 - Legal and arbitration proceedings The Group is currently involved in a limited number of liabilityclaims.

After review and based on the current status of claims pending,the Group does not believe these claims will have a materialadverse impact on its results or financial position. Provisionshave been booked in the financial statements at December 31,2005, for all legal and tax risks that can be reasonably estimated.

2005 ANNUAL REPORT

2.7.2 - Dependency The Banque Populaire Group is not dependent on anypatents, licenses or industrial, commercial or financial sourcingagreements.

3 - Directors’ compensation The information below concerns the compensation paid toExecutive Directors of Banque Fédérale des Banques Populaire,the central body of the Banque Populaire Group.

3.1 - Compensation and benefits paid to Executive Directors in 2005 by BanqueFédérale des Banques Populaires and companiescontrolled by itn Total gross compensation paid to Executive Directors ofBanque Fédérale des Banques Populaires includes both a fixedand a variable component.

The fixed and variable compensation of Philippe Dupont andMichel Goudard have remained unchanged since 2003:

in euros 2005

B.F.B.P. Companies controlled by Total B.F.B.P. compensation

Fixed Variable Service Fixed Variableawards

Philippe Dupont 224,427 75,000 - 263,000 75,000 637,427

Michel Goudard 290,000 90,000 22,308 - - 402,308

in euros 2004

B.F.B.P Companies controlled by Total B.F.B.P. compensation

Fixed Variable Fixed Variable

Philippe Dupont 224,427 75,000 263,000 75,000 637,427

Michel Goudard 290,345 90,000 - - 380,345

Jean-Paul Dubus* 250,598 60,000 - - 310,598

in euros 2003

B.F.B.P Companies controlled by Total B.F.B.P. compensation

Fixed Variable Fixed Variable

Philippe Dupont 224,427 75,000 263,000 75,000 637,427

Michel Goudard 290,345 90,000 - - 380,345

Jean-Paul Dubus* 247,200 60,000 - - 307,200

* Jean-Paul Dubus has asserted his pension rights as of December 31, 2004.



n Philippe Dupont and Michel Goudard each have a car and anapartment paid for by the bank. In addition, Philippe Dupontreceives a standard allowance in his capacity as Chairman andChief Executive Officer.

Neither Philippe Dupont nor Michel Goudard receives any allo-wances or benefits from companies controlled by BanqueFédérale des Banques Populaires.

In respect of Banque Fédérale des Banques Populaires, allowan-ces and benefits in kind (tax base) awarded to ExecutiveDirectors are as follows:

in euros 2005 2004 2003

Philippe Dupont 63,868 61,853 56,658

Michel Goudard 11,437 15,921 13,182

Jean-Paul Dubus* - 14,656 16,393


3.2 - Directors’ fees Directors’ fees paid to members of the Board of Directors ofBanque Fédérale des Banques Populaires are determined onthe basis of each member’s attendance rate at Board meetingsand Board Committee meetings and are therefore entirelyvariable:

n the fee per Director and per Board meeting was B995;

n the fee per Director and per Board Committee meeting wasas follows:

- Group Risk Management Committee:B1,524;

- Audit Committee:B1,524;

- Remuneration Committee:B762.

Total Directors’ fees paid in 2005 in respect of 2004 amountedto B209,504. Amounts received per Director are shown in thetable below.

The Directors of Banque Fédérale des Banques Populaires arealso paid fees in their capacity as Directors of companies control-led by Banque Fédérale des Banques Populaires.Total fees paid inrespect of 2005 amounted to B180,740. Amounts received perDirector are shown in the table below.

in euros

Directors Directors’ fees paid in 2005* Directors’ fees paid in 2005* by B.F.B.P. by companies controlled by

(in euros) B.F.B.P. (in euros)

P. Dupont, chairman 10,945 10,065C. Hébrard 5,737 -C. Brevard 8,955 17,265M. Castagné 5,970 -R. Clavaud 15,181 2,948J. Clochet 5,970 -J-F. Comas 9,950 15,510C. Cordel 13,231 20,925P. Desvergnes 7,494 5,897J-C. Detilleux 10,945 -M. Devianne 6,499 -D. Duquesne 10,945 13,725S. Gentili 10,945 22,595A. Jacquier 4,975 -M. Jardin 4,975 -Y. de la Porte du Theil 13,996 19,895F. Moutte 13,318 -R. Nalpas 13,993 15,495P. Noblet 5,970 -F. Thibaud 15,517 13,695J-L. Tourret 13,993 22,725Total 209,504 180,740* In accordance with the French corporate governance act of May 15, 2001 (“NRE” Act), this table only shows directors’ fees paid during 2005. For Banque Fédérale des BanquesPopulaires, they correspond to fees for attending meetings of the Board of Directors and the Board Committee held during 2004. For the companies controlled by Banque Fédérale desBanques Populaires, they correspond to fees for attending Board meetings held during 2005.

2005 ANNUAL REPORT

During 2005, Michel Goudard also received B10,065 in his capa-city as non-voting Director of Natexis Banques Populaires.

3.3 - Post-employment benefitsPhilippe Dupont and Michel Goudard belong to the generalSocial Security pension scheme and the ARRCO and AGIRCcomplementary pension schemes. In their capacity as ExecutiveDirectors, they also belong to the following two schemes:

Retirement allowances

Philippe Dupont and Michel Goudard belong to the supplementarygroup pension scheme open to all executive managers of theBanque Populaire Group within the framework of the provisions ofthe by-law relating to this category.

The total amount paid to a director by way of a pension cannotexceed 60% of revenues for the period, up to a maximum ofB335,000.This is reduced to 50% for Directors appointed afterJuly 1, 2004.

This scheme was launched before May 1,2005, i.e.before the BretonAct (Law 2005-842) of July 26, 2005 came into effect.

Philippe Dupont benefits from this scheme in his capacity both atBanque Fédérale des Banques Populaires and at Natexis BanquesPopulaires.

Early retirement allowances

In the event of the early retirement of an Executive Director,apart from in the case of gross misconduct, an amount is paidequal to one year’s salary, plus 1/12th of annual compensationper year of service with the Group, and if applicable, 1/12th ofthe same annual compensation per year as Executive Director.The maximum amount that can be paid is 42/12ths of annualcompensation.

Retirement or early retirement allowances given rise to a payment equal to 1/40th of annual compensation per year of service with the Group, capped at 40/40ths of this compensation.

3.4 - Stock options granted to andexercised by Executive Directors No options have been granted on Banque Fédérale des BanquesPopulaires shares.

However, executive directors of Banque Fédérale des BanquesPopulaires have been awarded options on Natexis BanquesPopulaires shares.

Plan characteristics Number of options granted

Natexis Banques Populaires options As director granted to Exercise Expiration Exercise As director of companies Number Number executive Plan number date date price of B.F.B.P. controlled by of options of options directors of (in euros) B.F.B.P. exercised at end-2005B.F.B.P.

Philippe DupontN°9–CA 09/19/01 09/19/05 09/19/08 94.30 10,000 10,000 20,000 0N°10–CA 11/20/02 09/10/06 09/09/09 72.47 5,500 5,500 - 11,000N°11–CA 09/10/03 09/10/07 09/09/10 83.25 6,000 6,000 - 12,000N°12–CA 11/17/04 11/17/08 11/16/11 89.10 6,000 6,500 - 12,500N°13–CA 11/15/05 11/15/09 11/14/12 119.24 7,000 7,000 - 14,000

Michel GoudardN°9–CA 09/19/01 09/19/05 09/19/08 94.30 6,000 - 6,000 0N°10–CA 11/20/02 09/11/06 09/11/09 72.47 4,200 - - 4,200N°11–CA 09/10/03 09/10/07 09/10/10 83.25 4,200 - - 4,200N°12–CA 11/17/04 11/17/08 11/17/11 89.10 5,000 - - 5,000N°13–CA 11/15/05 11/15/09 11/14/12 119.24 6,000 - - 6,000

Jean-Paul Dubus*N°9–CA 09/19/01 09/19/05 09/19/08 94.30 4,000 - 4,000 0N°10–CA 11/20/02 09/11/06 09/11/09 72.47 2,800 - - 2,800N°11–CA 09/10/03 09/10/07 09/10/10 83.25 2,800 - - 2,800N°12–CA 11/17/04 11/17/08 11/17/11 89.10 3,000 - - 3,000




3.5 - Loans and guarantees givento Directors or Officers None

4 - Subsequent events

4.1 - Group strategic plan At its meeting of January 18, 2006, the Board of Directors ofBanque Fédérale des Banques Populaires reviewed efforts rela-ting to the strategic plan implemented by the Group at the startof 2005.

This collective review, synthesized into the Group Strategic Plan,allowed for the revalidation of the fundamentals of the Group’sbusiness model. On the basis of this, the Group obtained anoverview of the main challenges and requirements of continuedrobust growth.

The Group Strategic Plan is a development plan based on fivemain axes:

n continued efforts to gain market share in France;

n optimizing measures to promote customer loyalty and service,with the aim of meeting customers’ needs and continuing togenerate sufficient profit margins to finance efforts to win newcustomers and grow the Company;

n enhancement and optimization of the business portfolio, aswell improving the effectiveness of the Group’s payout capacityin order to help win new customers;

n targeted acquisitions in order to strengthen the Group’s presence in certain priority business lines and step up its inter-national expansion;

n mobilization of all resources and adaptation of the organizatio-nal structure to meet strategic targets.

The Board of Directors also examined Natexis BanquesPopulaires’ updated medium-term plan, which forms an integralpart of the Group’s strategy, and approved several partnershipsinitiated by the subsidiary.

4.2 - Long-term and short-termratings upgradedIn January 2006, credit rating agency Standard & Poor’s publishednew long and short-term credit ratings for Natexis BanquesPopulaires and Banque Fédérale des Banques Populaires, with along-term rating of AA- (with a stable outlook) and a short-termrating of A-1+.

This constitutes an upgrade in Natexis Banques Populaires’ longand short-term ratings, an upgrade in Banque Fédérale desBanques Populaires’ short-term rating and the first long-termrating for Banque Fédérale des Banques Populaires.

4.3 - Material changes in thefinancial or commercial situation In accordance with the European Commission’s regulation no. 809/2004 implementing the Prospectus Directive, no mate-rial changes in Natexis Banques Populaires’ financial or commer-cial situation have been seen since the end of the last financialyear for which audited financial statements have been published.

2005 ANNUAL REPORT

On March 12, 2006, the Banque Populaire Group issued ajoint press release with Groupe Caisse d’Epargne stating thefollowing:

“Banque Populaire Group and Groupe Caisse d’Epargne haveentered into exclusive negotiations for the creation of NATIXIS.

The Banque Populaire Group and Groupe Caisse d’Epargne,each one representing over 3,000,000 member stakeholders,have just signed a letter opening exclusive negotiations, whichshall end at the latest on June 1, 2006, for the combination ofsome of their respective businesses.

This ambitious project is designed to constitute a significantplayer in the finance and investment banking and banking servi-ces sector, whilst safeguarding each of the partners’ own retailbanking models.

The project dovetails naturally into both groups’ current deve-lopment strategies. For Groupe Caisse d’Epargne, this is a natu-ral extension of its current reorganization. For the BanquePopulaire Group, it provides its finance and investment bankingbusiness with the necessary growth to take it to new dimensions.

There are three guiding principles to the negotiations underwaybetween the two groups:

n respect for the identity and independence of each of the twonetworks’ regional banks and their head office organizations;

n the implementation of cross stockholdings between BanqueFédérale des Banques Populaires and Caisse Nationale desCaisses d’Epargne so as to reinforce the overall cohesion of thenew entity;

n the combination of all their investment and finance banking andbanking services in one single vehicle. The name of the legalentity will be NATIXIS. It is listed and will be jointly and equallycontrolled by the Banque Populaire Group and Groupe Caissed’Epargne.

NATIXIS, a major player in finance and investmentbanking and in banking services

The new entity NATIXIS will be a leader in a number of sectorsin France (especially employee savings, asset management, auto-mated payment systems and bancassurance). It will be a subsi-diary of Caisse Nationale des Caisses d’Epargne and BanqueFédérale des Banques Populaires and will have its own client base

and strong distribution networks based on a high quality serviceplatform designed to deliver best practices aimed at achievingthe best performance on the market.

NATIXIS will be created by the combination of Natexis BanquesPopulaires and various Caisse Nationale des Caisses d’Epargnecontributed subsidiaries in the finance and investment bankingsector (IXIS Corporate & Investment Bank, IXIS AssetManagement Group and CIFG), and in the specialist banking ser-vices sector (Crédit Foncier and Cefi) and private asset manage-ment (Compagnie 1818). Existing strategic partnerships at theBanque Populaire Group and Caisse d’Epargne, in particularCNP, will not be brought into the new entity.

Caisse Nationale des Caisses d’Epargne and Banque Fédérale desBanques Populaires will have equal stakes (34% each) in NATIXIS.This parity will be achieved by the combination of assets, the issueof Cooperative Investment Certificates and cash contributions,where necessary. NATIXIS will have a free float of at least 25%and market capitalization of more than B20 billion. It will have theresources necessary to take part in consolidation moves cur-rently underway in the industry. Both parties aim to propose arate of dividend payout of 50% of NATIXIS’ consolidated net pro-fits subject to profits, sufficient free reserves are to hand, then,taking into account all regulatory capital requirements.

NATIXIS’ corporate governance will be conducted through aSupervisory Board and a Management Board. Both groups willhave equal representation on the Supervisory Board and thechairmanship will alternate between representatives of eachgroup. Mr Charles Milhaud will be the first Chairman of theSupervisory Board. The Chairman of the Management Board,appointed by the Supervisory Board, will be selected by mutualagreement between the two groups. Mr Philippe Dupont will bethe first Chairman of the Management Board.

Close ties between the two Groups

The intention is to strengthen ties between the two groups byputting in place cross equity holdings, within the constraints ofcurrent legislation and regulations, between Caisse Nationale desCaisses d’Epargne and Banque Fédérale des Banques Populaires.The Chief Executive of each group will have a seat on the boardof the other party with the title of Vice-Chairman. The firstBanque Populaire Group representative on Caisse Nationale desCaisses d’Epargne’s Supervisory Board will be Philippe Dupontand the first Caisse Nationale des Caisses d’Epargne representa-tive on the Banque Fédérale des Banques Populaires Board ofDirectors will be Charles Milhaud.

Project to be launched end-2006

The timetable provides for the project to be implemented in thecourse of December 2006, after the period of exclusive negotia-tion, which will end at the latest on June 1, 2006, with the signa-ture of the final agreements following the required consultations

RECENT DEVELOPMENTS

On March 12, 2006, the Banque PopulaireGroup issued a press release stating that theBoard of Directors of Banque Fédérale des

Banques Populaires had unanimously approved thestart of exclusive negotiations between the BanquePopulaire Group and Groupe Caisse d’Epargneconcerning the creation of NATIXIS through thecombination of some businesses.



and agreement from the appropriate bodies in each group and inaccordance with the commitments to and rights of shareholders.In this respect, it shall be noted that Caisse des Dépôts etConsignations, which holds a 35% stake in Caisse Nationale desCaisses d’Epargne, has specific shareholders’ rights pursuant tothe shareholders agreement dated June 30, 2004. Consequently,when required, Caisse des Dépôts et Consignations will have totake a position on the proposed transaction to allow the execu-tion of the final agreements. To date, Caisse des Dépôts etConsignations has stated it is opposed to this project.

The Banque Populaire Group will be assisted in this project byCitigroup,Rothschild & Cie and Philippe Villin Conseil.Groupe Caissed’Epargne is assisted by Bucéphale Finance, Lazard Frères & Cie andMerrill Lynch.

Building on the strengths and mutual society culture of eachgroup, the implementation of this project should result in thecreation of NATIXIS, a strong player in the finance and invest-ment banking sector and banking services sector in its Frenchdomestic market and with the capability to develop in Europeand beyond.”

2005 ANNUAL REPORT

in millions of euros Notes 12/31/2005 01/01/2005EU IFRS EU IFRS

Cash and balances with central banks and post offices 3,129 3,359

Financial assets at fair value through profit or loss V.1 33,325 31,874

Hedging instruments V.2 279 571

Available-for-sale financial assets V.3 29,920 28,837

Loans and advances to banks V.4 55,744 39,543

Loans and advances to customers V.4 146,603 129,472

Interest rate hedging reserve 1 0

Held-to-maturity financial assets V.5 6,899 5,748

Current income tax assets 0 0

Deferred income tax assets V.6 682 767

Other assets V.7 8,152 6,621

Non-current assets held for sale V.16 0 0

Investments in associates VI.8 248 93

Investment property V.8 1,154 1,055

Property, plant & equipment V.9 1,702 1,772

Intangible assets V.9 286 234

Goodwill V.10 586 556

Total assets 288,711 250,501

Consolidated balance sheet - Assets

CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2005



in millions of euros Notes 12/31/2005 01/01/2005EU IFRS EU IFRS

Due to central banks and post offices 416 29

Financial liabilities at fair value through profit or loss V.1 6,758 7,237

Hedging derivatives V.2 474 767

Deposits from banks V.11 61,277 44,984

Customer deposits V.11 104,483 97,878

Debt securities in issue V.12 49,090 41,538


Current income tax liabilities 156 130

Deferred income tax liabilities V.6 536 548

Other liabilities V.7 12,517 10,769

Liabilities associated with non-current assets held for sale 0 0

Insurance companies’ technical reserves V.13 29,677 26,422

Provisions V.14 1,922 1,876

Subordinated debt V.15 6,404 5,385

Equity attributable to equity holders of the parent 13,699 11,684- Share capital and reserves 8,383 7,709- Retained earnings 3,180 2,334- Unrealized or deferred capital gains or losses 614 446- Net income for the year 1,522 1,195

Minority interests 1,301 1,249

Total liabilities 288,711 250,501

Consolidated balance sheet - Liabilities



in millions of euros Notes 12/31/2005 12/31/2004EU IFRS 2004 IFRS

Interest and similar income VI.1 11,539 10,440

Interest and similar expense VI.1 (7,126) (6,176)

Fees and commission (income) VI.2 3,157 3,024

Fees and commission (expense) VI.2 (784) (701)

Net gains or losses on financial instruments at fair value through profit and loss VI.3 841 409

Net gains or losses on available-for-sale financial assets VI.4 461 187

Income from other activities VI.5 5,794 4,872

Expenses from other activities VI.5 (5,640) (4,410)

Net banking income 8,242 7,646

General operating expenses VI.6 (5,084) (4,805)

Amortization, depreciation and impairment of property, (306) (300)plant & equipment and intangible assets

Gross operating income 2,852 2,541

Impairment charges and other credit provisions VI.7 (436) (477)

Operating income 2,416 2,064

Share of results of associates VI.8 15 7

Gains or losses on other assets VI.9 116 6

Change in value of goodwill VI.10 3 (43)

Income before income tax 2,551 2,034

Income tax VI.11 (855) (736)

Net income 1,696 1,298

Minority interests (174) (103)

Net income attributable to equity holders of the parent 1,522 1,195

Consolidated statement of income

2005 ANNUAL REPORT

Share capital and reserves

in milllions of euros Share Reserves Elimination capital of Retained

treasury earningsshares

Consolidated equity at December 31, 2003 before allocation - French GAAP 2,886 4,712 - 658

Allocation of 2003 net income - 510 - 343

Consolidated equity at January 1, 2004 after allocation - French GAAP 2,886 4,682 0 1,002

Impact of adopting 2004 IFRS applicable as of January 1, 2004 (1) - (4) - 1,929

Consolidated equity at January 1, 2004 - 2004 IFRS 2,886 4,678 0 2,931

Movements related to relations with shareholders Capital increase 147 - - -Share-based payment plans (2) - - - 4Dividend - (9) - (78)

Unrealized gains or losses in 2004 Impact of exchange rate differences - - - -

Impact of acquisitions and divestments on minority interests Reclassification of securities (3) - - - (10)Other changes in scope of consolidation (4) - - - -

2004 net income - - - -

Other changes - - - -

Consolidated equity at December 31, 2004 - 2004 IFRS 3,033 4,669 0 2,847

Impact of adopting EU IFRS applicable as of January 1, 2005 (5) - 7 - (512)

Allocation of 2004 net income - 259 - 936

Consolidated equity at January 1, 2005 after allocation - EU IFRS 3,033 4,935 0 3,271

Movements related to relations with shareholders Capital increase 226 (15) - -Share-based payment plans (2) - - - 4Dividend - - - (98)

Unrealized gains or losses in 2005 Impact of change in value of financial instruments - - - -Impact of exchange rate differences - - - -

Impact of acquisitions and disposals on minority interests Crédit Maritime tie-up (6) 180 18 - 24Other changes in scope of consolidation (7) - - - -

2005 net income - - - -

Other changes (8) - 6 - (21)

Consolidated equity at December 31, 2005 - EU IFRS 3,439 4,944 0 3,180

Consolidated statement of changes in equity from December 31, 2003 to December 31, 2005 - Banque Populaire Group

[1] Impact of adopting IFRS applicable in 2004 (2004 IFRS)On adoption of IFRS, the translation reserve existing as of January 1, 2004 was transferred to retained earnings.

[2] Share-based payment plans in 2004 and 2005:Under IFRS 2, employee stock option plans are treated as a cost to the company. The corresponding expense is equal to the value of the options granted in return for servicesrendered by employees. The cost and corresponding impact on retained earnings was B4 million in 2004 (including B3.6 million attributable to the Group) and B3.5 million in2005 (including B2 million attributable to the Group).

Impact of acquisitions and divestments on minority interests during 2004:

[3] Reclassification of securities: On December 23, 2004, Natexis Assurances acquired the 435,000 Crédit Maritime Vie shares previously held by the Crédit Maritime Group. As this is aninternal restructuring operation, the capital gains have been eliminated. The change in minority interests resulting from the reclassification of these shares is mirrored in a change inretained earnings, with no impact on the income statement.

[4) Other changes in equity:- B80 million arising on first-time consolidation of credit institutions (not subsidiaries) that have signed an association agreement with Crédit Coopératif. In view of their “associated”status, their retained earnings are recorded under minority interests;- B(15) million arising on the squeeze-out made by Natexis Banques Populaires for the remaining Coface shares;- B(13) million arising on Coface’s buyout of the minority interests in Unistrat;- B7 million in dilution arising on Natexis Banques Populaires’ acquisition of BP Développement shares from the Banque Populaire banks,- B3 million arising on other changes in scope of consolidation.



Unrealized gains or losses

Exchange Revaluation Change in value of financial Net income Equity Equity Total differences instruments net of deferred tax attributable attributable attributable equity

to equity to equity to minorityAvailable Hedging holders holders interests

for sale instruments of the parent of the assets parent

(66) - - - 853 8,504 1,962 10,466

- - - - (853) 0 - -

(66) 0 0 0 0 8,504 1,962 10,466

66 - - - - 1,991 (277) 1,714

0 0 0 0 0 10,495 1,685 12,180

- - - - - 147 - 147- - - - - 4 0 4- - - - - (87) (86) (173)

(41) - - - - (41) (42) (83)

- - - - - (10) 10 -- - - - - 0 63 63

- - - - 1,195 1,195 149 1,344

- - - - - 0 - 0

(41) 0 0 0 1,195 11,703 1,779 13,482

2 - 344 140 - (19) (530) (549)

- - - - (1,195) 0 - -

(39) 0 344 140 0 11,684 1,249 12,933

- - - - - 211 - 211- - - - - 4 0 4- - - - - (98) (43) (141)

- - 156 (77) - 79 28 10780 - - - - 81 22 102

- - (3) - - 219 (219) 0- - - - - 0 98 98

- - - - 1,522 1,522 166 1,688

0 - 10 3 - (2) - (2)

41 - 507 66 1,522 13,699 1,301 15,000

[5] Impact of adopting IFRS applicable in 2005 (EU IFRS)

Impact of acquisitions and divestments on minority interests during 2005:

[6] Crédit Maritime Mutuel tie-up: as part of the tie-up between the Crédit Maritime regional banks and the Banque Populaire regional banks, each Crédit Maritime regional bank madea capital increase reserved for the appropriate Banque Populaire regional bank, giving each one between 20% and 22% of the share capital. After approval from the French BankingCommission at end 2005, the Crédit Maritime Mutuel banks were consolidated by the consolidating entity. As this was an internal restructuring, the change in minority interests resul-ting from the tie-up is mirrored in a changed in retained earnings (B219 million), with no impact on the income statement.

[7] Other changes in scope of consolidation:The increase in minority interests is principally due to dilution of the percentage holding in Natexis Banques Populaires:* B57 million representing a net 1.33% reduction in the Group’s percentage holding in Natexis Banques Populaires, following the sale of Natexis Banques Populaires shares on the market;* B41 million representing a net 0.83% reduction following the exercise of stock options during the period, which was partially offset by a 0.10% increase in the number of treasury shares heldduring the year.

[8] Other changes:Other changes principally comprise:- adjustments between retained earnings (attributable to the Group) and unrealized gains/losses (attributable to the Group): B14 million ;- as part of Banque Populaire Val de France’s absorption of its subsidiary Sociep, Sociep’s retained earnings were transferred to the share premium: B6 million.



in millions of euros 12/31/2005 01/01/2005EU IFRS EU IFRS

Income before income taxes 2,551 2,034

+/- Net charge to depreciation and amortization of property, plant & equipment and intangible assets 306 310+/- Impairment of goodwill and other non-current assets (9) 35+/- Net charge to other provisions (including insurance reserves) 2,953 1,720+/- Share of results of associates (15) (7)+/- Net loss/(gain) on investing activities (414) (194)+/- Net loss/(gain) on financing activities 0 0+/- Other movements (79) 434

= Total non-cash items included in income before income taxes and other adjustments 2,743 2,298

+/- Decrease/(increase) in interbank and money market items 1,168 8,734+/- Decrease/(increase) in customer items (10,426) (10,874)+/- Decrease/(increase) in other financial assets or liabilities 1,340 1,472+/- Decrease/(increase) in non-financial assets or liabilities 3,486 4,203- Income taxes paid (868) (633)

= Net decrease/(increase) in operating assets and liabilities (5,299) 2,901

Total net cash provided/(used) by operating activities (A) (6) 7,232

+/- Decrease/(increase) in financial assets and investments in associates (1,841) (2,445)+/- Decrease/(increase) in investment property (159) 19+/- Decrease/(increase) in property, plant & equipment and intangible assets (209) (488)

Total cash used by investing activities (B) (2,209) (2,913)

+/- Cash received from/(paid) to shareholders 69 (22)+/- Other cash provided/(used) by financing activities 1,148 (1,624)

Total net cash provided/(used) by financing activities (C) 1,217 (1,646)

Effect of exchange rate changes on cash and cash equivalents (D) 117 (38)

Net increase/(decrease) in cash & cash equivalents (A + B + C + D) (880) 2,635

Net cash provided/(used) by operating activities (A) (6) 7,232Net cash provided/(used) by investing activities (B) (2,209) (2,913)Net cash provided/(used) by financing activities ( C) 1,217 (1,646)Effect of exchange rate changes (D) 117 (38)

Opening cash & cash equivalents (1,390) (1,245)

Cash, central banks, post offices (assets & liabilities) 3,329 1,735Interbank balances (1,939) (2,980)

Closing cash & cash equivalents 509 1,390

Cash, central banks, post offices (assets & liabilities) 2,713 3,329Interbank balances (2,203) (1,939)

Change in cash & cash equivalents (880) 2,634

Consolidated cash flow statement - Banque Populaire Group

2005 ANNUAL REPORT

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Note I - Impact of first-timeadoption of IFRSThe 2004 financial statements provided by way of comparisonhave been prepared in accordance with IFRS excluding IAS 32,39 and IFRS 4.

The effects of transition to IFRS on the 2004 financial statementswere described in a press release issued by the Banque PopulaireGroup on April 21, 2005.The main resulting reclassifications andrestatements affecting equity,Tier 1 capital, the balance sheet andincome statement are described in this note.

This note also describes the main reclassifications and restate-ments at January 1, 2005 resulting from the adoption of IAS 32,IAS 39 and IFRS 4.

The following terminology has been used for all of the financialdocuments provided:

n 2004 IFRS: IFRS excluding IAS 32, IAS 39 and IFRS 4;n EU IFRS: IFRS as adopted by a series of EU regulations, comprisingIAS 1 to 41, IFRS 1 to 5 and their interpretations as endorsed by theEuropean Union as at December 31, 2005.

IFRS 1 provides for certain exemptions to the principle of retros-pective adoption of IFRS as of the transition date:

n Business combinations: the Group has elected not to restatebusiness combinations before January 1, 2004.n Fair value as deemed cost: the Group has elected to measureits property, plant and equipment at cost.n Employee benefits: the Group has elected for prospectiveadoption of the corridor method.n Cumulative translation reserve: the translation reserve existingat January 1, 2004 has been transferred to retained earnings.n Share-based payment: the Group has elected to adopt IFRS 2for plans granted after November 7, 2002 which had not vestedat January 1, 2005.n Designation of previously recognized financial instruments:designation was made on the date of transition to IFRS.n Measurement of financial assets and liabilities at fair value:prospective adoption for transactions entered into afterJanuary 1, 2004.

Some information previously provided about the transition toIFRS has been amended following prospective adoption of thefair value option amendment to IAS 39 (endorsed by the ECregulation of November 15, 2005) and some method adjust-ments.

The main adjustment concerns the method of calculating collec-tive impairment provisions for loans and receivables.The amountpreviously disclosed was based on expected losses resultingfrom the application of Basel II using the probability of default ona one-year horizon. Expected losses have been recalculated to

factor in the probability of default based on the actual maturityof each exposure in the pools of assets concerned (industriesand countries). This resulted in a B45 million increase in theamount of impairment provisions recognized in the openingbalance sheet, together with B30 million decrease in equity netof deferred tax (B24 million attributable to equity holders of theparent).



Comments:

(1) Employee benefits

IAS 19 stipulates more precise rules for the measurement andrecognition of employee benefits. This led to an increase in theprovision for employee benefits, primarily due to actuarial gainsand losses, deducted from opening equity. Actuarial gains and los-ses comprise differences arising on changes in assumptions used(mainly the discount rate used) following the adoption of IFRS.

(2) Deferral of fees and commissions

IFRS require certain fees and commissions to be deferredover the period during which the service is rendered. UnderFrench GAAP, they were recognized in full upon receipt.Thisrestatement principally concerns the retail banking businesswith respect to fees charged for payment services and loan

insurance. It had no impact on net income for the period, ona comparable new lending basis.

(3) Elimination of Fund for General Banking Risks

Under international accounting standards (IAS 30 and IAS 37),provisions of a general nature do not qualify for recognition asa liability. The Fund for General Banking Risks was thereforereclassified in full as equity at January 1, 2004. Charges orreversals have been eliminated from the income statement.

(4) Restatement of leases

IAS 17 imposes stricter rules for the recognition of financeleases and operating leases. Certain contracts have thereforebeen reclassified as operating leases and the correspondingunrealized reserve recognized under French GAAP has beenderecognized.

I.1 - Impact on equity and Tier one capitalI.1.1 - Impact of 2004 IFRS on equity and Tier one capital at December 31, 2004N.B.n the impacts on equity and net income are shown net of the deferred tax effect,n the impact on the Tier one ratio is expressed in basis points.

Equity * Tier oneExcluding Net income ratio

net income(millions of euros) (millions of euros) (basis points)

Consolidated financial statementsat December 31, 2004 - French GAAP Comment 8,517 1,059 9.1%

2004 IFRS restatements:

Additional provisions for employee benefits (1) (221) 8 -0.14

Deferral of fees and commissions (2) (46) 3 -0.03

Restatement of fund for general banking risks (3) 2,082 115

Restatement of finance leases (4) (6) (2) 0.00

Restatement of goodwill and Coface network assets (5) 140 (11) -0.13Restatement of Coface network assets -0.13Restatement of goodwill 140 (11) 0.00

Property, plant & equipment and intangible assets (6) (15) 2 -0.01

Restatement of property, plant & equipment (31) (1) -0.02Capitalization of development expenses 16 3 0.01

Restatement of equalization reserves (7) 88 33 0.08

Deferred tax on capitalization reserve (8) (30) (3) -0.02

Scope and basis of consolidation (9) (1) (9) -0.20

Increase in percentage holding of NBP 40 11 -0.21First-time consolidation 13 (1) 0.01Other impacts (54) (19) 0.00

Total restatements 1,991 136 -0.45

Consolidated financial statements at December 31, 2004 - 2004 IFRS 10,508 1,195 8.7%

(*) attributable to equity holders of the parent

2005 ANNUAL REPORT

(5) Restatement of goodwill and Coface networkassets

n Goodwill Under IFRS, goodwill is no longer amortized but tested forimpairment at least once a year and whenever there is objectiveevidence that the value of the goodwill might be impaired, givingrise to the recognition of an impairment loss where necessary.Negative goodwill has been reclassified as equity in the openingbalance sheet and in subsequent years will be recognized imme-diately in the income statement. Goodwill arising on acquisitionsmade prior to January 1, 2004 has not been restated.

n Restatement of Coface network assets Network assets previously recognized as intangible assets in theFrench GAAP financial statements do not satisfy the criteria laiddown in IAS 38 for recognition as an intangible asset. In accor-dance with IFRS 1 on first-time adoption, these items have beenreclassified as goodwill.This had no impact on opening equity asthe adjustment is simply a reclassification.

(6) Restatement of property, plant & equipment andintangible assets (excluding network assets)

n Capitalization of software development expenses IFRS require software development expenses to be capitalized,which was not the case under French GAAP. These expenseshave therefore been recognized in the balance sheet as an intan-gible asset with a corresponding increase in opening equity.

n Component accounting for property, plant & equipmentThe impact of this approach relates primarily to property. UnderFrench GAAP, property assets (investment or owner-occupied)were depreciated over a period unique to the entire asset. UnderIFRS, a specific depreciation schedule is drawn up for each signifi-cant component of an asset which has a different useful life or rateof consumption of future economic benefits than the item as awhole.The resulting difference in depreciation was deducted fromopening equity.

(7) Equalization reserve

The equalization reserve recognized by Coface (credit insurancebusiness) and ABP IARD is a technical reserve permitted underFrench GAAP to protect insurance companies against the risk ofcatastrophe. IFRS does not permit the recognition of reservescovering risk of a general nature. Accordingly, the equalizationreserve was fully reclassified in equity on January 1, 2004.Charges to the equalization reserve recognized in 2004 underFrench GAAP have therefore been reversed.

(8) Deferred tax on the capitalization reserve

The capitalization reserve recognized in the separate financialstatements of insurance companies is intended to defer capitalgains arising on the sale of certain bonds to offset subsequentcapital losses.The portion presumed unlikely ever to be used isreclassified in equity. Under French GAAP, this does not give riseto the recognition of deferred income tax. Under IAS 12, it istreated as a temporary difference that gives rise to a deferredtax liability.

(9) Scope and basis of consolidation

n Calculation of the Group’s percentage holdings in NatexisBanques Populaires and its subsidiaries The consolidation of shares in Natexis Banques Populaires heldby the Banque Populaire banks and their subsidiaries, and thededuction of treasury shares from Natexis Banques Populaires’share capital, had the effect of increasing the Banque PopulaireGroup’s percentage holding in Natexis Banques Populaires from75.59% to 82.76%.The impact of this restatement on equity wasa reclassification between minority interests and equity attributa-ble to equity holders of the parent, and deduction of the valueof the securities concerned from retained earnings.

n Changes in scope of consolidation An analysis of the control criteria defined by IFRS did not haveany material impact on the scope of consolidation. The onlychange involved special purpose entities that were not conso-lidated under French GAAP.These are the Cristalys securitiza-tion fund, which is wholly-owned by BRED Banque Populaire,and four non-trading real estate companies (Sociétés CivilesImmobilières) that hold the property investments of NatexisAssurances and SCI Cofimmo (Coface sub-group).

Private equity investments between 20% and 50% are notaccounted for using the equity method as they have beendesignated as financial assets at fair value through profit orloss as of January 1, 2005. IAS 28 and 31 on investments inassociates accept that for this type of investment, fair valueprovides a better level of information than full consolidationor equity accounting.The adoption of IAS 27 for the privateequity business did not lead to the consolidation of any majo-rity investments, as none is material.

n Other impacts The impact on equity attributable to equity holders of theparent mainly comprises the allocation of IFRS restatements(sections1 to 8 above) between equity attributable to equityholders of the parent and minority interests, with no impact onthe Tier 1 ratio.



Comments:

(1) Amortized cost

Under French GAAP, loans are measured at cost with accruedinterest for the period recognized in profit or loss. Most fee andcommission income is recognized on a cash basis.

Under IFRS, loans and receivables are measured at amortizedcost using the effective interest method. Under this method,cer tain fees and commissions received or paid which aredirectly connected with the loan transaction are deferred overthe term of the loan on an actuarial basis.

(2) Valuation of certain financial instruments at fairvalue

Under French GAAP, the only financial instruments measured atfair value through profit or loss are securities and derivatives heldfor trading purposes.

IAS 39 requires the following financial instruments to be measu-red at fair value:

n through profit or loss: derivative financial instruments, ins-truments subject to a fair value hedge (to the extent of thecomponents hedged), instruments with embedded derivati-ves that cannot be separated from the host contract, instru-ments held for trading;

n through equity: financial instruments classified as available forsale and derivative financial instruments designated as cash flowhedges for macro-hedging purposes.

Under IFRS, insurance company investments are recognizedand measured in accordance with IAS 39. However, unrealizedgains or losses on investments representing contracts with adiscretionary participation feature are largely offset (about92%) by the recognition of a deferred participation liabilityunder the shadow accounting principle permitted by IFRS 4,which equates to considering that a proportion of those gainsor losses will be passed on to policyholders through the returnon their contracts.

I.1.2 - Impact on equity and Tier one capital at January 1, 2005 - EU IFRSN.B.n the impacts on equity are shown net of the deferred tax effectn the impact on the Tier one ratio is expressed in basis points

Equity* attributable Tier oneto equity holders ratio

of the parent(millions of euros) (basis points)

Consolidated financial statements at December 31, 2004 - 2004 IFRS Comment 11,703 8.7%

EU IFRS restatements

Amortized cost (1) (161) -0.11

Valuation of certain financial instruments at fair value (2) 643 0.09Fair value through profit or loss** 32 0.04Fair value of available for sale financial assets** 432Cash flow hedges** 100Fair value hedges** 5 0.00Fair value of insurance investments 74 0.05

Impairment charges and provisions (3) (404) -0.26

Discounting effect (75) -0.05Collective provisions (133) -0.08Home loans savings plan provisions (196) -0.13

Other impacts (4) (97) 0.00

Preferred shares (9) 0.00Treasury shares (19) -0.01Other (69) 0.00

Total EU IFRS restatements (19) -0.28

Consolidated financial statements at January 1, 2005 - EU IFRS 11,684 8.4%

(*) Including net income attributable to equity holders of the parent.(**) Excluding insurance.

2005 ANNUAL REPORT

(3) Impairment charges and provisions

n Impact of discountingThe conditions for identifying impairment of specific loans aresimilar to those used under French GAAP. However, under IFRS,the amount of the impairment is the difference between thecarrying amount of the loan and the estimated recoverableamount discounted at the effective interest rate applicable atthe inception of the loan.

n Collective provisionsThe rules for recognizing collective provisions are stricterunder IAS 39 than under French GAAP. If there is no objectiveevidence of impairment for an individually assessed financialasset, the asset is included in a pool of financial assets withsimilar credit risk characteristics and collectively assessed forimpairment. The country and industry provisions recognizedunder French GAAP were reclassified as collective provisions asof January 1, 2005. The method of calculating the provisions isbased on an internal ratings system cross-applied to three port-folios (personal/small business/corporate) and three risk types (pre-default/performing in default/industry). The breakdown byportfolio is based on the segmentation recommended underBasel II and performing loans are grouped into portfolios withsimilar risk characteristics. When a group of financial assets isfound to be impaired, the impairment provision is calculated onthe basis of expected losses.

n Provisions for home loan savings schemesHome loan savings schemes are peculiar to the French marketand are therefore not specifically treated by IFRS.The treatmentadopted by Banque Populaire Group is based principally on thework carried out on this issue under the aegis of the CNC.Thepurpose of the provisions is to cover the two risks inherent inthese schemes:- the risk of having to grant loans at a pre-agreed rate which islower than the market rate;- the risk of paying interest on the savings accounts at an above-market rate.

Both risks have been measured prospectively until extinctionof the savings carried on the balance sheet. This requiredmodeling current outstandings (savings and conversion intoloans) based on assumptions regarding future market ratesand client behaviour. Following this evaluation, a provision wastaken against these risks by deduction from opening equity atJanuary 1, 2005.

(4) Other impacts

n Preferred sharesUnder French GAAP, preferred shares issued by the Group arerecognized as equity and classified under minority interests.

Under IFRS, preferred shares are classified, after analysis of thecontracts, as liabilities or equity, depending on whether the issueris contractually obliged to pay cash to holders of the shares.

On the basis of its analysis, the Group has reclassified these sharesas liabilities, the main effect of which is a reduction in minority inte-rests corresponding to the amount of the issues.Dividends paid onthe preferred shares are treated as interest expense under IFRS.

n Treasury shares IFRS does not permit treasury shares to be recognized in thebalance sheet regardless of their purpose and classification underFrench GAAP. In accordance with 2004 IFRS, the treasury sharesheld by Natexis Banques Populaires have been eliminatedthrough equity at their historical value, taking account of theGroup’s new percentage holding in Natexis Banques Populaires(see Note I 1.1 - para. 9). The unrealized capital gain on theseshares was also eliminated as of January 1, 2005, in accordancewith IAS 39.

n Other impactsThe impact on equity mainly comprises the allocation of the EUIFRS restatements identified above between equity attributableto equity holders of the parent and minority interests, with noimpact on the Tier 1 ratio.



I.2 - Transition of the balance sheet at December 31, 2004 (2004 IFRS) and January 1, 2005 (EU IFRS)

Assetsin millions of euros IFRS restatements Restatements 01/01/2005 EU IFRS

2004 IFRS impacts EU IFRS impactsNote I.2.1 Note I.2.2 Note I.2.3

Cash and balances with central banks and post offices 3,354 0 5 3,359

Financial assets at fair value through profit or loss 30,505 (136) 1,505 31,874

Hedging instruments 230 0 341 571

Available-for-sale financial assets 28,944 (849) 742 28,837

Loans and advances to banks 39,727 0 (184) 39,543

Loans and advances to customers 130,442 149 (1,119) 129,472

Interest rate hedging reserve

Held-to-maturity financial assets 5,664 84 5,748

Deferred income tax assets 335 141 291 767

Current income tax assets

Other assets 7,122 (409) (90) 6,622

Non-current assets held for sale

Investments in associates 90 2 2 93

Investment property 276 739 40 1,055

Property, plant & equipment 1,722 50 0 1,772

Intangible assets 573 (342) 2 234

Goodwill 190 366 0 556

Total assets 249,173 (289) 1,619 250,502

Liabilities and Equityin millions of euros

Due to central banks and post office 29 29

Financial liabilities at fair value through profit and loss 3,222 0 84 7,237

Hedging instruments 221 0 546 767

Deposits from banks 44,908 (2) 78 44,984

Customer deposits 97,874 (8) 12 97,878

Debt securities 41,717 (186) 6 41,538


Deferred income tax liabilities 183 116 249 548

Current income tax liabilities 130 130

Other liabilities 14,809 (72) (32) 10,770

Liabilities associated with non-current assets held for sale

Insurance companies’ technical reserves 25,725 (96) 793 26,422

Provisions 4,037 (1,876) (285) 1,876

Subordinated debt 4,675 0 710 5,385

Minority interests 2,068 (288) (531) 1,249

Equity attributable to equity holders of the parent 9,576 2,122 (14) 11,684Share capital and reserves 7,706 (4) 7 7,709Retained earnings 953 1,924 (543) 2,334Unrealized or deferred gains or losses (143) 66 522 446Net income for the period 1,059 136 1 1,195

Total liabilities & equity 249,174 (289) 1,619 250,502

2005 ANNUAL REPORT

in millions of euros Cash and Financial Hedging Available Loans and Loans and Interest Held-to- Deferredbalances assets at instruments for-sale advances advances rate maturity income

with central fair value financial to banks to hedging financial tax assetsbanks & through assets customers reserve assets

post offices profit or loss

French GAAP (1) (2) (3) (3) (1) (2) (1) (2)

Interbank and money market assets 55,463 (3,354) (7,764) (5,015) (39,727) (29) 0

Customer transactions 120,584 (772) 1 (118,719) 0

Lease financing 8,890 (8,726)

Bonds, equities and other fixed and variableincome securities 26,256 (12,859) (7,827) 0 (2,663) 0

Insurance companyinvestment portfolios 26,044 (3,687) (15,928) (180) (5,664)

Investments in affiliates andassociated undertakingsand other securitiesheld for investment 989 (1,018) (175) (125) 0

Property & equipmentand intangible assets 2,389

Goodwill 228

Accrued income, prepaidexpenses and other assets 9,561 (4,406) (230) (335)

Total assets 250,404 (3,354) (30,505) (230) (28,944) (39,727) (130,442) - (5,664) (335)

3,354

30,505

230

28,944

39,727

130,442

5,664

335

I.2.1 - Main reclassifications made at December 31, 2004 (2004 IFRS) and at January 1, 2005 (EU IFRS)

Assets IFRS IFRS



Current Other Non- Invest- Investment Property, Intangible Goodwill Otherincome assets current ments property plant & assets reclassi-

tax assets assets held in equipment fications for sale associates (assets/

liabilities)

(1) (2) (1) (2)

425

(1,094)

(27) (13) (123)

(2,907)

0 (585)

(90) 445 (25)

(108) (1,708) (573)

(190) (38)

(7,122) 2,532

(7,122) (90) (276) (1,722) (573) (190) (1,230) IFRS

Cash and balances with centralbanks and post offices 3,354

Financial assets at fair value through profit or loss 30,505

Hedging instruments 230

Available-for-sale financial assets 28,944

Loans and advances to banks 39,727

Loans and advances to customers 130,442

Interest rate hedging reserve 0

Held-to-maturity financial assets 5,664

Deferred income tax assets 335

Current income tax assets 0

7,122 Other assets 7,122

Non-current assets held for sale 0

90 Investments in associates 90

276 Investment property 276

1,722 Property, plant & equipment 1,722

573 Intangible assets 573

190 Goodwill 190

Total assets 249,173

IFRS

2005 ANNUAL REPORT

in millions of euros Due from Financial Hedging Deposits Customer Debt Interest Deferred Current Other Liabilitiescentral liabilities at instru- from deposits securities rate income tax liabilities associatedbanks FV through ments banks hedging tax liabilities with non-

and post profit reserve liabilities current assets offices and loss held for sale

French GAAP (1) (2) (3) (3)

Interbank and money market liabilities 46,971 (29) (2,153) (44,908)

Customer deposits 98,253 (66) (97,874)

Debt securities in issue 42,001 (266) (41,717)

Insurance company technical reserves 25,725

Deferred income, accruedcharges and other liabilities 16,861 (737) (221) (183) (14,665)

Negative goodwill 142 (142)

Provisions for contingenciesand losses 1,939 0 (130)

Long-term subordinated debt 4,675 0

Fund for General Banking Risks 2,192

Minority interests 2,068

Shareholders’ equity(excluding FGBR) 9,576- Common stock 3,033- Additional paid-in capital 741- Retained earnings 4,743- Net income for the period 1,059

Total liabilities 250,404 (29) (3,222) (221) (44,908) (97,874) (41,717) (183) (130) (14,807)

29

3,222

221

44,908

97,874

41,717

183

130

14,807

Liabilities IFRS IFRS


Insurance Provisions Subor- Minority Equity Share Retained Unrealized Net Othercompanies’ dinated interests attributable capital earnings or income reclassi-

technical debt to equity and deferred for the ficationsreserve holders of reserves gains or period (assets/

the parent losses liabilities)

119

(313)

(18)

(25,725)

(1,055)

(1,846)(37)

(4,675)

(2,192)

(2,068)

(9,576)

(3,033)(741)

(3,932) (953) 143(1,059) 0

(25,725) (4,037) (4,675) (2,068) (9,576) (7,706) (953) (143) (1,059) (1,230) IFRS

Due to central banks and post offices 29

Financial liabilities at fair valuethrough profit or loss 3,222

Hedging instruments 221

Deposits from banks 44,908

Customer deposits 97,874

Debt securities 41,717

Interest rate hedging reserve 0

Deferred income tax liabilities 183

Current income tax liabilities 130

Other liabilities 14,807

Liabilities associated with non-currentassets held for sale 0

25,725 Insurance companies’ technical reserves 25,725

4,037 Provisions 4,037

4,675 Subordinated debt 4,675

2,068 Minority interest 2,068

9,576 Equity attributable to equity holders of the parent 9,576

7,706 - Share capital and reserves 7,706

953 - Retained earnings 953

(143) - Unrealized or deferred gains or losses (143)

1,059 - Net income for the period 1,059

Total liabilities 249,174

IFRS


2005 ANNUAL REPORT

Comments on reclassifications (see board I.2.1)The balance sheet reclassifications relate to the adoption of thenew presentation format set out in CNC recommendation2004-R-03 of October 27, 2004, and the main reclassificationsmade at December 31, 2004 (under 2004 IFRS) and at January 1,2005 (under EU IFRS), including the following:

(1) Breakdown of securities portfolio

Under 2004 IFRS, financial instruments at fair value throughprofit or loss comprise only financial instruments held for trading, while available-for-sale financial assets comprise securitiesheld for sale, investments in affiliates and non-consolidatedcompanies and other long-term investments.

The adoption of IAS 32 and IAS 39 as of January 1, 2005 led tothe reclassification of items making up the securities portfolio totake account of the new classification rules based on the pur-pose of the financial instruments and their valuation method.

(2) Breakdown of insurance company investments

Under French GAAP, insurance company investments are bro-ken down into four asset classes: marketable securities (mainlybonds at fixed or revisable rates), equities, property investments,and loans and deposits.

Under IFRS, insurance investments (B26 billion) are reclassifiedby type:

n investments in marketable securities have been reclassified inaccordance with the categories set out in IAS 32 and IAS 39, asfollows:- Assets at fair value through profit or loss (B3.7 billion),

- Available-for-sale financial assets (B15.9 billion),

- Held-to-maturity financial assets (B5.7 billion) *

n property investments are classified as “Investment property”(B0.6 billion);n B0.2 billion has been reclassified as “Loans and advances tocustomers.”* The “held-to-maturity financial assets” category is only used by the Group for fixed-income securities representing insurance company investments.

(3) Hedging instruments

Under French GAAP, the fair value of financial instruments wasrecognized in the balance sheet as “Accrued income, prepaidexpenses and other assets” or “Deferred income, accrued char-ges and other liabilities” and related solely to derivative financialinstruments held for trading purposes.

Under IFRS, all derivative financial instruments are recognized onthe balance sheet at their fair value on inception, whether theyare for trading or hedging purposes:

n trading derivatives are recognized as financial assets or liabili-ties at fair value through profit or loss;n hedging derivatives are identified in the balance sheet under aseparate line item.



I.2.2 - Main restatements made at December 31, 2004 (2004 IFRS)

Assetsin millions of euros Changes in scope and methods

of consolidationEmployee Deferral of Elimination Restatement Goodwill Non- Equali- Deferred Increase First- Other Total

benefits fees and of FGBR of lease and current zation tax in time 2004commissions financing value of assets reserve on percentage consoli- IFRS

Coface capitali- holding dation impactsnetwork zation in NBP

reserve

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Cash and balances with central banksand post offices 0 0

Financial assets at fair value throughprofit or loss (137) 1 (136)

Hedging instruments 0 0

Available-for-sale financial assets (170) (683) 5 (849)

Loans and advances to banks 0 0

Loans and advances to customers (360) 510 (1) 149


Held-to-maturity financial assets

Deferred income tax assets 112 23 5 0 4 (3) 141


Other assets (66) (4) (337) (3) (409)


Investments in associates 8 (6) 2

Investment property 349 394 (4) 739

Property, plant & equipment (2) (4) 40 16 50

Intangible assets (341) 2 (2) (342)

Goodwill 366 0 366

Total assets 112 (43) (8) 25 (6) (307) (64) 1 (289)

Liabilitiesin millions of euros

Due to central banks and post offices

Financial liabilities at fair value through profit or loss 0 0

Hedging derivatives 0 0

Deposits from banks (1) (1) (2)

Customer deposits (8) 0 (8)

Debt securities (186) 0 (186)


Deferred income tax liabilities 10 68 33 5 0 116

Current income tax liabilities

Other liabilities 5 (103) 10 19 (2) (72)

Liabilities associated with non-currentassets held for sale

Insurance companies’ technical reserves (190) 91 3 (96)

Provisions 320 (2,186) (3) (7) (1,876)

Subordinated debt 0 0

Minority interests (366) 2 76 (288)

Equity attributable to equity holders of the parent (213) (43) 2,186 (8) 129 (12) 121 (33) 51 12 (67) 2,122

Share capital and reserves (2) (2) (4)Retained earnings (221) (46) 2,074 (7) 140 (15) 88 (30) 40 13 (113) 1,924Unrealized or deferred capital gains or losses (10)66 66Net income for the period 8 3 115 (2) (11) 2 33 (3) 11 (1) (19) 136

Total liabilities 112 (43) (8) 25 (6) (305) (66) 1 (289)

Comments :

(1 - 9) See comment on each restatement in note I.1.1 - Impact on equity and Tier 1 capital at December 31, 2004 (2004 IFRS).

(10) In application of IAS 21, the translation reserve arising on the conversion of foreign entities’ financial statements existing at January 1, 2004 has been transferred to retained earnings. As this is areclassification between items of equity, it had no impact on opening equity.

I.2.3 - Main restatements at January 1, 2005 (EU IFRS)

Assetsin millions of euros Impact of fair value Impact of provisions Other impacts

Amortized FV through AFS CF FV Insurance Dis- Collec- Home Prefer- Treasury Other Total cost P&L assets hedges hedges company coun- tive loan red shares EU IFRS

exc. exc. exc. exc. investments ting provi- saving shares impactsInsurance Insurance Insurance Insurance sions scheme

investments investments investments investments provisions

(1) (2) (3) (4)

Cash and balances with central banksand post offices 5 5

Financial assets at fair value 7 331 0 1,168 0 (19) 18 1,505through profit or loss

Hedging instruments (44) 179 191 0 15 341

Available-for-sale financial assets 4 (2) 577 451 (398) (2) 112 0 742

Loans and advances to banks (3) (120) (1) (60) 0 (184)

Loans and advances to customers (260) 1 34 (110) (741) (44) (1,119)


Held-to-maturity financial assets 0 84 0 84

Deferred income tax assets 82 0 38 79 103 (10) 291


Other assets (42) (192) 123 0 21 (90)


Investments in associates 1 1 2

Investment property 16 24 40

Property, plant & equipment 0 0

Intangible assets 2 2

Goodwill 0 0 0

Total assets (211) 94 577 179 555 999 (75) (722) 103 112 (19) 27 1,619

Liabilitiesin millions of euros

Due to central banks and post offices

Financial liabilities at fair valuethrough profit or loss 79 5 0 84

Hedging derivatives (29) 152 399 24 546

Deposits from banks (3) 80 0 78

Customer deposits 12 0 12

Debt securities (25) (9) 51 (12) 6


Deferred income tax liabilities 17 145 52 3 29 2 249

Current income tax liabilities

Other liabilities (2) 9 (125) (133) 97 117 2 (34)

Liabilities associated with non-current assets held for sale

Insurance companies’ technical reserves 793 793

Provisions (7) 0 (583) 299 5 (285)

Subordinated debt (20) 2 132 599 (3) 710

Minority interests 0 (595) 63 (531)

Equity attributable to equityholders of the parent (161) 32 432 100 5 74 (75) (139) (196) (9) (19) (58) (14)

Share capital and reserves 0 7 7Retained earnings (161) 14 89 (15) 5 (6) (75) (139) (196) (9) (19) (31) (543)Unrealized or deferred capital gains or losses 18 343 114 81 (35) 522Net income for the period 0 1 1

Total liabilities (211) 94 577 179 555 999 (75) (721) 103 112 (19) 28 1,619

Comments: (1 - 4) See comment on each restatement in note I.1.2 - “Impacts on equity and Tier 1 capital at January 1, 2005 (EU IFRS).

2005 ANNUAL REPORT



I.3 - Transition of income statement at December 31, 2004 (2004 IFRS)

Income statementin millions of euros 2004 IFRS

12/31/2004 Reclassifications Restatements Preferred 12/31/2004French GAAP shares 2004 IFRS

Note I.3.1 Note I.3.2 (1) (1)

Interest income 9,620 809 11 10,440

Interest expense (6,100) (37) 8 (48) (6,176)

Income from variable income securities 65 (65) //////// //////// ////////

Net fee and commission income 2,321 2 2,323

Net gains/(losses) on trading account securities 414 (414) //////// //////// ////////

Gains or losses on financial instrumentsat fair value through profit or loss //////// 430 (21) 409

Net gains on securities held for sale 240 (240)

Gains or losses on available 199 (13) 187for-sale financial assets ////////

Other banking revenue and expenses 74 (74) //////// //////// ////////

Gross margin on insurance operations 810 (810)

Other net banking income 196 220 46 463

Net banking income 7,641 18 34 (48) 7,646

General operating expenses (4,789) (30) 14 (4,805)

Depreciation, amortization and impairment of property, plant & (307) 7 (300)equipment and intangible assets

Gross operating income 2,545 (12) 56 (48) 2,541

Provisions for loans losses (480) 3 0 (477)

Operating income 2,065 (9) 56 (48) 2,064Share of results of associates 7 0 7

Gains or losses on other assets 26 (21) 0 5

Change in value of goodwill (33) (10) (43)

Income before income taxes 2,066 (30) 46 (48) 2,034

Exceptional items (30) 30 //////// //////// ////////

Income tax (700) (35) (736)

Charge to fund for general banking risks (115) //////// 115 //////// ////////

Net income 1,221 0 125 (48) 1,298

Attributable to minority interests (162) 11 48 (103)

Attributable to equity holders of the parent 1,059 0 136 1,195

Comments: (1) For comparability, minority interests in preferred shares were reclassified in net banking income as of December 31, 2004.

2005 ANNUAL REPORT

I.3.1 - Breakdown of reclassifications at December 31, 2004 (2004 IFRS)

Income statementin millions of euros Reclassifications Total

Exceptional Gains or losses Otheritems on other assets

(1) (2) (3)

Interest income 809 809

Interest expense (37) (37)

Income from variable income securities //////// //////// (65) (65)

Net fee and commission income 0

Net gains/(losses) on tradingaccount securities //////// //////// (414) (414)

Gains or losses on financial instruments 430 430at fair value through profit or loss

Net gains on securities held for sale //////// //////// (240) (240)

Gains or losses on available-for-sale financial assets 18 181 199

Other banking revenue and expenses //////// //////// (74) (74)

Gross margin on insurance operations //////// //////// (810) (810)

Other net banking income 220 220

Net banking income 0 18 0 18

General operating expenses (30) (30)

Depreciation, amortization and impairment of property, plant & equipment and intangible assets 0

Gross operating income (30) 18 0 (12)

Impairment charges and other credit provisions 3 3

Operating income (30) 21 0 (9)

Share of results of associates 0

Gains or losses on other assets (21) (21)

Change in value of goodwill 0

Income before income taxes (30) 0 0 (30)

Exceptional items 30 //////// //////// 30

Income tax 0

Charge to fund for general banking risks //////// //////// //////// 0

Net income 0 0 0 0

Attributable to minority interests 0

Attributable to equity holders of the parent 0 0 0 0

Comments:

(1) Reclassification of exceptional itemsExceptional items have been reclassified as general operating expenses. They mainly comprise expenses relating to mergers between Banque Populaire regional banks (B17m), expensesrelating to the Coface Group’s stock option plan (B8m) and other expenses corresponding to prior year results of subsidiaries that were consolidated for the first time in 2004 (B2m).

(2) Reclassification of gains or losses on other assetsGain or losses on disposal of financial assets and net provision charges against securities held for investment classified under French GAAP as “gains or losses on other assets” arereclassified respectively under IFRS in “net banking income” and “Impairment charges and other credit provisions”. Net gains or losses on disposal of property, plant & equipment andintangible assets used in the business, and on disposal of investments in companies that were still consolidated at the time of disposal, are still classified in “gains or losses on otherassets”.

(3) Other reclassificationsOther reclassifications comprise reclassifications within “net banking income”, principally:- allocation of gross margin on insurance operations;- reclassification of interest on fixed-income trading securities in “interest income”.



I.3.2 - Income statement at December 31, 2004 - Breakdown of restatements for 2004 IFRS

Income statementin millions of euros Restatements* Total

Changes in scope and methods of consolidation

Employee Deferral Elimination Restatement Goodwill Non- Equali- Deferred Increase First- Otherbenefits of fees and of FGBR of lease and current zation tax on in time

commissions financing value of assets reserve capitali- percentage consoli-Coface zation holding dation

network reserve inNBP

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Interest income 0 13 (1) 11

Interest expense (3) 11 1 8

Income from variable income securities /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Net fee and commission income 4 (2) 0 2

Net gains/(losses) on trading account securities /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Gains or losses on financial instruments at fair value through profit or loss (21) 0 (21)

Net gains on securities held for sale /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Gains or losses on available for-sale financial assets (15) 2 0 (13)

Other banking revenue and expenses /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Gross margin on insurance operations /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Other net banking income (2) (3) 52 0 0 0 46

Net banking income 4 (3) (6) 52 0 (15) 2 0 34

General operating expenses 12 0 4 1 (1) (1) 14

Depreciation, amortization andimpairment of property, plant &equipment and intangible assets 8 (1) (1) 1 7

Gross operating income 12 4 (3) 5 52 (15) 0 1 56

Impairment charges and othercredit provisions 0 0 0

Operating income 12 4 (3) 5 52 (15) 0 1 56

Share of results of associates 0 0

Gains or losses on other assets 0 0 0 0 0

Change in value of goodwill (11) 1 (10)

Income before income taxes 12 4 0 (3) (11) 5 52 (15) 0 2 46

Exceptional items /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// /////// ///////Income tax (4) (1) 1 (3) (19) (3) (4) (1) (35)

Charge to fund for generalbanking risks /////// /////// 115 /////// /////// /////// /////// /////// /////// /////// /////// 115

Net income 8 3 115 (2) (11) 2 33 (3) (19) 0 1 126

Attributable to minority interests 0 30 (19) 11

Attributable to equity holders of the parent 8 3 115 (2) (11) 2 33 (3) 11 0 (19) 136

Comments:

* See comment on each restatement (1 to 9) in note I.1.1 - “ Impact on equity and Tier 1 capital at December 31, 2004 (2004 IFRS)”.

2005 ANNUAL REPORT

Note II - Basis of presentationAs an unlisted company, the Banque Populaire Group is not obli-ged to adopt international financial reporting standards (IFRS).However, with a view to transparency and comparability withother major banking groups in the market, the Board ofDirectors of Banque Fédérale des Banques Populaires has decided to prepare its consolidated financial statements in accor-dance with IFRS as of January 1, 2005.The consolidated financialstatements include a balance sheet, income statement, state-ments of changes in equity, cash flow statement and notes to thefinancial statements.

The consolidated financial statements for the year endedDecember 31, 2005 are the first to be prepared using the inter-national financial reporting standards as endorsed by theEuropean Union and applicable as of that date.These standardsinclude IAS 1 to 41, IFRS 1 to 6 and their interpretations endor-sed by the European Union as at December 31, 2005.

The Group has elected to adopt the June 2005 fair value amend-ment to IAS 39 “Financial Instruments: Recognition andMeasurement” prospectively.This amendment permits the reco-gnition of financial assets and liabilities at fair value through profit or loss provided that they meet one of the following threecriteria:

n hybrid instruments containing one or more embedded deriva-tives;

n instruments that belong to a group of assets or liabilities that ismanaged and its performance evaluated on a fair value basis;

n instruments that eliminate or significantly reduce an accountingmismatch.

As permitted by IFRS 1, the Group elected not to adopt IAS 32,IAS 39 and IFRS 4 for its opening balance sheet at January 1,2004.These standards have been adopted for the first time as ofJanuary 1, 2005. The 2004 comparative data affected by thesestandards are therefore based on the French GAAP previouslyused by the Group in accordance with standards CRC 99-07 and2000-04 of the “Comité de la Réglementation Comptable”.Theprinciples of first-time adoption of IAS 32-39 and IFRS 4 are described in note I of this report.

The consolidated financial statements provide comparative data asof December 31, 2004 for the income statement, based on IFRSexcluding IAS 32-39 and IFRS 4, and comparative data as ofJanuary 1, 2005 for the balance sheet and cash flow statement.

Meanwhile, the Group has elected not to adopt the followingamendments prospectively, which were endorsed by theEuropean Union as of December 31, 2005:

n the amendment to IAS 39 “Financial Instruments: Recognitionand Measurement” concerning cash flow hedges of future intra-group transactions in foreign currencies;

n the amendment to IAS 19 “Employee Benefits” concerningactuarial gains and losses, group plans and disclosures.

The application of these two amendments is not expected tohave a material impact.

The Group has elected not to adopt the following standardsprospectively, which were published by the IASB and endorsedby the European Union on January 11, 2006:

n the amendment to IAS 1 concerning equity disclosures;

n IFRS 7 “Financial Instruments: disclosures”.

These two standards only concern information to be providedin the notes and therefore have no impact on the Group’s finan-cial statements.They will be adopted as of January 1, 2007.

Consolidation methods and principles are set out in note III.

For greater clarity, the significant accounting policies used to prepare the consolidated financial statements at December 31,2005 are presented in the notes to the financial statements, andprincipally the notes to the balance sheet (note V), income statement (note VI) and the note on payroll costs, employees,employee compensation and benefits (note VIII).

Note III - Consolidationmethods and principles

III.1 - Structure of the BanquePopulaire GroupThe Banque Populaire Group is a group of cooperative bankswith an ownership structure in the form of an inverted pyramid.The capital of the Group’s central body, Banque Fédérale desBanques Populaires, is owned by the Banque Populaire regionalbanks, which are wholly-owned by their member-stakeholders.Banque Fédérale des Banques Populaires is also the holdingcompany for Natexis Banques Populaires, which is the Group’slisted entity.

Due to its unusual ownership structure, the consolidated finan-cial statements of the Banque Populaire Group are based on thedefinition of a reporting entity made up of a group of membersbound by a single mechanism for financial relations and corpo-rate governance.

The reporting entity has been determined in accordance withIAS 27,which allows the Group to prepare its consolidated finan-cial statements using IFRS.

III.1.1 - The role of Banque Fédérale des Banques PopulairesSince its reincorporation as a société anonyme pursuant to ar ticle 27 of law no. 2001-4200 of May 16, 2001, BanqueFédérale des Banques Populaires has fully and actively exercisedthe two key roles assigned to it:

n Role of central body of the Banque Populaire Group

In accordance with the 1947 Act on cooperative groups, set outin article 8 of the May 16, 2001 law, the role of central bodyforms the core of the Banque Populaire group’s organization.



Banque Fédérale des Banques Populaires is responsible for :

n organizing the liquidity and capital adequacy of the network asa whole;

n defining the policy and future strategy of the Banque PopulaireGroup;

n negotiating national and international agreements on behalf ofthe network;

n more generally, exercising administrative, technical and financialcontrol over the organization and management of the BanquePopulaire banks and their direct or indirect subsidiaries in orderto maintain a cohesive network and ensure its proper functio-ning and development.

In 2003, the role of central body was extended to CréditMaritime Mutuel, pursuant to article 93 of the Financial SecurityAct (law no. 2003-706) of August 1, 2003.

n The role of banking holding company and bank

Banque Fédérale des Banques Populaires is the holding com-pany of the Natexis Banques Populaires Group and otherdirectly-owned subsidiaries. As a fully-fledged bank, BanqueFédérale des Banques Populaires centralizes the BanquePopulaire banks’ cash surpluses and ensures their refinancing.This function is substantially delegated to Natexis BanquesPopulaires under a cash pooling agreement.

III.1.2 - Liquidity and capital adequacy –internal guarantee mechanismsThe system to guarantee the liquidity and capital adequacy of theBanque Populaire network has been organized by BanqueFédérale des Banques Populaires in its capacity as central body,in accordance with articles L. 511-30, L. 511-31, L. 511-32 and L. 512-12 of the French Monetary and Financial Code.

The system functions by pooling the capital of all the banks in thenetwork.

If any one bank is faced with a lack of liquidity or is undercapita-lized, all the other banks will be called on to contribute capital,within the limit of their own resources. As a last resort, theBanque Fédérale des Banques Populaires will also provide capi-tal from its own resources.

The capital pool is organized in two tiers.The first tier consists ofthe “Federal Solidarity Fund” set aside by Banque Fédérale desBanques Populaires and the second tier is the “RegionalSolidarity Fund” set aside by each Banque Populaire bank. Eachyear, the Banque Populaire banks transfer an amount to this fundequal to 10% of their net income before transfers to the fund forgeneral banking risks and tax, after deduction of tax on theamount of the transfer. Withdrawals from these funds by theBanque Populaire banks must be authorized by Banque Fédéraledes Banques Populaires.

In the separate financial statements of each entity, the FederalSolidarity Fund and Regional Solidarity Funds are recognized byBanque Fédérale des Banques Populaires and the Banque

Populaire banks respectively as a specific component of the Fundfor General Banking Risks. Under IAS 30 and IAS 37, these fundsdo not meet the criteria for recognition as a liability and accor-dingly they have been reclassified as equity in the consolidatedfinancial statements as of January 1, 2004. Similarly, transfers inand out of the funds in 2004 and 2005 have been eliminated inthe income statement.

A collective agreement has also been signed, whereby eachBanque Populaire bank guarantees the liquidity and capital adequacy of the mutual guarantee companies whose corporatepurpose is limited to guaranteeing the activities of the BanquePopulaire banks.

The guarantee system of the Banque Populaire network alsoguarantees the liquidity and capital adequacy of Crédit MaritimeMutuel, for which the Banque Fédérale des Banques Populairesis the central body, in accordance with Article L. 512-69 of theFrench Monetary and Financial Code. This guarantee systemkicks in after Crédit Maritime Mutuel’s own system.

Lastly, the members of the network contribute, along with allFrench credit institutions, to the Fonds de Garantie des Dépôts(deposit guarantee fund) set up in application of the Depositors’Protection Act.

III.1.3 - Definition of the reporting entityDue to the Group’s unusual ownership structure, the reportingentity is made up of all the institutions directly or indirectly affiliated with the central body, as follows:

n the Banque Populaire banks, i.e. the 19 Banque Populaireregional banks, Casden Banque Populaire and Crédit Coopératif;

n the Crédit Maritime Mutuel banks that are affiliated toBanque Fédérale des Banques Populaires pursuant to theFinancial Security Act (law no. 2003-706 of August 1, 2003 andconsolidated as of the second half of 2005;

n the mutual guarantee companies (SCM) which are licensedjointly with the Banque Populaire banks;

n the Group’s central body – within the meaning of the law –Banque Fédérale des Banques Populaires.

2005 ANNUAL REPORT

Since the first half of 2004, the Banque Populaire Group includesthe credit institutions that have signed an association agreementwith Crédit Coopératif.Their Group’s share in their net incomeand equity is recorded under minority interests.

The other Group companies, including Natexis BanquesPopulaires, are treated as subsidiaries of the reporting entity.

III.2 - Scope of consolidation andconsolidation methodsThe scope of consolidation includes all significant entities overwhich the reporting entity exercises control or influences itsmanagement. Three types of control are identified under IFRS:companies that are exclusively controlled, companies that arejointly controlled and companies over which the entity exercisessignificant influence.The type of control exercised by the repor-ting entity is not based solely on the percentage of voting rightsit holds, but includes an economic and legal analysis of relationsbetween the reporting entity and its subsidiaries.

Under IAS 27, exclusive control is presumed to exist when theparent has:

n ownership, directly or indirectly through subsidiaries, of morethan half of the voting power of an entity;

n power to govern the financial and operating policies of theentity under a statute or an agreement;

n power to appoint or remove the majority of the members ofthe Board of Directors or equivalent governing body and controlof the entity is by that board or body;

For entities that are 40-50% owned, IAS 27 requires control tobe demonstrated for the entity to be fully consolidated.

Joint control is the contractually agreed sharing of control overan economic activity between a limited number of shareholdersor investors, and exists only when the strategic financial and operating decisions relating to the activity require the unanimousconsent of the parties sharing control. Jointly controlled compa-nies are proportionately consolidated.

Significant influence is the power to participate in the financialand operating policy decisions of an economic activity but is notcontrol or joint control over those policies. Significant influenceis presumed to exist when the reporting entity directly or indirectly owns at least 20% of the voting rights.

In order to present a true and fair picture of the group’s consolida-ted operations, only those subsidiaries providing a material contri-bution are consolidated. Materiality is not determined with respectto numerical thresholds, but based on the principle of ascendingmateriality. In other words, any entity included at a sub-consolida-tion level is included at all higher consolidation levels, even if it is notmaterial at those levels. Conversely, any entity considered to bematerial within a given scope of consolidation is also considered tobe material at all lower consolidation levels and must therefore beconsolidated by them where exclusive control is exercised.

Consolidation methodsThe Group’s consolidated financial statements include the finan-cial statements of the parent company, controlled entities andentities over which the Group has significant influence. Entitiesover which the Group has exclusive control are fully consolida-ted, those over which it has joint control are proportionatelyconsolidated and those over which it has significant influence areaccounted for by the equity method.

Potential voting rightsIAS 27 requires the reporting entity to consider the existenceand effect of instruments such as call options and potential votingrights when assessing whether it exercises control or significantinfluence. However, potential voting rights are not taken intoaccount for the purpose of calculating the percentage holding.

A review of potential voting rights held by Natexis BanquesPopulaires did not lead to any changes in the scope of consoli-dation in 2004 and 2005.

Private equityIAS 27 requires the consolidation of all subsidiaries regardless ofthe activity of the parent company. It therefore applies to privateequity companies in the same way as other companies.

Member-stakeholders

Member-stakeholders

Member-stakeholders

Mutual guaranteeCompanies

Banque Populaire Group

Reporting entity

Local subsidiaries

Associatedinstitutions *


99%

81% **

CréditMaritime Mutuel Banque Populaire banks

Banque Fédérale desBanques Populaires

(*) Credit institutions “associated” with Crédit Coopératif via an association agreement.

(**) Percentages include the holdings of Banque Fédérale’s subsidiaries in Natexis Banques Populaires and exclude treasury shares.



Accordingly, a private equity company is required to consolidateall investments in which it holds more than 50%, provided theyare material.

However, IAS 28 and 31 recognize the specific nature of the pri-vate equity business. Private equity investments between 20%and 50% do not have to be accounted for using the equitymethod if they are designated at inception as at fair valuethrough profit or loss in accordance with IAS 39.These standardsaccept that for this type of investment:

n fair value provides a better level of information than fullconsolidation or equity accounting;

n measurement at fair value is a well-established practice amongprivate equity companies;

n percentage holdings may vary and the application of IAS 28would therefore lead to frequent deconsolidations and reconso-lidations which would affect the quality of the information provi-ded.

Private equity subsidiaries in which the Group holds between20% and 50% or, in line with the fair value option amendment, inwhich its holding is less than 20%, are designated as financialassets at fair value through profit or loss. Fair value, which inclu-des an illiquidity discount where appropriate, is reviewed oneach reporting date and changes are recognized through profitor loss.

A review of investments held by the Group’s private equitycompanies did not lead to the consolidation of any majorityinvestments, as none is material.

Business combinationsAs required by IFRS 3, all business combinations are accountedfor using the purchase method.The cost of a business combina-tion is the aggregate of the fair values, on the acquisition date, ofassets given, liabilities incurred or assumed, and equity instru-ments issued by the acquirer, plus any costs directly attributableto the business combination.

Business combinations that took place after January 1, 2004, havebeen restated in accordance with IFRS 3.Those prior to January 1,2004, have not been restated retrospectively, as permitted by IFRS 1.

On the acquisition date, the Group measures the fair value of allidentifiable assets and liabilities (including any contingent liabili-ties), regardless of their purpose.The excess of the cost of thebusiness combination over the acquirer’s interest in the acqui-ree’s identifiable assets, liabilities and contingent liabilities is reco-gnized as goodwill (see note V.10), which is allocated on theacquisition date to one or more cash-generating units (CGUs)expected to benefit from the acquisition.

Goodwill is not amortized but tested for impairment at leastonce a year and whenever there is objective evidence that thegoodwill might be impaired. Impairment testing consists of com-paring the carrying amount of the CGU or group of CGUs(including goodwill) with its recoverable amount.

When the recoverable amount is lower than the carrying amount,anirreversible impairment loss is recognized in the income statement

and charged first against the goodwill allocated to the CGU or groupof CGUs and then against other identifiable assets belonging to theCGU or group of CGUs.

Negative goodwill is recognized immediately in the income sta-tement under “Changes in value of goodwill”.

Exclusion from the scope of consolidationThe only exclusion from the scope of consolidation are thoseentities acquired with the intention of reselling them withintwelve months of their acquisition, where an active plan to seeka purchaser has been established. None of the Group’s entitiesmeet this condition.

III.3 - Securitization and specialpurpose entitiesThese transactions are governed by SIC 12, an interpretationthat has been endorsed by the European Union. Under SIC 12,the reporting entity may be presumed to have control over aspecial purpose entity even where there is no equity relations-hip.The main criteria for appreciating the existence of control asdefined by SIC 12 are as follows:

n Activities: in substance, the activities of the SPE are beingconducted on behalf of the Group, which directly or indirectlycreated the SPE according to its specific business needs.

n Decision-making: in substance, the Group has the decision-making powers to obtain the majority of the benefits of the acti-vities of the SPE or, by setting up an “autopilot” mechanism, theGroup has delegated these decision making powers.

n Benefits: in substance, the Group has rights to obtain a majo-rity of the benefits of the SPE’s activities distributed in the formof future net cash flows, earnings, net assets or other economicbenefits, or rights to majority residual interests.

n Risks: in substance, the Group retains the majority of the resi-dual or ownership risks related to the SPE or its assets in orderto obtain benefits from its activities.

The Group has reviewed all its special purposes entities in lightof these four criteria.

III.3.1 - Securitization transactions

Own-account transactionsn Natexis Banques Populaires carries out synthetic securitiza-tion transactions on its own account in order to transfer a signi-ficant portion of the counterparty risk relating to certain loanportfolios (collateralized loan obligations) or bonds (collaterali-zed bond obligations), using credit derivatives (credit defaultswaps) or market derivatives (credit linked notes).

2005 ANNUAL REPORT

Natexis Banques Populaires has carried out five synthetic asset securitizations for its own account since 2000 (PARIS 1, PARIS 2, NATIX,IGLOO 1, IGLOO 2), two of which still existed at December 31, 2005.As part of the Group’s active portfolio management policy andin agreement with the supervisory authorities, PARIS I AND II were wound up prematurely in 2004 and IGLOO 1 in the first half of 2005.

NATIX is not consolidated principally because the Group does not retain the majority of the ownership risks. However, IGLOO 2 hasbeen consolidated as of 2003 as the Banque Populaire banks are exposed to the majority of the ownership risks, having subscribed tounits in the SPE.

As of December 31, 2005, the attributes of NATIX were as follows:

December 31, 2005 – in millions of euros

SPE Currency Inception Maturity Gross amount Weighted risks Weighted risks First losssecuritized securitized retained

NATIX USD (first loss 2000 2008 145 145 29 3in euros)

As of December 31, 2004, the attributes of IGLOO 1 and NATIX were as follows:

December 31, 2004 – in millions of euros

SPE Currency Inception Maturity Gross amount Weighted risks Weighted risks First losssecuritized securitized retained

IGLOO 1 EUR 2000 2005 997 778 368 33

NATIX USD (first loss 2000 2008 190 190 34 3in euros)

1,187 968 402 36

n In March 2001, BRED Banque Populaire securitized a portfolioof home loans through the CRYSTALYS special purpose entity,partly guaranteed by CASDEN Banque Populaire. In line with SIC12, CRYSTALYS is fully consolidated in the IFRS financial state-ments as of January 1, 2004, as CASDEN Banque Populaire andBRED Banque Populaire retain the majority of the risks andrewards of ownership of both compartments. Its consolidationhad no impact on equity or Tier 1 capital as the Banque PopulaireGroup has retained all the units issued by the SPE.

n In December 2004, CASDEN Banque Populaire and BREDBanque Populaire carried out a securitization through the Amaren2 special purpose entity. At inception, the SPE’s assets comprisedB1,026 million of real estate loans granted by CASDEN BanquePopulaire and B769 million of real estate loans granted by Bredwhich were partly guaranteed by CASDEN Banque Populaire andBRED Banque Populaire’s mutual guarantee companies. CASDENBanque Populaire and BRED Banque Populaire have retained themajority of the notes issued by the SPE and Amaren 2 is thereforeconsolidated by the Banque Populaire Group.

Transactions on behalf of clientsIn 2002, Natexis Banques Populaires created a multisellerconduit called ELIXIR FUNDING to refinance its client securiti-zation transactions on the commercial paper market.

Natexis Banques Populaires acts as arranger, depository, under-writer, cash provider, letter of credit guarantor and paying agentfor ELIXIR FUNDING.

ELIXIR FUNDING is not consolidated as it does not meet thecontrol conditions required by SIC 12.

At December 31, 2005 and December 31, 2004, the attributesof ELIXIR FUNDING were:

in millions of euros 12/31/2005 12/31/2004

Amount authorized 1,070.7 614.6

Amount drawn 918.0 538.2

Natexis Banques Populaires liquidity line 530.0 248.4

Natexis Banques Populaires letter of credit 10.0 5.0

III.3.2 - Tax structures The Group provides asset financing (aircraft, ships, hotels, tech-nocenters, etc.) to certain clients via look-through entities (GIEs,SCIs, SAs organized as a tax group), either alone or in partner-ship with other banks.

In these structures, the Group acts both as lender and seller oftax positions. It has the power to make decisions concerning theactivities of these look-through entities, in substance in a fiduciarycapacity on behalf of its clients. However, it does not exercisecontrol within the meaning of SIC 12 and the look-through entities are therefore not consolidated.



III.3.3 - Real estate structuresSCI non-trading real estate companies are set up to hold financeleases granted by the Group’s leasing subsidiaries to finance realestate acquisitions (car parks, offices, headquarters buildings,etc.).

Natexis Banques Populaires acts in a fiduciary capacity at therequest of its clients and does not exercise control over the realestate structures within the meaning of SIC 12.

III.3.4 - Financial structuresThe purpose of these structures is to transfer ownership of par-ticipations in syndicated loans to a group of investors with diffe-rent seniority rankings. In 2004, Natexis Banques Populairescarried out a transaction of this type called VALLAURIS CLOPLC. Its assets comprise a portfolio of bank loans managed byNatexis Banques Populaires and refinanced through senior, mez-zanine and subordinated notes issued by the entity and purcha-sed by external investors.

As none of the four control conditions set out in SIC 12 is ful-filled, the SPE is not consolidated.


Total notes issued 308.0 308.0

Notes retained by NBP 12.5 19.5

Total invested in the portfolio 284.7 230.0

Fees paid to the portfolio manager 0.5% / year 0.5% / year

III.3.5 - “Alizé” employee stock ownership planOn May 31, 2001, Natexis Banques Populaires made anemployee share offering open to employees of the BanquePopulaire Group. The offering was carried out through theGroup’s employee stock ownership plan governed by the Act ofFebruary 19, 2001.A corporate mutual fund – FCPE Alizé Levier– was set up to hold the shares acquired by the employees participating in the offering.

Banque Fédérale des Banques Populaires entered into an agree-ment with the fund’s custodian, guaranteeing the net asset valueof any units in the fund surrendered by employees.

Based on the characteristics of the operation, the Group hasconsolidated the FCPE Alizé Levier mutual fund. It was alsoconsolidated under French GAAP.

III.3.6 - Other structuresNone of the guaranteed funds or regional investment fundsmanaged by the Banque Populaire Group are consolidated asthe Group does not exercise control and does not have themajority of the risks and benefits inherent in ownership.

Dedicated funds controlled by the Group are fully consolidated.They mostly concern the Group’s insurance companies.

III.4 - Presentation of the financialstatements and year endIII.4.1 - Consolidated financial statementsThe consolidated financial statements are presented in the formatset out in CNC recommendation no. 2004-R03 of October 27,2004.

All figures are expressed in millions of euros unless other stated.

III.4.2 - Year endThe consolidated financial statements are based on the separatefinancial statements of Group companies as of December 31,2005.

III.5 - Institutional activitiesconducted by Natexis BanquesPopulairesUnder article 84 of the 2001 amended Finance Act (law no. 2001-1276 of December 28, 2001), the mandate entrusted to NatexisBanques Populaires and companies under its control to managecertain public procedures on behalf of the State has been exten-ded until December 31, 2005. This mandate was extendedbeyond December 31, 2005, by the 2005 amended Finance Act(law no. 2005-1720 of December 30, 2005).These transactionsare recognized separately in the financial statements and someof them may be guaranteed by the State. The State and otherrelated creditors have a specific right over the assets and liabilitiesallocated to these institutional activities.

Insurance transactions managed by Coface on behalf of the Stateare not recognized in the financial statements. However, manage-ment fees received are recognized in the income statementunder the heading “Net fee and commission income”.

The amount of fees received and financing outstanding inconnection with institutional activities is not material.Accordingly, the financing outstanding has not been restated atamortized cost. Activities other than financing, where NatexisBanques Populaires acts as intermediary on behalf of the State,have been accounted for in the IFRS financial statements in thesame way as before.

III.6 - Foreign currency translation The consolidated financial statements are expressed in euros.

The balance sheets of foreign subsidiaries and branches whosefunctional currency is not the euro are translated into euros at year-end exchange rates.Revenue and expense items in the income sta-tements are translated at the average rate for the period.

Exchange differences arise from:

n the impact on net income for the year of any difference bet-ween the current year’s average rate and closing rate;

n the impact on equity (excluding net income for the year) ofany difference between the historic rate and the year-end rate.

2005 ANNUAL REPORT

They are recognized in equity under the line item “unrealized ordeferred gains or losses – exchange differences” and in minorityinterests for the non-Group share.

In line with IFRS 1, the translation reserve existing at December 31,2003 has been transferred to retained earnings. Exchange dif-ferences arising on the translation of foreign entities’ financial sta-tements have been calculated prospectively as of January 1,2004. As this is simply a reclassification in equity between trans-lation reserves and retained earnings, it had no effect on equityor regulatory capital. If a foreign entity is subsequently sold, thegain or loss on sale will only include those exchange gains or los-ses arising after January 1, 2004.

III.7 - Non-current assets held for saleThe assets and liabilities of subsidiaries which the Group intendsto sell within a period of twelve months and for which it has initiated an active plan to locate a buyer are identified separatelyin the balance sheets as non-current assets held for sale and lia-bilities associated with non-current assets held for sale.

III.8 - Elimination of intragrouptransactionsAssets, liabilities, commitments, and expense and revenue itemsbetween fully consolidated companies are eliminated wherethey are material. For proportionately consolidated companies,these items are eliminated to the extent of the Group’s percen-tage holding.

Intragroup dividends, impairment provisions for consolidatedinvestments and capital gains on intragroup disposal are elimina-ted in full.

III.9 - Insurance businessn General principles

The following rules apply to fully consolidated insurance com-panies:n items of income and expense are classified by nature in accor-dance with banking accounting policy and not by destination;n balance sheet items are included under the correspondingline items of the financial statements presented in the bankingformat.

Insurance company investments are classified in the balancesheet under the various categories of financial asset defined inIAS 39.Accordingly, they are measured at fair value through pro-fit or loss except for those classified as held-to-maturity financialassets or as loans and receivables.Contracts managed by the Group’s insurance subsidiaries meetthe definition of insurance contracts or investment contractswith a discretionary participation feature provided in IFRS 4.Accordingly, they give rise to the recognition of technical reser-ves, which are measured in accordance with French GAAP

pending publication of an IFRS on technical liabilities of insu-rance companies.

n Discretionary participation features

Investment contracts with a discretionary participation feature(life insurance) give rise to the recognition of a deferred parti-cipation liability to offset the difference in value between assetsand liabilities, in accordance with IFRS 4 (shadow accounting).The deferred participation liability is equal to the share of gainsor losses on investments due to policyholders in respect oftheir insurance contracts.The amount is calculated on the basisof the average rate of distribution to policyholders (averagecontractual distribution rate for each product weighted by thevalue of investments on the calculation date).The change in thedeferred participation liability is recognized directly in equityfor changes in value of available-for-sale assets and in profit orloss for changes in assets at fair value through profit or loss.

n Equalization reserve

Insurance subsidiaries regularly take equalization reserves in theirseparate financial statements to protect against the risk of catas-trophe. IAS 30 and 32 do not permit the recognition of reservescovering risk of a general nature. Accordingly, the equalizationreserve has been reclassified in equity as of January 1, 2004.Charges to the equalization reserve made under French GAAPhave therefore been eliminated in the IFRS financial statements.

n Life and non-life insurance contracts

Products sold by the Group’s insurance subsidiaries are princi-pally life insurance contracts, and more particularly investmentcontracts, and life and non-life personal risk contracts.

Under IFRS, over 99% of investment products have been classi-fied as insurance contracts and investment contracts with a discretionary participation feature (governed by IFRS 4) and theremainder as investment contracts with no discretionary partici-pation feature (governed by IAS 39).

Personal risk products are entirely classified as insurancecontracts (governed by IFRS 4).

In accordance with this classification and with IFRS 4, assets, liabi-lities, income and expenses connected with insurance contractsare recognized and measured using French GAAP (insurancecode regulations).

Note IV - Scope ofconsolidation

IV.1 - Impact of first-time adoption of IFRSAn analysis of the control criteria defined by IFRS did not haveany material impact on the scope of consolidation.



n Adoption of 2004 IFRS

The consolidation of securities in Natexis Banques Populairesheld by the Banque Populaire banks and their subsidiaries, andthe deduction of treasury shares from Natexis BanquesPopulaires’ share capital, had the effect of increasing the BanquePopulaire Group’s percentage holding in Natexis BanquesPopulaires from 75.59% to 82.76%.

Other changes in the scope of consolidation included:

n Consolidation of the Crystalys securitization fund, which iswholly-owned by BRED Banque Populaire, which was notconsolidated under French GAAP (see note III.3)

n Consolidation of five non-trading real estate companies (SociétésCiviles Immobilières) that hold the property investments ofNatexis Assurances, the first four through its subsidiary AssuranceBanque Populaire Vie and the fifth through the Coface sub-group:

- SCI Fructifoncier- SCI ABP Iéna- SCI ABP Pompe- SCI Neuilly Château (sold in second half of 2005)- SCI Cofimmo.

However, investments between 20% and 50% held by private equitysubsidiaries have not been accounted for under the equity methodas they have been designated as financial assets at fair value throughprofit or loss. IAS 28 and 31 on investments in associates recognizethat for such investments, fair value represents a better level of infor-mation than proportionate consolidation or equity accounting.Theadoption of IAS 27 for the private equity business has not led to theconsolidation of any majority investments, as none is material.

n Adoption of EU IFRS

The only change is the consolidation of dedicated funds repre-senting insurance company investments, as required by IAS 39:

n Coface:- AKCO Fund,- Coface Europe,- Cofaction 2,- Cofobligations,- MSL 1 Fund.

n Natexis Assurances:- ABP Actions,- ABP Croissance Rendement,- ABP Taux,- ABP Monétaire Plus,- ABP Midcap,- ASM Alternatif Garanti 1.

IV.2 - Changes in scope ofconsolidation in 2005The main changes in scope of consolidation in 2005 were:

IV.2.1 - Mergers of Banque Populaire banksBanque Populaire du Midi and Banque Populaire des PyrénéesOrientales, de l’Aude et de l’Ariège merged to form Banque

Populaire du Sud, as approved by their member-stakeholders onOctober 28 and 29, 2005 respectively.

As the merged banks were already part of the reporting entityand the mergers were accounted for at net book values, theyhad no impact on the consolidated financial statements.

IV.2.2 - Tie-up between Crédit Maritime Mutuelregional banks and Banque Populaire banks At its meeting of October 19, 2004, the Board of Directors ofSociété Centrale du Crédit Maritime agreed to create closer tiesbetween the Crédit Maritime regional banks and the BanquePopulaire regional banks on an individual basis:

n Caisse Régionale du Nord is tied to Banque Populaire du Nord;n Caisse Régionale du littoral de la Manche and CaisseRégionale du Finistère are tied to Banque Populaire de l’Ouest;n Caisse Régionale du Morbihan et de Loire Atlantique andCaisse Régionale de Vendée are tied to Banque PopulaireAtlantique;n Caisse Régionale du Sud-Ouest is tied to Banque Populairedu Sud-Ouest;n Caisse Régionale de Méditerranée is tied to BanquePopulaire du Sud;n Caisse Régionale de la Guadeloupe, Caisse Régionale de laMartinique and Caisse Régionale de la Réunion are tied toBRED Banque Populaire. In the first half of 2005, these overseasbanks merged to create Crédit Maritime Outre Mer.

As part of the restructuring, the Banque Populaire banks took upnew shares issued by the Crédit Maritime Mutuel banks, whichare affiliated to Banque Fédérale des Banques Populaires pursuant to the Financial Security Act (law no. 2003-706) ofAugust 1, 2003.Accordingly, they have been consolidated by thereporting entity as of the second half of 2005.

IV.2.3 - Partnership between BanquePopulaire Group, MAAF and MMAIn line with the agreements entered into by the three groups,MAAF and MMA acquired a 34% stake in SBE (Société deBanque et d’Expansion) on December 26, 2005.

On September 20, 2005, by extraordinary resolution of the sha-reholders, SBE approved the following transactions:

n SBE transferred its industrial premises branch business andremote banking business to Sogefip, a joint subsidiary of BREDBanque Populaire and Banque Populaire Val de France;

n On December 26, 2005, SBE made a new share issue restric-ted to COVEA MAB (MAAF, Mutuelle du Mans, etc.);

n SBE was then renamed MA Banque (Multi Accès Banque) andSogefip was renamed SBE.

All these transactions took place in the final quarter of 2005.Themerger bonus was eliminated in the consolidated financial state-ments.

MA Banque and SBE are 66% and 100% owned respectively bythe Group and are fully consolidated.

2005 ANNUAL REPORT

IV.2.4 - Capital transactions concerningNatexis Banques PopulairesThe Group’s percentage holding in Natexis Banques Populairesfell from 82.76% at December 31, 2004 to 80.87% at December31, 2005.The main changes during the year that contributed tothis decrease were:

n Divestment by SGTI, a subsidiary of Casden Banque Populaire,of 620,701 Natexis Banques Populaires shares in the first quar-ter of 2005, reducing the Group’s percentage holding in NatexisBanques Populaires by 1.3%;

n Exercise of stock options covering 480,436 Natexis BanquesPopulaires shares during the year, reducing the Group’s percen-tage holding in Natexis Banques Populaires by 0.8%;

n New share issue for cash restricted to Banque Fédérale desBanques Populaires made by Natexis Banques Populaires onDecember 27, 2005, leading to the issuance of 256,039 sharesand increasing the Group’s percentage holding in NatexisBanques Populaires by 0.1%.

IV.2.5 - Other companies consolidated for thefirst time in 2005n Banque Calédonienne d’Investissement, 35%-owned byBRED and accounted for by the equity method;

n Coface sub-group:- Coface Chili, 84%-owned by Coface SA;

- Coface Factoring Italia Spa, a subsidiary created to developthe factoring business in Italy, 100%-owned by Coface Italia;

- Coface Service (France), created in 2005 to receive assettransfers from Coface SCRL and Coface ORT, 100%-owned byCoface SA;

- Coface South African Insurance Company, a South Africansubsidiary created in October 2005, 100%-owned by Coface SA;

- Credit Underwriting Agency Limited (CUAL), in whichCoface already owned 22% of the capital and acquired theremaining 78% in February 2005;

- Coface Leid, a Lithuanian credit insurance company acquired inMarch 2005 by Coface, and then merged with OKV Coface, itself79.2%-owned by AK Coface Holding and 14.8% by Coface SA;

- Cofacerating.ch, a Swiss business information and receivablesmanagement company created by Coface in Switzerland, 100%-owned by Coface SA.

- FNS 3, a private equity subsidiary of Natexis Private EquityInternational Singapore (NPEIS) operating in Asia;

- Investima 12 which carries Banque Fédérale des BanquesPopulaires’ third owner-occupied building;

- Natexis Private Equity International Management (NPEIM), aprivate equity management company, subsidiary of NatexisBanques Populaires;

- Natexis LLD, a vehicle leasing company, subsidiary of NatexisLease;

- Natexis Services Ltd, a resource sharing company for the Group’soperations in London, subsidiary of Natexis Banques Populaires;

- Segimlor, a company which carries the owner-occupied buil-dings of Banque Populaire Lorraine Champagne;

- Volksbank International AG (VBI), an Austrian credit institu-tion, 25%-owned by Banque Fédérale des Banques Populairesand accounted for using the equity method;

- Three non-trading real estate companies (sociétés civilesimmobilières):

- Société Civile Immobilière de la Banque Populaire du Sud-Ouest, subsidiary of Banque Populaire du Sud-Ouest;

- Créponord and SCI Faidherbe, subsidiaries of BanquePopulaire du Nord.

The impact of these companies on 2005 consolidated net ban-king income and net income was as follows (in millions of euros):

December 31, 2005Company Net banking Net

income income

Banque Calédonnienne d’investissement 0 3

Coface Sub-group 6 1

Creponord 0 0

FNS3 42 29

Investima 12 0 0

Natexis LLD 3 1

Natexis Services Ltd 1 0

Natexis Private Equity International Management 1 0

SCI BPSO 0 3

SCI Faidherbe 0 1

Segmilor 2 2

Volksbank International AG 0 3

IV.2.6 - Companies deconsolidated in 2005 n Bancassurance Popolari, sold on September 26, 2005;

n Cofacerating.fr and Cofacerating.it., two Coface subsidiarieswound up during the year ;

n OFIVM, sold during the second half;

n SAMIC, subsidiary of Natexis Banques Populaires, in whichNatexis Banques Populaires acquired 24% from the minorityshareholders and then sold 75% during the second half;

n SCI Cofimmo which carries Coface SCRL’s head office, sold onSeptember 30, 2005;

n SCI Neuilly Château sold on September 9, 2005;

n Two subsidiaries were deconsolidated as their contribution nolonger met the materiality threshold:

- Vecteur Gestion, subsidiary of Banque Populaire Val de France,

- Union des Caisses Régionales, subsidiary of Crédit MaritimeMutuel.



At December 31, 2004, the respective contribution of thesecompanies to consolidated net banking income and consolida-ted net income was as follows (in millions of euros):

December 31, 2004Company Net banking Net

income income

Coface Sub-group 0 0

Bancassurance Popolari 1 0

OFIVM 0 0

Samic 6 0

SCI Neuilly Château 2 3

Union des Caisses Régionales 1 0

Vecteur Gestion 0 0

IV.2.7 - Other internal restructurings n Coface sub-group:- Creation of Coface Service by merging Coface SCRL andCoface ORT, to become the leader in business information andtrade receivables management;- Absorption of Cofacerating.com and Unistrat Assurance byCoface SA through a transfer of all their assets and liabilities;

n Absorption of Cristal Négociations by Spafica, a subsidiary ofNatexis Banques Populaires;

n Absorption of SAS SBE by Banque Fédérale des BanquesPopulaires;

n Absorption of SOCIEP by its parent company BanquePopulaire Val de France;

n Absorption of Natexis Investissement Asia by FNS, a privateequity subsidiary based in Singapore;

n Transfers of business within the Natexis Banques Populaires:- Creation of Natexis Investor Servicing by transferring thefund administration business of Natexis Banques Populaires,Natexis Epargne Entreprise and Natexis Asset Management;- Transfer of businesses by Natexis Banques Populaires to two

of its subsidiaries:- Domestic and international payments business to Natexis

Paiements;- Aircraft financing business to Natexis Transport Finance.

These transactions involved businesses or subsidiaries that werealready consolidated by the Group and therefore had no impacton the consolidated financial statements.

2005 ANNUAL REPORT

IV.3 - Companies included in the scope of consolidationBanque Populaire Group

Companies December 31, 2005 December 31, 2004 December 31, 2003

Company/Business line Country % % Consolidation % % Consolidation % % Consolidationinterest voting method interest voting method interest voting method

(a) rights (b) rights (b) rights (b)

I - Consolidating entity

I-1 Banque Populaire banks

Banque Populaire Occitane - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire BourgogneFranche-Comté - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire du Sud-Ouest - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire du Massif Central - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire des Alpes - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire du Nord - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire Centre Atlantique - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire de Loire et Lyonnais - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire Provençale et Corse - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire Lorraine Champagne - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBICS - Banque Populaire - FR Merged N Merged N 100.00% 100.00% FullBanque Populaire Atlantique - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire de la Côte d’azur - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire du Midi - FR Merged N 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire des PyrénéesOrientales, de l’Aude et de l’Ariège - FR Merged N 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire de l’Ouest - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire Rives de Paris - FR 100.00% 100.00% Full 100.00% 100.00% Full /// /// NBanque Populaire Nord de Paris - FR Merged N Merged N 100.00% 100.00% FullBanque Populaire Alsace - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire du Sud - FR 100.00% 100.00% Full /// /// N /// /// NBanque Populaire Val de France - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBanque Populaire Toulouse-Pyrénées - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBRED - Banque Populaire - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCASDEN - Banque Populaire - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCrédit Coopératif - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

I-2 Mutual guarantee companies

ACEF QUERCY AGENAIS - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullACEF DU TARN ET DE L’AVEYRON - FR 100.00% 100.00% Full /// /// N /// /// NBICS HABITAT - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBRED HABITAT - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullFOREST. LORRAINE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullFOREST. MASSIF CENTRAL - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullFOREST. PYRENEES-ORIENTALES - FR Liquidated N 100.00% 100.00% Full 100.00% 100.00% FullFOREST. SEINE-ET-MARNE - FR Liquidated N 100.00% 100.00% Full 100.00% 100.00% FullPROCOMI COTE-D’AZUR - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCACEF BAS-RHIN - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCACEF CENTRE-ATLANTIQUE - FR Merged N 100.00% 100.00% Full 100.00% 100.00% FullSOCACEF MASSIF CENTRAL - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCACEF NORD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCACEF TARN ET AVEYRON - FR Merged N 100.00% 100.00% Full 100.00% 100.00% FullSOCAMA ALPES-MARITIMES - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCAMA ANJOU-VENDEE - FR /// /// N Merged N 100.00% 100.00% FullSOCAMA ARIEGE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCAMA ATLANTIQUE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCAMA AUDE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOCAMA AVEYRON - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full






SOCAMA BAS-RHIN - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA BICS - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA BOUCHES-DU-RHONE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA BOURGOGNE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA BRED-IDF - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA CHAMPAGNE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA CHARENTE-MARITIME - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA CORSE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA DAUPHINE-ALPES DU SUD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA DEUX-SEVRES - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA DOUBS-HTE-SAONE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA HAUTE-GARONNE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA HAUTE-SAVOIE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA HAUT-RHIN - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA JURA-AIN - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA LOIRE-Ht-VIVARAIS - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA LORRAINE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA LOT - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA LOT-ET-GARONNE - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA LYON-ET-REGION - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA MASSIF CENTRAL - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA MIDI - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA MIDI-PYRENEES OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA NORD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA Nord de Paris - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA NORMANDIE - FR 100.00% 100.00% Full /// /// N /// /// N

SOCAMA Occitane - FR 100.00% 100.00% Full /// /// N /// /// N

SOCAMA OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA REGIONALE L-C-D - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA ROUSSILLON - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA SAVOIE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA SUD-OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA TARN - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA VAL-DE-FRANCE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA VAR - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMA VAUCLUSE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI TARN et AVEYRON - FR /// /// N Merged N 100.00% 100.00% Full

SOCAMI ATLANTIQUE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI AUDE-ARIEGE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI BAS-RHIN - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI BOURGOGNE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI CENTRE ATLANTIQUE (ancienne Socami Limousin) - FR 100.00% 100.00% Full 100.00% 100.00% Full /// /// N

SOCAMI CENTRE-OUEST - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI CHAMPAGNE - FR /// /// N Merged N 100.00% 100.00% Full

SOCAMI COTE D’AZUR - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI DAUPHINE-ALPES DU SUD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI FRANCHE-COMTE-M-A - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI HAUTE-SAVOIE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI HAUT-RHIN - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI HTE-GARONNE-HABITAT - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI LIMOUSIN - FR /// /// N Change of name .N 100.00% 100.00% Full

SOCAMI LOIRE ET LYONNAIS - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

2005 ANNUAL REPORT




SOCAMI LORRAINE - FR /// /// N Merged N 100.00% 100.00% Full

SOCAMI LORRAINE CHAMPAGNE - FR 100.00% 100.00% Full 100.00% 100.00% Full /// /// N

SOCAMI MASSIF CENTRAL - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI MIDI - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI NORD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI Nord de Paris - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI Occitane - FR 100.00% 100.00% Full /// /// N /// /// N

SOCAMI OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI PROVENCE ET CORSE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI PYRENEES-ORIENTALES - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI SAVOIE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI SUD OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI TARN ET AVEYRON - FR Merged N 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMI VAL-DE-FRANCE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMMES - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAMUPROLOR - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOCAUPROMI - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOFRONTA - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB COTE D’AZUR - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB FRANCHE-COMTE-M-A - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB LORRAINE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB NORD - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB SAVOIE-HTE-SAVOIE - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

SOPROLIB SUD-OUEST - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

I-3 Central bodies

BANQUE FEDERALE DES BANQUES POPULAIRES - FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

I-4 Affiliates (c)

SOCIETE CENTRALE DU CMM - FR 100.00% 100.00% Full 7.64% 100.00% Full 7.68% 100.00% Full

CAISSE REGIONALE REGION NORD (13) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE DE MEDITERRANEE (17) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE DE VENDEE (6) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE DU FINISTERE (16) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE LITTORAL MANCHE (16) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE SUD OUEST (14) FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE MORBIHAN / L.A (6 FR 100.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE DE GUADELOUPE (9) FR Merged N 0.00% 100.00% Full 1.95% 100.00% Full

CAISSE REGIONALE DE MARTINIQUE (9) FR Merged N 0.00% 100.00% Full 0.00% 100.00% Full

CAISSE REGIONALE DE REUNION (9) FR Merged N 0.00% 100.00% Full 0.00% 100.00% Full

CREDIT MARITIME OUTRE MER (9) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

II – ASSOCIATES (d)

CMGM (10) FR 5.37% 100.00% Full 6.03% 100.00% Full Consolidated from 2004 N

EDEL (10) FR 33.94% 100.00% Full 33.94% 33.94% Full 33.94% 33.94% Equity

Gedex Distribution (10) FR 0.00% 100.00% Full 0.00% 100.00% Full Consolidated from 2004 N

MONINFO (10) FR 33.91% 100.00% Full 33.91% 100.00% Full Consolidated from 2004 N

Nord Financement (10) FR 0.97% 100.00% Full 0.96% 100.00% Full Consolidated from 2004 N

Société financière de la NEF (10) FR 5.76% 100.00% Full 6.95% 100.00% Full Consolidated from 2004 N

SOCOREC (10) FR 0.00% 100.00% Full 0.00% 100.00% Full Consolidated from 2004 N

SOFIGARD (10) FR 0.29% 100.00% Full 0.29% 100.00% Full Consolidated from 2004 N

SOFINDI (10) FR 4.76% 100.00% Full 5.06% 100.00% Full Consolidated from 2004 N

SOFIRIF (10) FR 4.21% 100.00% Full 4.29% 100.00% Full Consolidated from 2004 N





(a) rights (b) rights (b) rights (b))

SOFISCOP (10) FR 1.71% 100.00% Full 1.68% 100.00% Full Consolidated from 2004 NSOFISCOP SUD EST (10) FR 4.18% 100.00% Full 3.92% 100.00% Full Consolidated from 2004 NSOMUDIMEC (10) FR 0.33% 100.00% Full 0.35% 100.00% Full Consolidated from 2004 NSOMUPACA (10) FR 1.67% 100.00% Full 1.74% 100.00% Full Consolidated from 2004 N

III – SUBSIDIARIES

III.1 – Retail banking

ACHATPRO (9) FR 92.80% 92.80% Full 91.37% 91.37% Equity 39.58% 39.58% EquityAGRO AUDACES (4) FR 89.13% 91.82% Full 89.40% 91.82% Full 80.85% 82.94% FullAMEDIS (9) GB Deconsolidated N Deconsolidated N 0.00% 96.00% FullATLANTIQUE PLUS (6) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBANKEO (2) FR 60.00% 60.00% Full 60.00% 60.00% Full 60.00% 60.00% FullBANQUE CALEDONIENNE D’INVESTISSEMENT (9) FR 35.00% 35.00% Equity Consolidated from 2005 N Consolidated from 2005 NBANQUE MONETAIRE ET FINANCIERE (3) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBATINOREST (10) FR 94.88% 94.88% Full 85.13% 80.00% Full Consolidated from 2004 NBDG SCI (5) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBERCY GESTION FINANCE (9) FR 99.96% 99.96% Full 99.96% 99.96% Full 99.96% 99.96% FullBGF+ (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBIC BRED (9) FR 99.95% 99.95% Full 99.95% 99.95% Full 99.94% 99.94% FullBICEC (2) CM 52.48% 52.48% Full 52.08% 52.48% Full 52.08% 52.49% FullBISE (10) PL 46.67% 46.67% Equity 37.92% 37.91% Equity 28.55% 26.80% EquityB-PROCESS (9) FR 42.20% 42.20% Equity 34.89% 34.89% Equity 26.56% 26.56% EquityBRED COFILEASE (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBRED GESTION (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullBTP Banque (10) FR 99.95% 99.95% Full 99.95% 99.95% Full 100.00% 100.00% FullBTP CAPITAL INVESTISSEMENT (10) FR 79.42% 79.42% Full 79.42% 79.42% Full 79.41% 79.41% FullC.2.C (3) FR Deconsolidated N Deconsolidated N 48.99% 48.99% FullCaisse centrale (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCaisse de Garantie Immob. du Bâtiment(10) FR 33.40% 33.40% Equity 33.40% 33.40% Equity 33.40% 33.40% EquityCaisse solidaire (10) FR 11.33% 100.00% Full 11.40% 100.00% Full Consolidated from 2004 NCAPI COURT TERME N°1 (3) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCERIUS INVESTISSEMENTS (2) FR 99.85% 99.85% Full 99.85% 99.85% Full 100.00% 100.00% FullCLICK AND TRUST (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCLIVEO SNC (2) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCOFEG (9) FR 99.67% 99.67% Full 99.67% 99.67% Full 99.67% 99.67% FullCOFIBRED (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCREPONORD (13) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NCOOPAMAT (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullCrédit Coopératif Trésorerie plus (10) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullCREDIT MARITIME INVESTISSEMENT (12) FR Deconsolidated N Deconsolidated N 2.61% 100.00% FullCYBERPLUS MARKET (4) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullDE PORTZAMPARC (6) FR 72.67% 74.53% Full 72.86% 74.53% Full 67.02% 67.02% FullECOFI INVESTISSEMENT (10) FR 99.99% 99.99% Full 99.98% 99.99% Full 99.98% 99.98% FullEFITEL (10) FR 99.99% 100.00% Full 99.99% 100.00% Full 100.00% 100.00% FullESFIN (10) FR 37.58% 37.58% Equity 37.58% 37.58% Equity 37.58% 37.58% EquityFCC AMAREN II (4) FR 100.00% 100.00% Full 100.00% 100.00% Full Consolidated from 2004 NFCC CRISTALYS (f) (9) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NFINANCIERE VECTEUR (8) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullFONCIERE VICTOR HUGO (7) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullGC2I INVESTISSEMENT (4) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullGIE CARSO MATERIEL (4) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullGIE LIVE ACHATS (4) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% Full

2005 ANNUAL REPORT




GIE USC (10) FR 99.79% 100.00% Full 100.00% 100.00% Full 100.00% 92.00% FullGROUPEMENT DE FAIT (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullGUIDEO (2) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullINFORMATIQUE BANQUES POPULAIRES(4) FR 99.76% 99.76% Full 99.76% 99.76% Full 99.75% 99.75% FullINTERCOOP (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullINVESTIMA 12 (2) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NL F I (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullLFI2 (4) FR Deconsolidated N Deconsolidated N 99.01% 99.01% FullLFI4 (9) FR 100.00% 100.00% Full 98.04% 98.04% Full 98.04% 98.04% FullLUX EQUIP BAIL (15) LU 90.00% 90.00% Full 90.00% 90.00% Full 90.00% 90.00% FullMone+CC2 (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullNOVACREDIT (4) FR 66.00% 66.00% Full 65.77% 65.77% Full 66.00% 66.00% FullOUEST CROISSANCE SCR (4) FR 98.07% 99.43% Full 98.26% 99.22% Full 97.32% 99.24% FullPARNASSE FINANCES (3) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullPARNASSIENNE DE CREDIT (3) FR 92.06% 92.44% Full 92.09% 92.44% Full 92.08% 92.44% FullPREPAR COURTAGE (ex BERPA) (9) FR 99.20% 99.20% Full 99.20% 99.20% Full 99.30% 99.30% FullPREPAR-IARD (9) FR 99.99% 99.99% Full 99.99% 99.99% Full 99.98% 99.98% FullPREPAR-VIE (9) FR 99.78% 99.78% Full 99.78% 99.78% Full 99.77% 99.77% FullPROMEPAR (9) FR 99.96% 99.97% Full 99.96% 99.97% Full 99.96% 99.97% FullMA BANQUE (ex SBE) (2) FR 65.81% 65.81% Full 99.78% 99.78% Full 99.77% 99.77% FullSAS PERSPECTIVES ET PARTICIPATIONS (9) FR 99.76% 100.00% Full 99.76% 99.76% Full 99.76% 99.76% FullSCI BPSO (14) FR 99.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSCI du CREDIT COOPERATIF (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSCI FAIDHERBE (13) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSCI L’ARENAS (7) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSCI SAINT-DENIS (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSDR Nord Pas de Calais (10) FR 28.92% 28.92% Equity 28.92% 28.92% Equity 28.92% 28.92% EquitySEGIMLOR (15) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSGTI (3) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSICOMI COOP (10) FR 51.70% 51.70% Full 50.26% 50.26% Full 49.96% 49.96% FullSMI (7) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullSNC AZUR IMMO (7) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullSNC M+X (4) FR 99.67% 100.00% Full 99.67% 100.00% Full 99.75% 100.00% FullSOCIEP (8) FR absorption N 99.99% 99.99% Full 99.99% 99.99% FullSODEGA (9) FR Merged N Merged N 100.00% 100.00% FullSODEMA (9) FR Merged N Merged N 100.00% 100.00% FullSOFIAG (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSOFIDEG (9) FR Merged N Merged N 100.00% 100.00% FullSOFIDER (9) FR 100.00% 100.00% Full 100.00% 99.49% Full 100.00% 99.49% FullSOFINCIL (3) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSBE (ex SOGEFIP) (8) & (9) FR 100.00% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSPIG (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullTRANSIMAT (10) FR Deconsolidated N Deconsolidated N 100.00% 100.00% FullTRANSIMMO (10) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullTRUST AND PAY (9) FR 62.57% 44.00% I.P. 59.35% 44.00% I.P. 55.69% 44.00% I.P.UNION DES CAISSES REGIONALES (12) FR Deconsolidated N 0.00% 100.00% Full 0.00% 100.00% FullVECTEUR Gestion (8) FR Deconsolidated N 100.00% 100.00% Full 100.00% 100.00% FullVIALINK (9) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullVolksbank International AG (VBI) (2) FR 24.50% 24.50% Equity Consolidated from 2005 N Consolidated from 2005 N

III.2 – Natexis Banques Populaires and its subsidiaries (e)

NATEXIS BANQUES POPULAIRES - FR 80.87% 80.87% Full 82.76% 82.76% Full 82.33% 82.33% FullCorporate and Institutional Banking and MarketsBAIL EXPANSION (1) FR 80.77% 99.88% Full 82.66% 99.88% Full 82.23% 99.88% Full






DOMIMUR (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

DUPONT DENANT CONTREPARTIE (1) FR 40.43% 100.00% Full 41.38% 50.00% Full 41.16% 50.00% Full

ECRINVEST 6 (1) FR 80.83% 99.95% Full 82.71% 99.94% Full 82.27% 99.94% Full

ENERGECO (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

FINANCIERE CLADEL (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.32% 100.00% Full

FRUCTIBAIL (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

FRUCTICOMI (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

INVESTIMA 6 (1) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

NATEXIS ALGERIE (1) DZ 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS ABM CORP. (1) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS ARBITRAGE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS BAIL (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS BLEICHROEDER Inc (1) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NAT. BLEICHROEDER SA (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS BLEICHROEDER UK (1) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS COFICINE (1) FR 74.80% 92.50% Full 76.55% 92.50% Full 76.15% 92.50% Full

NATEXIS FINANCE (1) FR 80.86% 100.00% Full 82.76% 100.00% Full 82.32% 100.00% Full

NATEXIS FUNDING (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% Full

NATEXIS LLD (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS IMMO DEVELOPPEMENT (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% Full

NATEXIS INVESTMENT CORP. (1) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS LEASE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS LEASE MADRID (1) SP 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS LEASE MILAN (1) IT 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS LUXEMBOURG (1) LU 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS COMMODITY MARKETS LTD (ex Metals) (1) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS MOSCOW (1) RU 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS PRAMEX INTERNATIONAL (1) FR 80.13% 99.08% Full 82.00% 99.08% Full 81.57% 99.08% Full

NATEXIS SERVICES LTD (1) GB 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS TRANSPORT FINANCE (ex SBFI) (1) FR 80.87% 100.00% Full 82.75% 99.99% Full 82.32% 99.99% Full

NATEXIS US FINANCE CORPORATION (1) US 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

VAL A (SAS) (1) FR 80.87% 100.00% Full 81.18% 98.09% Full 80.75% 98.09% Full

Private Equity and Wealth Management

BANQUE PRIVÉE ST DOMINIQUE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

BP DEVELOPPEMENT Globale (4) FR 89.09% 97.05% Full 87.94% 93.91% Full 92.79% 97.73% Full

BPSD GESTION (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% Full

FCPR NATEXIS INDUSTRIE Globale (1) FR 72.56% 89.73% Full 74.32% 89.80% Full 82.33% 100.00% Full

FIN. NATEXIS SINGAPOUR (1) SG 80.87% 100.00% Full 82.76% 82.76% Full 82.33% 100.00% Full

FINATEM (1) DE 72.78% 100.00% Full 74.48% 100.00% Full 74.09% 90.00% Full

FNS2 (1) SG 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

FNS3 (1) SG 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

INITIATIVE ET FINANCE INVESTISSEMENT (1) FR 74.65% 91.81% Full 76.40% 91.81% Full 76.00% 92.37% Full

MERCOSUL (1) GB 80.87% 100.00% Full 82.76% 82.76% Full 82.33% 100.00% Full

NATEXIS INVESTMENT GLOBAL. (1) FR 80.62% 99.69% Full 82.30% 99.45% Full 81.70% 99.26% Full

NAT. INVEST ASIA (1) HK Absorption N 82.76% 82.76% Full 82.33% 100.00% Full

NATEXIS CAPE (1) LU 80.87% 100.00% Full 82.76% 82.76% Full 82.33% 98.71% Full

NATEXIS ACTIONS AVENIR (1) FR Liquidated N Liquidated N 67.64% 81.25% Full

NATEXIS ACTIONS CAPITAL STRUCTURANT (1) FR 52.29% 100.00% Full 54.93% 57.84% Full 66.79% 73.71% Full

NATEXIS INDUSTRIE (1) FR 80.73% 99.83% Full 82.62% 99.83% Full 82.20% 99.85% Full

2005 ANNUAL REPORT




NATEXIS INVERSIONES (1) SP 80.87% 100.00% Full 82.76% 82.76% Full 82.33% 100.00% Full

NATEXIS NOUVEAUX MARCHES (1) FR Liquidated N Liquidated N 75.29% 91.53% Full

NATEXIS PRIVATE BANKING LUXBG (1) LU 77.47% 95.80% Full 72.66% 87.80% Full 72.28% 87.80% Full

NATEXIS PRIVATE EQUITY (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS PRIVATE EQUITY INTERNATIONAL (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS PRIVATE EQUITY INTERNATIONAL MANAGEMENT (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS PRIVATE EQUITY INTERNATIONAL SINGAPOUR (1) SG 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

NATEXIS PRIVATE EQUITY OPPORTUNITIES (1) FR 80.64% 99.71% Full 82.76% 100.00% Full Consolidated from 2004 N

NATEXIS VENTURE SELECTION (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.13% 99.76% Full

NEM2 (1) FR 80.73% 99.82% Full 82.61% 99.82% Full 72.50% 88.07% Full

PARIS OFFICE FUND (1) FR 40.43% 50.00% I.P. 41.38% 50.00% I.P. Consolidated from 2004 N

SOFINNOVA (1) FR Deconsolidated N Deconsolidated N 20.07% 23.38% Full

SOPRANE SERVICES (1) FR 80.67% 99.76% Full 82.56% 99.76% Full 82.13% 99.76% Full

SOPROMEC (1) FR 89.09% 100.00% Full 87.94% 100.00% Full 84.37% 98.07% Full

NAXICAP PARTNERS (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% Full

SPEF LBO (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% Full

SPEF VENTURE (1) FR 80.85% 100.00% Full 82.74% 99.98% Full 82.31% 99.97% Full

Services

ABP ACTIONS (f) (1) FR 80.02% 98.95% Full Consolidated from 2005 N Consolidated from 2005 N

ABP CROISSANCE RENDEMENT (f) (1) FR 79.16% 97.88% Full Consolidated from 2005 N Consolidated from 2005 N

ABP MIDCAP (f) (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

ABP MONETAIRE PLUS (f) (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

ABP PREVOYANCE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.32% 100.00% Full

ABP TAUX (f) (1) FR 80.07% 99.01% Full Consolidated from 2005 N Consolidated from 2005 N

ABP VIE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

ADIR (1) LB 27.49% 33.99% Equity 28.13% 33.99% Equity 27.99% 33.99% Equity

ASM ALTERNATIF GARANTI 1 (f) (1) FR 80.07% 99.01% Full Consolidated from 2005 N Consolidated from 2005 N

ASSURANCES BP IARD (1) FR 40.45% 49.99% Equity 41.38% 49.99% Equity 41.17% 49.99% Equity

AXELTIS Ltd (1) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

BANCASSURANCE POPOLARI (1) IT Sold N 42.21% 51.00% I.P. 41.99% 51.00% Full

CREDIT MARITIME VIE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 3.07% 100.00% Full

INVEST KAPPA (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 87.99% 96.94% Full

NATEXIS ASSET MANAGEMENT (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS ASSET SQUARE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS ASSURANCES (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NATEXIS EPARGNE ENTREPRISE (1) FR Absorption N 82.75% 100.00% Full 82.32% 100.00% Full

NATEXIS INTEREPARGNE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.32% 100.00% Full

NATEXIS INTERTITRES (1) FR 80.81% 99.93% Full 82.70% 99.93% Full 82.26% 99.92% Full

NATEXIS INVESTOR SERVICING (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

NATEXIS LIFE (1) LU 79.71% 100.00% Full 79.33% 100.00% Full 78.91% 100.00% Full

NATEXIS PAIEMENTS (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

NX ASSET MANAGEMENT IMMOBILIER (1) FR 80.61% 99.67% Full 82.49% 99.67% Full 82.06% 99.67% Full

NXBP1 (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

OFIVM (1) FR Sold N 28.14% 34.00% Equity 27.99% 34.00% Equity

PROXIGMA (1) FR Deconsolidated N Deconsolidated N 82.33% 100.00% Full

SAMIC (1) MC Sold N 62.57% 75.60% Full 62.24% 75.60% Full

SCI ABP IENA (f) (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N






SCI ABP POMPE (f) (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSCI FRUCTI FONCIER (f) (1) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NSCI NEUILLY CHATEAU (f) (g) (1) FR Sold N Consolidated from 2005 N Consolidated from 2005 NSLIB (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullSOCECA (1) FR 20.19% 24.97% Equity 20.66% 24.97% Equity 20.55% 24.97% EquityVITALIA VIE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

Receivables Management

COFACE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullADG COFACE ALLGEMEINE DEBITOREN GESELLSCHAFT (11) DE 80.87% 100.00% Full 62.07% 75.00% Full 61.75% 75.00% FullALLGEMEINE KREDIT COFACE FINANZ (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullAKCO FUND (f) (11) DE 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NALLGEMEINE KREDIT COFACE (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullALLGEMEINE KREDIT COFACEINFORMATIONS (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullAXA ASSURCREDIT (ex ASSURCREDIT) (11) FR 32.35% 40.00% I.P. 33.10% 40.00% I.P. 32.93% 40.00% I.P.CENTRE D’ETUDES FINANCIERES (CEF) (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NCIA DE SEGUROS DE CREDITOS COFACE CHILE SA (11) CL 68.22% 84.36% Full Consolidated from 2005 N Consolidated from 2005 NCIMCO SYSTEMS LIMITED (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCODINF Services (11) FR Sold N Sold N 24.70% 30.00% EquityCOFACE AK HOLDING (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE COLLECTION NORTH AMERICA (11) US 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NCOFACE CREDIT MANAGEMENT NORTH AMERICA (11) US 80.87% 100.00% Full 33.10% 40.00% Full 82.33% 100.00% FullCOFACE DEBT PURCHASE (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE EUROPE (f) (11) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NCOFACE EXPERT (11) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE FACTORING ITALIA SpA (11) IT 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NCOFACE HOLDING AMERICA LATINA (11) MX 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NCOFACE NORTH AMERICA HOLDING COMPANY (11) US 80.87% 100.00% Full 33.10% 40.00% Full 82.33% 100.00% FullCOFACE INTERCREDIT BULGARIA (11) BU 60.64% 100.00% Full 62.06% 100.00% Full 61.74% 100.00% FullCOFACE INTERCREDIT CZECH REPUBLIC (11) CZ 60.64% 100.00% Full 62.06% 100.00% Full 61.74% 100.00% FullCOFACE INTERCREDITHRATSKA (CROATIA) (11) HR 60.64% 100.00% Full 62.06% 100.00% Full 61.74% 100.00% FullCOFACE INTERCREDIT HUNGARY (11) HU 60.64% 100.00% Full 62.06% 100.00% Full 61.74% 100.00% FullCOFACE INTERCREDIT POLAND (11) PL 58.82% 97.00% Full 60.20% 97.00% Full 59.88% 97.00% FullCOFACE INTERCREDIT ROMANIA (11) RO 60.64% 100.00% Full 62.06% 100.00% Full 37.04% 60.00% FullCOFACE INTERCREDIT SLOVAKIA (11) SK 60.64% 100.00% Full 62.06% 100.00% Full 61.74% 100.00% FullCOFACE INTERCREDIT SLOVENIA (11) SI 60.64% 100.00% Full 62.06% 100.00% Full 37.04% 60.00% FullCOFACE ITALIA (11) IT 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE MOPE (11) PT 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE NORTH AMERICA (11) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE NORTH AMERICAINSURANCE (11) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE ORT (11) FR Merged N 82.76% 100.00% Full Consolidated from 2004 NCOFACE SCRL (11) FR Merged N 82.76% 100.00% Full 82.33% 100.00% FullCOFACE SERVICE (France) (11) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 NCOFACE SERVICE (Italie) (11) IT 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCOFACE SERVICE ECUADOR (ex VERITAS ANDINA) (11) EC 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

2005 ANNUAL REPORT




COFACE SERVICES COLOMBIA(ex VERITAS COLOMBIA) (11) CO 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICES NETHERLAND (11) NL 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

COFACE SERVICES NORTH AMERICA GROUP (11) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICES PERU (11) PE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICES VENEZUELA (11) VE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICIOS CHILE (11) CL 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICIOS ARGENTINA (11) AR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

COFACE SERVICIOS COSTA RICA, S.A(ex VER. DE CENTRO AMERICA) (11) AR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICIOS DO BRAZIL (11) BR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

COFACE SERVICIOS ESPAÑA, SL (11) ES 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICIOS MEXICO SA DE CV (11) MX 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE SERVICIOS PANAMA (11) PA 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

COFACE SOUTH AFRICAN INSURANCE COMPANY (11) ZA 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

COFACE UK (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACE UK SERVICES LIMITED (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACERATING HOLDING (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACERATING.CH (11) CH 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

COFACERATING.COM (11) FR Absorption N 82.76% 100.00% Full 82.33% 100.00% Full

COFACERATING.DE (11) DE 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFACERATING.FR (11) FR Liquidated N 82.76% 100.00% Full 82.33% 100.00% Full

COFACERATING.IT (11) IT Liquidated N 82.76% 100.00% Full 82.33% 100.00% Full

COFACREDIT (11) FR 29.11% 36.00% Equity 29.79% 36.00% Equity 29.64% 36.00% Equity

COFACTION2 (f) (11) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

COFINPAR (11) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

COFOBLIGATIONS (f) (11) FR 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

COGERI (11) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

CREDICO LIMITED (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

CREDITORS GROUP HOLDINGS LTD (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

CREDIT UNDERWRITING AGENCY LIMITED (CUAL) (11) ZA 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

EIOS (11) FR 24.07% 29.76% Equity 24.63% 29.76% Equity Consolidated from 2004 N

FIMIPAR (11) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

GRAYDON HOLDING (11) NL 22.24% 27.50% Equity 22.76% 27.50% Equity 22.64% 27.50% Equity

GROUPE COFACE INTERCREDIT HOLDING AG (11) AT 60.64% 74.99% Full 62.06% 74.99% Full 61.74% 74.99% Full

KOMPASS BILGI (11) TK 56.54% 69.91% Full 57.86% 69.91% Full 57.56% 69.91% Full

KOMPASS CZECH REPUBLIC (11) CZ 75.21% 93.00% Full 76.97% 93.00% Full 76.56% 93.00% Full

KOMPASS INTERN. NEUENSCHWANDER (11) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

KOMPASS JAPAN (11) JP 80.83% 99.95% Full 82.72% 99.95% Full 82.29% 99.95% Full

KOMPASS POLAND (11) PL 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

KOMPASS SOUTH EAST ASIA (11) SG 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

KOMPASS UNITED STATES (11) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

LIBRAIRIE ELECTRONIQUE (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

LONDON BRIDGE FINANCE LIMITED (11) GB 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

MSL 1 FUND (f) (11) DE 80.87% 100.00% Full Consolidated from 2005 N Consolidated from 2005 N

N.V. COFACE EURO DB (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N

ÕESTERREICHISCHE KREDITVERSICHERUNGS COFACE (11) AT 76.02% 94.00% Full 77.79% 94.00% Full 77.39% 94.00% Full

ÖKV KREDITINFORMATIONS (11) AT 76.02% 100.00% Full 77.79% 100.00% Full 77.39% 100.00% Full

OR INFORMATIQUE (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 N






ORCHID TELEMATICS LIMITED (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NTHE CREDITORS GROUP LIMITED (11) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullTHE CREDITORS INFORMATION CO LTD (11) IT 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NUNISTRAT ASSURANCES (11) FR Absorption N 82.76% 100.00% Full 41.16% 50.00% FullUNISTRAT COFACE (11) FR 80.87% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NVERITAS PUERTO RICO CORP. (11) US 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullVISCONTEA COFACE (11) IT 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullVISCONTEA IMMOBILIARE (11) IT 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullNATEXIS FACTOREM (1) FR 80.59% 99.66% Full 82.48% 99.66% Full 82.05% 99.66% FullVR FACTOREM (1) DE 41.10% 51.00% I.P. 42.06% 51.00% I.P. Consolidated from 2004 I.P.

Other activities

AUXILIAIRE ANTIN (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullCIE FONCIERE NATEXIS (1) FR 80.86% 100.00% Full 82.75% 100.00% Full 82.32% 100.00% FullCO ASSUR (1) FR 80.71% 99.80% Full 82.59% 99.80% Full 82.16% 99.80% FullCRISTAL NÉGOCIATIONS (1) FR Absorption N 82.72% 99.96% Full 82.29% 99.96% FullEDVAL C INVESTMENTS Ltd (1) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullFONCIERE KUPKA (1) FR 80.85% 100.00% Full 82.75% 100.00% Full 82.31% 100.00% FullIFCIC (1) FR 16.51% 20.42% Equity 16.90% 20.42% Equity 16.81% 20.42% EquityIMMOBILIERE NATEXIS (1) FR 80.86% 100.00% Full 82.76% 100.00% Full Consolidated from 2004 NINTERFINANCE NATEXIS NV (1) NL 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% FullNATEXIS ALTAIR (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullNATEXIS AMBS (1) US 0.00% 100.00% Full 0.00% 100.00% Full 41.62% 100.00% FullNATEXIS IMMO EXPLOITATION (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullNBP INVEST (1) FR 80.87% 100.00% Full 82.76% 82.76% Full 82.33% 100.00% FullNBP PREFERRED CAPITAL 1, LLC (1) US 0.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% FullNBP PREFERRED CAPITAL II, LLC (1) US 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullNBP PREFERRED CAPITAL III, LLC (1) US 0.00% 100.00% Full 0.00% 100.00% Full 0.00% 100.00% FullSAGP (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullSAS SBE (2) FR Absorption N 100.00% 100.00% Full 100.00% 100.00% FullSCI ALTAIR 1 (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullSCI ALTAIR 2 (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullSCI VALMY COUPOLE (1) FR 80.73% 100.00% Full 82.62% 100.00% Full 82.19% 100.00% FullSEGEX (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.32% 100.00% FullSEPIA (1) FR 80.85% 99.99% Full 82.75% 99.99% Full 82.31% 99.99% FullSIBP (2) FR 100.00% 100.00% Full 99.23% 100.00% Full 99.22% 100.00% FullSODETO (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% FullSOGAFI (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% FullSPAFICA (1) FR 80.86% 99.99% Full 82.75% 99.99% Full 82.32% 99.99% FullSPV IGLOO2 (2) IE 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSTÉ FINANCIÈRE BFCE (1) FR 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% FullWORLEDGE A INVESTMENTS Ltd EUR (1) GB 80.87% 100.00% Full 82.76% 100.00% Full 82.33% 100.00% Full

III.3 – Other subsidiaries

BFBP ACTIONS EUROPE (2) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullFCP ALIZE (4) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullMAINE SERVICES (2) FR 100.00% 100.00% Full 100.00% 100.00% Full 100.00% 100.00% FullSCI BP (2) FR Merged N Merged N 99.00% 99.00% FullSCI JAVEL (2) FR Merged N Merged N 99.00% 99.00% FullSCI PONANT+ (2) FR 100.00% 100.00% Full 100.00% 100.00% Full 99.90% 100.00% Full

2005 ANNUAL REPORT

COMMENTS(a) Subsidiaries of:

1 Natexis Banques Populaires2 Banque Fédérale des Banques Populaires3 CASDEN Banque Populaire4 Joint subsidiaries of Banque Populaire banks5 Banque Populaire Rives de Paris6 Banque Populaire Atlantique7 Banque Populaire Côte d’Azur8 Banque Populaire Val de France9 BRED Banque Populaire10 Crédit Coopératif11 Coface12 Crédit Maritime Mutuel13 Banque Populaire du Nord14 Banque Populaire du Sud-Ouest15 Banque Populaire Lorraine Champagne16 Banque Populaire de l’Ouest17 Banque Populaire du Sud

(b) Consolidation methodFull Full consolidationEquity Accounted by the equity methodProp. Accounted by the proportionate consolidationN Not consolidated

(c) By decision of the Board of Directors of Société Centrale du Crédit Maritime on October 19, 2004, the Crédit Maritime regional banks will besupported by the appropriate Banque Populaire regional bank. As a result, the Banque Populaire banks have acquired a holding in the share capitalof the Crédit Maritime Mutuel banks affiliated to the Banque Fédérale des Banques Populaires pursuant to the Financial Security Act of August 1,2003 (law no. 2003-706), which have been consolidated by the consolidating entity as of the second half of 2005.

(d) Crédit Coopératif joined the Banque Populaire Group in 2003 and merged with Caisse Centrale du Crédit Coopératif (C.C.C.C.) on October 17,2003, at which point C.C.C.C. ceased to be Crédit Coopératif ’s central body within the meaning of the French Banking Act of January 24, 1984. Bydecision of the Comité des Etablissements de Crédits et des Entreprises d’Investissement (CECEI) on July 25, 2003, and following the October 17,2003 merger, Crédit Coopératif continues to exercise first-line responsibility over its former “affiliates”, the terms of which are set out in associationagreements between each of the credit institutions previously affiliated to the C.C.C.C and Crédit Coopératif, which now guarantees their liquidityand solvency.These credit institutions are now known as “associates” (rather than “affiliates”) of Crédit Coopératif.

(e) Subsidiaries are broken down by business activity (see note IX).

(f) Consolidated for the first time upon adoption of IFRS.

(g) Sold in second half of 2005.



Note V - Notes to the balancesheet

V.1 - Assets and liabilities at fair value through profit or lossThese are securities held for trading purposes or designated asat fair value through profit or loss on initial recognition in accor-dance with IAS 39.

Securities held for trading purposes are those acquired princi-pally for the purpose of selling them in the near term and thoseforming part of a portfolio of identified financial instruments thatare managed together and for which there is evidence of arecent actual pattern of short-term profit-taking.

The June 2005 fair value option amendment to IAS 39 -“Financial Instruments: Recognition and Measurement”, endor-sed by the European Union on November 15, 2005, sets out theconditions for designating assets and liabilities at fair value.Theymust fall into one of the following three categories:

n Hybrid instruments containing one or more embedded deri-vatives;

n Instruments that belong to a group of assets or liabilities that ismanaged and its performance evaluated on a fair value basis;

n Instruments that eliminate or significantly reduce an accountingmismatch.

These assets and liabilities are measured at fair value on eachreporting date and any changes recognized through profit or losson a separate line item entitled “gains or losses on financial ins-truments at fair value through profit or loss”.The interest com-ponent is recognized as interest income or expense.

No impairment is recognized against financial assets at fair valuethrough profit or loss as the counterparty risk is incorporated intheir market value.

V 1.1 - General provisions relating to fairvalueThe fair value of a financial asset or liability is the amount that canbe obtained in an arm’s length transaction between knowledgea-ble, willing parties.

At inception, fair value is the price paid or received.On subsequentreporting dates, fair value is the quoted price if the instrument isquoted on an active market. If there is no active market in the ins-trument, fair value is established using a valuation technique basedon observable data resulting from recent arm’s length markettransactions,discounted cash flow analysis or option pricing models.

Values may be adjusted to take account of liquidity or counter-party risk, and modeling risk in the case of hybrid instruments. Inthe case of hybrid instruments sold, if fair value is based on a valua-tion technique using observable market data, any gain reflectingthe difference between the transaction price and fair value asdetermined is recognized through profit or loss at inception.

If observable market data are not available, fair value is based onthe transaction price not the fair valuearising from the valuationtechnique.The gain is then deferred and recognized through pro-fit or loss over the life of the instrument.

n Instruments quoted on an active market:These are listedsecurities and derivatives, such as futures and options, that aretraded on organized and identifiably liquid markets.

n Over-the-counter instruments valued using recognizedmodels and observable data:

Standard instruments

The majority of over-the-counter derivatives, such as swaps,forward rate agreements, caps, floors and plain vanilla options,are traded in an active market, i.e. a liquid market with regulartrading.

Valuations are determined using widely accepted models (dis-counted future cash flows, Black and Scholes model, interpola-tion techniques) and directly observable market data,documented as such.

Hybrid instruments

Certain hybrid and/or long-maturity financial instruments arevalued using a recognized internal model based on observabledata such as yield curves, implied volatility ranges for options andinformation arising from market consensus or from active over-the-counter markets.

The observability of the market data used has been demonstra-ted. In terms of methodology, data must meet the following fourconditions to be considered as observable:

n they are derived from external sources (via a recognizedcontributor if possible);

n they are updated periodically;

n they are based on recent transactions;

n their characteristics are identical to those of the transactionconcerned. If necessary, a proxy may be used, provided its appro-priateness is demonstrated and documented.

The fair value of instruments obtained using valuation models isadjusted to take account of counterparty risks, modeling risksand data risks.

The trading profit generated by these instruments is recognizedimmediately through profit or loss.

n Over-the-counter instruments valued using unrecogni-zed models or non-observable data

Under IAS 39, a profit may only be recognized after initial reco-gnition if it is generated by a change in a factor that market participants would consider in setting a price, i.e. only if themodel and the data used to obtain the valuation are observable.

If the valuation model is not recognized or the data used notobservable, the trading profit generated at inception may not berecognized immediately in profit or loss.

At December 31, 2005, only a limited number of hybrid option-type derivatives were valued on the basis of non-observable

2005 ANNUAL REPORT

data. The gain generated on these instruments at inception isdeferred and released to profit or loss over the life of the instru-ment or until the data becomes observable.

Instruments traded on active markets are quoted securities,trading or hedging derivatives (swaps, FRAs, collars, futures, etc.).Net positions are measured on the basis of the bid price forshort positions and the asking price for long positions.

The fair value of investments in equity instruments that do nothave a quoted market price in an active market is estimated

either on the basis of the group’s share in the underlying net

assets using latest available data, or on the basis of price earnings

or discounted cash flow models for the most significant invest-

ments.

At December 31, 2005, assets at fair value principally comprised

fixed-income securities and, to a lesser extent, derivative financial

instruments and variable income securities, and more particu-

larly private equity investments.

V.1.2 - Financial assets at fair value through profit or loss

12/31/2005 01/01/2005in millions of euros Notes EU IFRS EU IFRS

Securities held for trading 22,243 22,655

Securities 22,243 22,655

Fixed income 21,628 22,026

Variable income (1) 615 629

Pledged assets 0 0

Derivative financial instruments held for trading V.1.4 4,815 3,685

Trading transactions 4,815 3,685

Other 0 0

Securities designated as at fair value 5,986 4,794



Variable income (1) 1,915 1,312

Pledged assets 95 803

Loans and receivables at fair value through profit or loss 281 741

Total 33,325 31,874

(1) Variable income securities valued on the basis of their quoted market price (listed securities) or using another valuation method(unlisted securities valued on the basis of price-earnings ratio or discounted cash flows) break down as follows:

Variable income securities at fair value through profit or loss

in millions of euros 12/31/2005 EU IFRS

Quoted market Other valuationprice methods Total

Trading securities 574 41 615

Securities designated as at fair value 932 983 1,915

o/w private equity investments 99 969 1,068

Total 1,506 1,023 2,530



V.1.3 - Financial liabilities at fair valuethrough profit or lossAt December 31, 2005, financial liabilities at fair value throughprofit or loss comprised primarily derivative financial instrumentsnot designated as hedges and liabilities arising from short-sellingof financial assets (securities).

The June 2005 fair value option amendment to IAS 39 - FinancialInstruments: Recognition and Measurement, endorsed by the

European Commission on November 15, 2005, permits the designation of financial liabilities as at fair value through profit orloss.The Group has elected to use this option retrospectively asof January 1, 2005 and has re-designated certain interest-rateinstruments index-linked to different types of component (equi-ties for personal savings plans and structured medium-termnotes) as at fair value through profit or loss.

Changes in credit risk are not included in the fair value of finan-cial liabilities measured at fair value.


Trading securities 2,107 3,210

Securities 2,011 995

Fixed income 1,915 766

Variable income 96 229

Pledged securities 96 2,215

Securities designated as at fair value 324 0

Securities 324 0

Fixed income 324 0

Variable income 0 0

Derivative financial instruments held for trading V.1.4 4,155 4,023

Other liabilities (1) 173 4

Total 6,758 7,237

(1) Principally equity-based personal savings plans and structured medium-term notes.

2005 ANNUAL REPORT

V.2 - Hedging instruments - assetsand liabilitiesIAS 39 defines a derivative as a financial instrument that has allthree of the following characteristics:

n its value changes in response to the change in a specified inte-rest rate, financial instrument price, commodity price, foreignexchange rate, index of prices or rates, credit rating or othervariable (the “underlying”);n it requires no or little initial net investment;n it is settled at a future date.

IAS 39 defines three types of hedging relationship:

n cash flow hedge,

n fair value hedge,

n hedge of a net investment in a foreign operation.

The Group does not hold any hedges of net investments inforeign operations.

In accordance with IFRS 1 (para 29), all hedging relationshipsexisting as of December 31, 2004 are recognized as hedges inthe opening balance sheet on January 1, 2005, excluding thosenot allowed under IAS 39 such as written options or interestrate hedges of held-to-maturity securities. In other words, atransaction may not be designated as a hedge if it was notalready so designated in the consolidated financial statements atDecember 31, 2004. If a transaction designated as a hedgebefore the date of transition does not meet the criteria forhedge accounting under IAS 39, changes in fair value are no longer recognized in retained earnings but recognized in profit orloss over the life of the hedged item. For cash flow hedges, chan-ges in value of the hedging instrument are recognized throughequity. Hedging relationships are presumed to be effective whenthe ratio of actual changes in the value of the hedging instrumentand the hedged item is between 80% and 125%.

V.1.4 - Derivative financial instruments held for tradingDerivative financial instruments not designated as hedges are automatically deemed to be held for trading, regardless of the period forwhich they are held.They are measured at fair value through profit or loss.

If a hybrid instrument (host contract and derivative) is not measured at fair value through profit or loss, the embedded derivative isseparated from the host contract and recognized as an asset or liability at fair value through profit or loss if it meets the definition of aderivative and its financial characteristics and associated risks are not closely related to those of the host contract.

in millions of euros 12/31/2005 EU IFRS 01/01/2005 EU IFRS

Notional amount Asset Liability Asset Liability

Futures and forwards 872,760 1,537 1,522 938 1,515

Organized markets 99,158 9 17 5 0

Interest rate 64,536 3 9 5 0

Currency 0 0 0 0 0

Other 34,622 6 8 0 0

Over-the-counter 773,602 1,528 1,505 933 1,515

Interest rate swaps 591,669 1,010 1,231 882 1,322

Forward currency 181,251 54 4 117 118

Currency swaps 341 396 249 45 56

Other 341 68 21 (111) 19

Options 304,719 3,268 2,624 2,743 2,504

Organized markets 17,327 17 5 1 666

Interest rate options 3,157 1 0 0 0

Currency options 30 0 0 0 0

Other 14,140 16 5 1 666

Over-the-counter 287,392 3,251 2,619 2,742 1,838

Interest rate options 80,768 628 595 289 397

Currency options 192,624 1,161 711 1,040 688

Other 14,000 1,462 1,313 1,413 752

Credit derivatives 2,450 10 10 4 4

Total 1,179,929 4,815 4,155 3,685 4,023



V.2.1 - Cash flow hedgesCash flow hedges are used to hedge exposure to changes ininterest rates on variable rate assets and liabilities and futurefixed-rate transactions.The Group principally uses cash flow hed-ges for macro-hedging purposes (hedging portfolios of loans orborrowings). The hedging instruments are recognized in thebalance sheet at their fair value and any changes are recognizeddirectly in equity for the effective portion of the hedge under theline item “unrealized or deferred gains or losses”. They are relea-sed to profit or loss under net banking income symmetricallywith gains or losses on the hedged items. The hedged item ismeasured in line with the rules for measuring the asset class towhich it belongs.

Transactions classified as macro-hedges in the separate financialstatements have been treated under IFRS as cash flow hedges,which corresponds exactly to the method of managing interestrate risk used by the Banque Populaire banks. The BanquePopulaire Group is therefore not concerned by the “carve out”version of IAS 39 on the treatment of macro-hedges as endor-sed in European regulation no. 2086/2004 of November 19,2004.

Portfolios of assets or liabilities that may be hedged are, for eachmaturity band:

n assets and liabilities exposed to variability in cash flows (varia-ble-rate loans and borrowings) due to the fact that future inte-rest rate levels are not known in advance;

n highly probable forecast transactions whose future cash flowsare not known today, i.e. exposure to variability in cash flowson future fixed-rate loans as the interest rate at which the loanwill be granted is not yet known. Similarly, the Group may beexposed to variability in cash flows on future refinancing in themarket.

Under IAS 39, hedges of an overall net position of fixed rateassets and fixed rate liabilities with similar maturities do not qua-lify for hedge accounting. However, almost the same effect can

be achieved by designating a percentage of one or more portfo-lios of variable interest rate instruments as the hedged item.

The effectiveness of a hedge is assessed by creating a “hypothe-tical” derivative for each maturity band and comparing changesin its fair value since inception with those of the derivatives to bedocumented as hedges.

For a cash flow hedge, the hypothetical derivative is created so as toachieve a hedge that qualifies as effective. Its characteristics are basedon those of the hedged item. Effectiveness is then assessed by com-paring the changes in value of the hypothetical derivative with theactual hedging instrument.This method requires the preparation ofa maturity schedule.

The prospective effectiveness test involves verifying whether the portfolio of hedging instruments is acceptable in a macro-hedging relationship.

The hedge is effective if, for each target maturity band, the nomi-nal amount of items to be hedged is higher than the notionalamount of the hedging instruments.

The retrospective test is used to check whether the hedgeimplemented remains effective on different reporting dates.

On each reporting date, changes in the fair value of hedging instru-ments, excluding accrued interest, are compared with those ofhypothetical derivative instruments (synthetic instruments repre-senting assets and liabilities and the management intention). Theratio of their respective changes should be between 80% and 125%.

If the hedged item is sold or the future transaction is no longerhighly probable, the cumulative gain or loss recognized in equityis recognized immediately in profit or loss.

If the hedging relationship is discontinued but the hedged item isstill held, the fair value of the derivative, excluding accrued inte-rest, on the date the relationship was discontinued is deferredover the life of the hedged item.After discontinuation of the hed-ging relationship, changes in the fair value of the former hedginginstrument are recognized immediately in profit or loss.


Notional amount Asset Liability Asset Liability

Futures and forwards 74,186 158 113 268 263

Organized markets 0 0 0 0 0

Over-the-counter 74,186 158 113 268 263

Interest rate swaps 74,185 158 113 267 263

Currency swaps 1 0 0 0 0

Options 0 0 0 0 0


Over-the-counter 0 0 0 0 0

Credit derivatives 0 0 0 0 0

Total 74,186 158 113 268 263

2005 ANNUAL REPORT


Notional amount Assets Liabilities Assets Liabilities

Futures and forwards 14,917 117 359 294 501

Organized markets 0 (7) 0 0 0

Other 0 (7) 0 0 0

Over-the-counter 14,917 125 359 294 501

Interest rate swaps 10,600 99 346 248 444

Currency swaps 4,316 25 14 46 57

Options 3 3 0 9 3


Over-the-counter 3 3 0 9 3

Swaptions 1 0 0 0 0

Other 2 3 0 9 3

Credit derivatives 0 0 0 0 0

Total 14,920 121 359 303 504

V.2.2 - Fair value hedgesFair value hedges are used by the Group principally for micro-hedging purposes to hedge fixed-rate assets and liabilities.Changes in fair value of the hedging instrument are recognizedin profit or loss under the line item “gains or losses on financialinstruments at fair value through profit or loss”. Accrued intereston the derivatives is recognized as interest income or expense.The hedged item is accounted for symmetrically with the hed-ging instrument. Hedged items otherwise measured using theeffective interest rate method are still measured on an accrualsbasis and the gain or loss excluding accrued interest is recogni-zed in profit or loss under the line item “gains or losses on finan-cial instruments at fair value through profit or loss”.

The prospective test is used to check that the financial characteris-tics of the hedged item and the hedging instrument are the same.

The retrospective test is used to check whether the hedgeimplemented remains effective on different reporting dates.On each reporting date, changes in the fair value of hedging

instruments, excluding accrued interest, are compared withthose of hypothetical assets and liabilities (synthetic instru-ments representing assets and liabilities to be hedged at therisk-free rate).The ratio of their respective changes should bebetween 80% and 125%.

If the hedging relationship is discontinued (e.g. the hedging ins-trument is sold) or the hedge is no longer effective, hedgeaccounting is discontinued prospectively.The hedging instrumentis reclassified as held for trading and adjustments to the value ofthe hedged item are amortized to profit or loss on a straight-linebasis over the shorter of the term of the derivative and the resi-dual term of the previously hedged item. In the case of earlyrepayment of the hedged item, the changes in value are recogni-zed immediately.

Documentation of a hedging relationship includes the itemsconcerned (hedged item and hedging instrument), the hedgingstrategy (risk hedged, type of hedge accounting used) and detailof effectiveness tests (frequency, results, etc.).



Maturity

Sensitivity Under 1-3 3-6 6 months 1-3 Over Total1 month months months to 1 year years 3 years

Euro 12 79 64 233 715 4,192 5,295

US dollar 1 8 10 18 118 448 603

Pound sterling 0 - 0 4 6 42 53

Swiss franc - 0 - 0 0 20 20

Total 13 87 73 255 839 4,703 5,971

Maturity

Notional amount Under 1-3 3-6 6 months 1-3 Over Total1 month months months to 1 year years 3 years

Euro 31,919 53,587 23,882 42,282 47,432 71,794 270,895

US dollar 4,962 7,531 3,309 3,108 7,386 8,731 35,027

Pound sterling 108 - 587 781 308 759 2,544

Swiss franc - 129 - 18 5 320 472

Total 36,989 61,246 27,778 46,189 55,131 81,605 308,938

V.2.3 - Assessing hedge effectivenessThe effectiveness of a hedge is assessed at inception of the hed-ging relationship and through its life both prospectively andretrospectively at least half-yearly. The retrospective test is usedto check whether changes in the value of the hedging instrumentand the hedged item are within the accepted range of 80% -125%. The prospective test is not necessarily quantified andcovers the residual term of the hedging relationship.

Assessing the effectiveness of a fair value hedge involves creatinga synthetic asset (or liability) to eliminate the effect of the unhed-ged components of market value (interest margin and liquidity).The effectiveness test compares changes in fair value of the syn-thetic asset (or liability) with those of the hedging instrument.

As required by IFRS 1, hedging relationships existing atDecember 31, 2004 have been recognized at the transition dateof January 1, 2005, save for those not permitted under IFRS suchas hedges of held-to-maturity securities.

V.2.4 - Credit derivativesCredit derivatives are not considered to be financial guarantees.Accordingly, credit default swaps are classified as derivativesgoverned by the provisions of IAS 39. Credit link notes arehybrid instruments containing a host contract and embeddedderivative.

The embedded derivative is measured in the same way as a sim-ple derivative. If there is no active market, embedded derivativesare measured using an internal model.

V.2.5 - Internal contractsGiven the structure of the Banque Populaire Group, many of thehedging instruments used by the Banque Populaire banks arecontracted with Natexis Banques Populaires. To ensure thatthese contracts qualify as hedges on a consolidated level, NatexisBanques Populaires ensures that the transactions are turnedaround correctly in the market in terms of notional amount andsensitivity, on an index-by-index and currency-by-currency basisand for each maturity band.

This rule only applies to futures and forward contracts.Accordingly, all internal option-based contracts are recognized atfair value through profit or loss, even if they qualify as hedges inthe separate financial statements.

The tables below show a breakdown of the excess of externalderivatives over internal derivatives, expressed in sensitivity andnotional amount.The notional amount of internal contracts turnedaround in the market was B22,225 million at December 31, 2005.

2005 ANNUAL REPORT

V.3 - Available-for-sale financialassetsAvailable-for-sale financial assets are non-derivative financialassets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through pro-fit or loss. In the Group’s case, they mainly comprise fixed-incomesecurities or variable income securities (equities).

At initial recognition, available-for-sale financial assets are measu-red at fair value. Discounts are not recognized at inception as thepurchase price is presumed to be the market price. Fair value isdetermined on the basis set out in note V.1.

Fair value at initial recognition is the purchase price plus directlyattributable transaction costs (brokerage, commissions paid tostockbrokers, stock exchange tax) and accrued interest. As thetransaction costs on these securities are not material, they arerecognized immediately as an expense.

On subsequent reporting dates,available-for-sale financial assets areremeasured at fair value and any changes recognized in equity,other than interest and amortization of premiums/discounts onfixed-income securities,which are recognized through profit or loss.

In the case of variable income securities, the entire change in fairvalue is recognized in equity.

Fair value for listed securities is their market price on the repor-ting date. Fair value for unlisted securities is determined usingprice/earnings or discounted cash flow models.

Available-for-sale financial assets are assessed for objective evidence of impairment on each reporting date. Impairment los-ses are incurred only if there is objective evidence of impairmentas a result of one or more events that occurred after initial reco-gnition of the asset. The definition of objective evidence ofimpairment is the same as that used for loans. Two additionalindicators are used in the case of equity instruments: negativeeffects due to the technological, legal or economic environmentand, more importantly, a significant and prolonged decline in thefair value of an equity instrument below its cost.

Impairment tests are conducted when the following conditionsare met:

n fair value has fallen below cost for a period of six consecutivemonths;n the value loss is at least 25%.

Where there is objective evidence of impairment, including pro-longed impairment for variable income securities, the cumulativeloss that had been recognized in “unrealized or deferred gains orlosses” is removed from equity and recognized in profit or loss.Theamount of the impairment loss is equal to the difference betweenpurchase cost (net of any principal repayment and amortization)and the recoverable amount. Recoverable amount is the net pre-sent value of expected future future cash flows discounted at themarket interest rate in the case of fixed-income securities, and fairvalue on the reporting date for variable income securities.

Impairment losses are recognized in net banking income underthe line item “net gains/(losses) on available-for-sale financial

assets”. Once an impairment loss has been recognized in respectof an equity instrument, all additional impairment losses arerecognized in profit or loss. Impairment losses are reversed inequity.

Unrealized losses on fixed-income securities are recognized asprovisions (impairment charges and other credit provisions inthe income statement) as the provision can be reversed in profit or loss if the value of the security increases in a subsequentperiod.

Available-for-sale financial assets that are part of a interest ratehedging relationship are measured at fair value and any changesattributable to the hedged risk recognized in profit or loss.Thisdoes not affect the actuarial deferral of the premium or discount, nor the recognition of interest in the case of fixed-income securities.


EU IFRS EU IFRS

Outstanding loans 0 0

Loans and receivables 0 0

Other 0 0

Accrued interest 0 0



Variable income (1) 5,020 4,541


Total 29,920 28,837

(1) Variable income securities traded on an active market amounted to €430 million atDecember 31, 2005.

V.4 - Loans and advances to banksand customersV.4.1 - General rulesLoans and receivables are non-derivative financial assets withfixed or determinable payments that are not quoted in an activemarket.

All the regional banks’ loans and advances to customers are clas-sified as loans and receivables, including portfolios of loansacquired. All loans and advances to banks are classified as loansand receivables.

At initial recognition, loans are measured at their fair value,which is the nominal amount of the loan less any discount andtransaction income plus transaction costs.

If a loan is granted at a below market interest rate, a discountequal to the difference between the nominal value of the loanand the sum of future cash flows discounted at the market rateis deducted from the nominal value of the loan. Market rate isthe rate practised by the large majority of banks in the marketplace at a given time for instruments and counterparties withsimilar characteristics. Amounts recognized by the Group as



discounts were not material at January 1, 2005 and December31, 2005.

After initial recognition, loans and receivables are measured atamortized cost using the effective interest method.

Internal costs included in the effective interest rate comprisevariable costs directly incurred in granting the loans.The BanquePopulaire Group has adopted a restrictive position whereby onlythe performance-related component of account managers’salary directly contingent upon granting loans is included in theeffective interest rate. No other internal costs are included.

External costs principally comprise fees and commissions paid tooutside business introducers.

Transaction income is income directly attributable to the origina-tion of new loans and principally comprises set-up fees chargedto customers, rebilled costs and commitment fees (if it is moreprobable than improbable that the loan will be drawn down).Fees received in respect of financing commitments that will notgive rise to a drawdown are deferred on a straight-line basis overthe term of the commitment.

Expenses and income arising on loans with an initial term of lessthan one year at inception are deferred on a pro rata basis withno recalculation of the effective interest rate. For variable orrevisable rate loans, the effective interest rate is recalculated ateach repricing date. Changes in future cash inflows or outflowsare accounted for using the “catch-up” method, which involvesmaintaining the original effective interest rate at inception of thecontract and recognizing immediately in profit or loss the diffe-rence between the carrying amount and the value obtainedusing discounted cash flow.

The fair value of loans and advances to banks and customers isdetermined on the basis of discounted future cash flows.The dis-count rate used is the market rate on the reporting date. If thereis a quoted price that meets the criteria of IAS 39, the quotedprice is used.

The fair value of loans with an initial term of less than one yearis deemed to be their carrying amount.

V.4.2 - Impairment of loans and receivablesIAS 39 defines the method of recognizing and measuring impair-ment losses.

A loan or receivable is deemed to be impaired if the followingtwo conditions are met:

n there is objective evidence of impairment on an individual orcollective basis as a result of one or more events that occurredafter the initial recognition of the asset (a “loss event”);

n the loss event (or events) has an impact on the estimatedfuture cash flows of the financial asset that can be reliably estima-ted.

The impairment loss is equal to the difference between amorti-zed cost and the recoverable amount, which is the net presentvalue of future cash flows estimated to be recoverable takingaccount of any available collateral, discounted at the original

effective interest rate. For short-term assets with a maturityof less than one year, future cash flows are not discounted andimpairment losses are assessed on an overall basis with nodistinction between interest and principal.

Movements in impairment losses are recognized in profit or lossunder the line item “impairment charges and other credit provi-sions”.

IAS distinguishes between two types of impairment:

n specific impairment;n collective impairment.

Specific impairment

Specific impairment is calculated on a loan by loan basis accor-ding to a schedule of future cash flows, and determined accor-ding to historical loss experience for the category of loanconcerned. Guarantees reduce the amount of the impairmentand when a loan is fully guaranteed, no impairment charges arerecognized.

Collective impairment

If there is no objective evidence of impairment for an individuallyassessed financial asset, the asset is included in a group of finan-cial assets with similar credit risk characteristics and collectivelyassessed for impairment in accordance with IAS 39.

The method used by the Group is largely based on the internalratings system implemented as part of the Basel II reform, cross-applied to three portfolios (personal/small business/corporate)and three risk types (pre-default/performing in default/industry).The breakdown by portfolio is based on the segmentationrecommended under Basel II and performing loans are groupedinto portfolios with similar risk characteristics.

For collective assessment purposes, assets have been dividedinto three risk groups:

n Loans classified in the two lowest risk rating categories with a highprobability of default: these loans, which are identified in themanagement systems by a special rating, present objective evi-dence of deterioration, mostly in the form of payment arrears.Most of these loans are for small amounts and the impairmentcharge is based on future expected loss rates calculated usingthe future Mac Donough ratio models.

n Loans in default according to Basel II but deemed performingunder accounting standards: some loans do not fulfil the criteriafor individual impairment assessment, but they are nonethelessconsidered to be “in default” from a prudential standpoint. In thiscase, a collective impairment provision is determined by applyingthe expected loss rate used for the purpose of calculating thefuture McDonough ratio, to the principal outstanding for all loansin the Group.

n Industry and country exposure determined according to a combi-nation of quantitative and qualitative criteria: objective evidence ofimpairment is based on in-depth analysis and monitoring of busi-ness sectors and countries. It typically arises from a combinationof micro or macroeconomic factors specific to the industry orcountry.

2005 ANNUAL REPORT

When a group of financial assets is found to be impaired, theimpairment charge is calculated on the basis of expected losses,as required by the Basel II accord.

However, under Basel II, the expected losses are based on theprobability of default over a one-year horizon. The Group has

adapted the calculation method to take account of the probabi-lity of default over the maturity of the loans concerned.

The Group uses its experienced judgement to adapt the resultsof this model to its real perceived risk.

V.4.3.1 - Performing loans and advances to banksPerforming loans and advances to banks mostly comprise repurchase agreements.

Under IFRS, repurchase agreements are treated in the same way as in the separate financial statements, except that securities sold mustbe identified by the vendor as the counterparty has the option to sell them on again or keep them as collateral.

The purchaser recognizes the nominal value of the receivable under loans and receivables.The amount disbursed in respect of the assetis recognized under “securities bought under repurchase agreements”.

V.4.3 - Loans and advances to banks

Notes 12/31/2005 01/01/2005in millions of euros EU IFRS EU IFRS

Performing loans

Performing loans V.4.3.1 55,745 39,552

Collective impairment (47) (58)

Net 55,697 39,494

Non-performing loans

Non-performing loans 108 109

Specific impairment (61) (60)

Net (1) 46 49

Total (2) 55,744 39,543

(1) Impairment losses accounted for 56% of total non-performing loans at December 31, 2005 against 55% at January 1, 2005.

(2) At December 31, 2005, the fair value of loans and advances to banks, determined in accordance with note V.4, was €55,730 million.


Loans and advances 12,182 8,769

Current accounts in debit 3,456 2,054

Unlisted fixed income securities 14 0

Reverse repos 39,341 28,365

Other 301 115


Total 55,745 39,552



V.4.4 - Loans and advances to customers

12/31/2005 01/01/2005in millions of euros Notes IFRS-EU IFRS-EU

Performing loans

Performing loans V.4.4.1 145,547 128,521

Collective impairment (749) (691)

Impairment of securities (57) (54)

Net 144,740 127,776


Non-performing loans 5,782 5,626

Specific impairment (3,919) (3,930)

Net (1) 1,863 1,696

Total (2) 146,603 129,472

(1) Impairment losses accounted for 68% of total non-performing loans at December 31, 2005 against 70% at January 1, 2005.

(2) At December 31, 2005, the fair value of loans and advances to customers, determined in accordance with note V.4, was €148,327 million.

V.4.4.1 - Performing loans and advances to customers


Lease financing V.4.4.2 8,681 8,195

Other loans and receivables V.4.4.3 115,283 99,588

Current accounts in debit 8,454 7,527

Unlisted fixed income securities 2,931 2,958

Reverse repos 5,469 6,569

Factoring 3,469 2,683

Other 599 456


Total (1) 145,547 128,521

(1) At December 31, 2005, the fair value of performing loans and advances to customers, determined in accordance with note V.4, was €147,214 million.

V.4.4.2 - Lease financing

Leases are classified as finance leases when substantially all therisks and rewards incidental to legal ownership are transferredby the lessor, otherwise they are classified as operating leases.

IAS 17 gives five examples of situations that lead to a lease beingclassified as a finance lease:

n the lease transfers ownership of the asset to the lessee by theend of the lease term;

n the lessee has the option to purchase the asset at a price thatis expected to be sufficiently lower than the fair value at the datethe option becomes exercisable for it to be reasonably certain,at the inception of the lease, that the option will be exercised;

n the lease term is for the major part of the economic life of theasset;

n at the inception of the lease, the present value of the minimumlease payments amounts to at least substantially all of the fairvalue of the leased asset;

n the leased assets are of such a specialized nature that only thelessee can use them without major modifications.

IAS 17 also describes three indicators that could also lead to alease being classified as a finance lease:

n if the lessee can cancel the lease, the lessor’s losses associatedwith the cancellation are borne by the lessee;

n gains or losses from the fluctuation in the fair value of the residualaccrue to the lessee;

n the lessee has the ability to continue the lease for a secondaryperiod at a rent that is substantially lower than the market rent.

Finance leases are recognized in the balance sheet in an amountequal to the payments due under the contract discounted at theinterest rate implicit in the lease plus any unguaranteed residualvalue accruing to the lessor.As required by IAS 17, unguaranteedresidual values are reviewed on a regular basis.At December 31,2005, the unguaranteed residual value accruing to the lessoramounted to B206 million.

2005 ANNUAL REPORT

If there is a reduction in the estimated unguaranteed residualvalue, the income allocation over the lease term is revised. Anyreduction in respect of amounts accrued is recognized immedia-tely in profit or loss and any reduction in respect of future amountsis recognized by revising the interest rate implicit in the lease.

Impairment charges for finance leases are determined using thesame method as that described for loans and receivables.

Finance income corresponding to interest is recognized in theincome statement under “interest income” based on a pattern

reflecting a constant period rate of return on the net investmentin the finance lease, using the interest rate implicit in the lease.

The interest rate implicit in the lease is the discount rate that:

n at the inception of the lease, causes the aggregate presentvalue of the minimum lease payments;

n the unguaranteed residual value to be equal to the sum of thefair value of the leased asset and any initial direct costs of thelessor.

V.4.4.2.1 - Finance leases


Real estate Equipment TOTAL Real estate Equipment TOTAL

Finance lease outstandings 5,198 3,482 8,681 5,025 3,169 8,195

Net non-performing leases (1) 88 62 150 104 62 166

Non-performing leases 130 99 229 155 95 250

Impairment (42) (37) (79) (52) (33) (84)

Total (2) 5,286 3,544 8,830 5,129 3,231 8,360

(1) Impairment losses covered 35% of non-performing leases at December 31, 2005 against 34% at January 1, 2005.

(2) At December 31, 2005, the fair value of performing finance leases, determined in accordance with note V.4, was €8,782 million.

V.4.4.2.2 - Residual maturity of finance leases

in millions of euros Residual maturity

Under 1 year 1 to 5 years Over 5 years Not allocated TOTAL

Finance leases

Gross investment 1,022 3,775 3,140 0 7,938

Net present value of minimum lease payments 396 2,518 2,494 0 5,408

Unearned finance income 578 578

Contingent lease payments recognized //////// //////// //////// 0 0

Provisions for unrecoverable minimum lease payments //////// //////// //////// 3 3



V.4.4.3 - Other loans and advances to customersOther loans and advances to customers amounted to B115,283 million against B99,588 million at January 1, 2005:


Commercial loans 3,624 3,513

Export credits 1,206 1,145

Cash loans and consumer credit 24,299 20,087

Equipment loans 33,827 30,119

Home purchase loans 44,081 38,764

Other 8,247 5,960

Total 115,283 99,588

V.5 - Held-to-maturity financialassetsThese are non-derivative financial assets with fixed or determi-nable payments and a fixed maturity that the Banque PopulaireGroup has the positive intention and ability to hold to maturity,other than those that are designated at initial recognition as atfair value through profit or loss, those designated as available forsale and those that meet the definition of loans and receivables.

At initial recognition, they are measured at fair value includingtransaction costs. After initial recognition, they are measured atamortized cost using the effective interest method.They are tes-ted for impairment on each reporting date and where necessaryan impairment loss recognized through profit or loss under theline item “impairment charges and other credit provisions”.

In the Banque Populaire Group’s case, this category is only usedfor fixed-income securities representing insurance companyinvestments.


Bonds

Cost 6,898 5,748

Impairment 0 0

Net 6,898 5,748

Other

Cost 1 0

Impairment 0 0

Net 1 0

Total (1) 6,899 5,748

(1) At December 31, 2005, the fair value of held-to-maturity securities, determined in accordance with note V.4, was €6,937 million.

2005 ANNUAL REPORT

V.6 - Deferred income tax assets and liabilitiesDeferred taxes arise on temporary differences existing in the separate financial statements between the book value and the tax baseof assets and liabilities carried on the balance sheet or on specific consolidation adjustments. They are calculated using the liabilitymethod based on future applicable tax rates.

The net deferred income tax balance recognized in the balance sheet as either deferred income tax assets or liabilities, arises princi-pally from the following sources:


Main sources of deferred income taxes (1)

Flow-through entities (430) (450)

Leasing reserve (562) (618)

Elimination of equalization reserve (246) (187)

Financial instruments at fair value through equity (908) (747)

Other financial instruments at fair value (215) (125)

Provisions for employee benefits 917 938

Provisions for regulated savings schemes 306 299

Other non-deductible provisions (2) 1,199 1,151

Ordinary and evergreen tax loss carryforwards 232 310

Amortized cost of loans 275 243

Unrealized gains on mutual funds 115 70

Other temporary differences 9 6

Total sources of deferred income taxes, gross 692 890

Unrecognized sources of deferred tax assets (374) (422)

Total sources of deferred income taxes, net 318 468

Recognized deferred tax assets

Deferred taxes at standard rate 136 215

Deferred tax liabilities 4 10

Deferred taxes at reduced rate (2) (10)

Total recognized deferred taxes 138 215

Including- deferred tax assets 682 767- deferred tax liabilities (536) (548)- deferred taxes of associates (8) (4)

(1) Positive amounts correspond to sources of deferred tax assets and negative amounts to sources of deferred tax liabilities.

(2) Including collective impairment and the impact of discounting specific impairment charges.



V.7 - Other assets and liabilitiesOther assets and liabilities correspond to technical accounts,details of which are given below.

The line item deferred income and accrued charges includes“Day One Profit or Loss” (DOPL). Under IFRS, if a financialinstrument is not quoted in an active market, its fair value isbased either on data from recent similar transactions in themarket or on internal measurement models. The December

2004 amendment to IAS 39 “Financial Instruments: recogni-tion and measurement” endorsed by the European Com-mission on October 25, stipulates that if an internalmeasurement model is used, a gain or loss (DOPL) may onlybe recognized at inception if the internal model is based onobservable market data. Otherwise the gain or loss is deferredover the term of the transaction. At December 31, 2005, theamount of deferred DOPL carried in the balance sheetamounted to B1.2 million.

Assets12/31/2005 01/01/2005

in millions of euros Notes EU IFRS EU IFRS

Sundry assets V.7.1.1 3,036 2,375

Accrued income and prepaid expenses V.7.2.1 4,107 3,384

Accrued income and prepaid expenses - insurance companies V.7.3.1 1,010 861

Total 8,152 6,621

Liabilities12/31/2005 01/01/2005


Sundry liabilities V.7.1.2 6,446 5,907

Deferred income and accrued charges V.7.2.2 5,064 4,666

Deferred income and accrued charges - insurance companies V.7.3.2 1,008 196

Total 12,517 10,769

V.7.1 - Sundry assets and liabilities

V.7.1.1 - Sundry assets12/31/2005 01/01/2005

in millions of euros EU IFRS EU IFRS

Securities settlement accounts 0 4

Real estate development 32 74

Other assets 547 146

Other receivables 2,444 2,141


Total 3,036 2,375

V.7.1.2 - Sundry liabilities12/31/2005 01/01/2005


Amounts due on securities 1,955 1,775

Sundry payables 4,025 3,728

Securities settlement accounts 86 44

Other 305 284


Total 6,446 5,907

2005 ANNUAL REPORT

V.7.2 - Accruals and prepayments

V.7.2.1 - Accrued income and prepaid expenses12/31/2005 01/01/2005


Collection accounts 792 597

Adjustment accounts 41 2

Prepaid expenses 74 80

Accrued income 677 707

Deferred charges 6 5

Other 2,517 1,994

Total 4,107 3,384

V.7.2.2 - Deferred income and accrued charges12/31/2005 01/01/2005


Collection accounts 504 747

Adjustment accounts 12 453

Deferred income 988 866

Accrued expenses 1,056 1,052

Day one profit and loss 1 0

Other 2,502 1,548

Total 5,064 4,666

V.7.3 - Accruals and prepayments - insurance companies

V.7.3.1 - Accrued income and prepaid expenses - insurance companies12/31/2005 01/01/2005


Reinsurers’ share of technical reserves 272 263

Insurance receivables 459 393

Reinsurance receivables 49 49

Accrued premium income 134 129

Deferred acquisition costs 18 20

Other 79 6

Total 1,010 861

V.7.3.2 - Deferred income and accrued charges - insurance companies12/31/2005 01/01/2005


Insurance liabilities 145 101

Reinsurance liabilities 75 76

Cash deposits received from reinsurers 29 14

Other 759 4

Total 1,008 196



V.8 - Investment propertyIAS 40 defines investment property as property held to earnrentals or for capital appreciation or both.

As is the case for property, plant & equipment (see note V.9),investment property is recognized as an asset when it meets thefollowing conditions:

n it is probable that the future economic benefits associated withthe investment property will flow to the entity;

n the cost of the investment property can be measured reliably.

Investment property is measured in the same way as property,plant & equipment (cost less accumulated depreciation and impair-ment losses) by all Group entities except the Natexis Assurancessub-group, which measures its investment properties at fair valuewith changes in fair value recognized through profit or loss.

Investment property leased under an operating lease may have aresidual value that will reduce the depreciable amount of the asset.

Gains or losses on disposal of investment properties are reco-gnized in profit or loss under the line item “net income or expen-ses on other activities”.


Cost Depreciation & Net Cost Depreciation & Netimpairment impairment

Investment property

Fair value (1) 549 //////// 549 470 //////// 470

Cost 973 (368) 605 921 (335) 585

Total (2) 1,522 (368) 1,154 1,391 (335) 1,055

(1) Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred participation reserve equal, on average, to 92% of the base concerned.

(2) The fair value of investment property is obtained by capitalizing the rental income at the market yield:

Fair value of investment property


Cost Fair value

Operating leases 478 642

Finance leases - TUP * 24 24

Other 652 670

Total 1,154 1,336

* TUP: Temporarily unlet properties.

2005 ANNUAL REPORT

V.9 - Property, plant & equipmentand intangible assetsThis item includes owner-occupied property, equipment ownedand used in the business, equipment let under operating leases,property acquired under finance leases and assets temporarilyunlet under finance leases, and interests in non-trading real estatecompanies (SCIs).

In accordance with IAS 16 and IAS 38, property, plant & equip-ment and intangible assets are recognized as assets only if theymeet the following conditions:

n it is probable that the future economic benefits associated withthe asset will flow to the entity;

n the cost of the asset can be measured reliably.

In accordance with IFRS1, the Group has elected not to measurethese assets at fair value in the 2004 opening balance sheet.Theyhave been maintained at cost, which is defined as the purchaseprice plus directly attributable transaction expenses (transferduties, fees, commissions and registration expenses). Borrowingcosts are not capitalized.

Internally-generated computer software is measured in accor-dance with IAS 38. Expenses incurred during the developmentphase are only recognized as intangible assets if they meet thesix conditions set out by IAS 38. Expenses incurred during theresearch phase are recognized as expenses when they areincurred.

A specific deprecation schedule is drawn up for each significantcomponent of an item of property, plant and equipment whichhas a different useful life or rate of consumption of future eco-nomic benefits than the item as a whole. Useful life is not neces-sarily the same as the depreciation period for tax purposes, northe asset’s economic life.

The following significant components and depreciation periodshave been identified:

Component Depreciation period

Land N/A

Indestructible elevations N/A

Walls, roof, waterproofing 20 - 40 years

Foundations, framework 30 - 60 years

External rendering 10 - 20 years

Equipment and installations 10 - 20 years

Internal fixtures and fittings 8 - 15 years

Other items of property, plant and equipment are depreciatedover their estimated useful life, which ranges from 5 to 10 years.

The depreciable amount of each component is cost less residualvalue. Residual value is the present value of the asset at the endof its estimated useful life. The Group does not believe it canreliably measure the residual value of items other than land and indestructible elevations. They are therefore assigned a nil residual value.

Intangible assets with a finite useful life are amortized on astraight-line basis over their estimated useful life, which may notexceed eight years in the case of software. Amortization beginsas soon as the asset is ready for use.No residual value is assigned.

Intangible assets with an indefinite useful life, including purchasedgoodwill, are not amortized but tested for impairment at leastonce a year. Leasehold rights are amortized on a straight-linebasis over the residual term of the lease (with no extension) andtested for impairment compared by comparing the net presentvalue of market rents and actual rents.

The charge to depreciation or amortization is recognized in theincome statement under the heading “depreciation, amortizationand provisions for impairment of property, plant and equipmentand intangible assets”.

In accordance with IAS 36, assets are assessed for objective evi-dence of impairment based on external indicators (decline inactivity, sharp increase in rates) or internal indicators (obsoles-cence, wear & tear, restructuring, discontinuation of activity) atthe interim and year-end reporting dates. Impairment testingconsists of estimating the recoverable amount of an asset, whichis the higher of fair value less costs to sell and value in use.Valuein use is the present value of future cash flows expected to bederived from continuing use of the asset.

The recoverable amount is estimated on an asset by asset basis,but not allocated to components of an asset.

Impairment losses are recognized in the income statementunder the heading “depreciation, amortization and provisions forimpairment of property, plant and equipment and intangibleassets”.They may be reversed if conditions change (e.g. evidenceof impairment no longer exists). Impairment losses are deductedfrom the depreciable or amortizable amount of the asset andtherefore have an impact on the future depreciation or amorti-zation schedule.

Gains or losses on the sale of property, plant & equipment orintangible assets are recognized in the income statement underthe heading “gains or losses on other assets”.

Assets held under finance leases (Group as lessee) are recogni-zed in the consolidated balance sheet under property, plant &equipment if their amount is material. At inception of the lease,they are measured at the lower of fair value or the net presentvalue of minimum future lease payments.

These assets are depreciated over the same period as otherassets in the same category.Assets leased under operating leasesare recognized as assets on the balance sheet as property, plant& equipment.



V.9.1 - Property, plant & equipment and intangible assets


Cost Depreciation Net Cost Depreciation Netamortization & amortization &

impairment impairment

Property, plant & equipment 3,623 (1,921) 1,702 3,579 (1,807) 1,772

Assets held under finance leases 168 (99) 69 168 (89) 79

Buildings 168 (99) 69 168 (89) 79

Other 0 0 0 0 0 0

Owned assets 3,455 (1,822) 1,633 3,411 (1,718) 1,693

Shares in non-trading real estate companies 59 0 59 91 0 91

Land 206 (3) 203 233 (3) 230

Buildings 1,325 (626) 699 1,153 (557) 596

Other 1,865 (1,193) 672 1,934 (1,158) 777

Intangible assets 788 (502) 286 727 (494) 234

Leasehold rights 186 (107) 79 167 (100) 67

Software 483 (363) 121 433 (342) 91

Other 119 (32) 87 127 (52) 76

Total 4,411 (2,423) 1,989 4,306 (2,301) 2,005

V.9.2 - Movements in property, plant & equipment and intangible assets during the year

in millions of euros Cost Increase Decrease and Change in scope Exchange Other Cost01/01/2005 other disposals of consolidation differences 12/31/2005

Property, plant & equipment 3,579 412 (383) (19) 2 32 3,623

Assets held under finance leases 168 0 0 0 0 0 168

Buildings 168 0 0 0 0 0 168

Other 0 0 0 0 0 0 0

Owned assets 3,411 412 (383) (19) 2 32 3,455

Shares in non-trading real estatecompanies 91 2 (1) (32) 0 0 59

Land 233 7 (32) 1 0 (2) 206

Buildings 1,153 132 (115) (12) 0 166 1,325

Other 1,934 272 (235) 24 2 (132) 1,865

Intangible assets 727 113 (64) 6 2 4 788

Leasehold rights 167 2 (5) 21 0 0 186

Software 433 59 (24) (16) 2 30 483

Other 127 52 (35) 1 0 (26) 119

Total 4,306 525 (446) (13) 4 36 4,411

2005 ANNUAL REPORT

V.10 - GoodwillV.10.1 - Accounting treatmentGoodwill is maintained in the balance sheet at its historic valuein the currency of origin and translated into euros at the year-end rate. Adjustments to goodwill are made within twelvemonths of the date of acquisition.

Negative goodwill is recognized immediately in the income sta-tement under “Changes in value of goodwill”.

Goodwill is not amortized but tested for impairment wheneverthere is objective evidence that its value may be impaired, usingthe discounted cash flow method.

V.10.2 - Impairment testingFor the purpose of impairment testing, goodwill is allocated tocash-generating units (CGUs).The Group’s CGUs correspond tothe segments defined for the purpose of segment reporting (seenote IX.):

n “Retail Banking”, which principally comprises the 21 BanquePopulaire banks and Crédit Maritime Mutuel,

n “Federal Activities”,which principally comprises the activities ofBanque Fédérale (and international retail banking activitiesconducted by the direct subsidiaries of Banque Fédérale desBanques Populaires),

n “Financing, Investment Banking and Services” represented byNatexis Banques Populaires and grouped into the following corebusinesses: “Corporate and Institutional Banking and Markets”,

“Private Equity and Wealth Management”, “ReceivablesManagement”, “Services” and “Other Businesses”, which them-selves form CGUs for the purpose of impairment testing.

The impairment loss is equal to the difference between the carryingamount of a CGU (which includes a portion of goodwill) and its reco-verable amount, defined as the higher of fair value and value in use.

When the recoverable amount is lower than the carryingamount, an irreversible impairment loss is recognized in profit orloss and charged first against the goodwill allocated to the CGUand then against other identifiable assets in proportion to theircarrying values.

At December 31, 2005, goodwill amounted to a total of B586million, including B556 million (96% alllocated to three NatexisBanques Populaires core businesses: Receivables Management(B447 milion), Corporate and Institutional Banking and Markets(B59 million) and Services (B50 million).

Save for exceptions, the value in use of the Natexis BanquesPopulaires CGU has been determined on the basis of futureannual free cash flows discounted to perpetuity. Future cashflows have been estimated on the basis of the medium-termbusiness plan (2006-2008) and after 2008, on a constant perpe-tual growth rate of 2%, which is equal to the average expectedinflation rate over an extremely long-term horizon.

The discount rate used is based on recent stock market data. Itrepresents the projected average rate of return on listed stocksin the sector concerned, based on their current market value,their expected results over the next few years and an extrapo-lation into perpetuity based on a constant growth rate of 2%.


Opening Acquisitions Exchange Closingvalue differences value

Net values per CGU

Coface Group 436 3 439

Volksbang International AG 20 20

Natexis Assurances 39 39

Natexis Bleichroeder Inc 31 5 36

Natexis Bail 12 12

Coficiné 9 9

Natexis Factorem 6 6

Natexis Intertitres 6 6

Other 18 2 20

Total 556 25 5 586



V.11 - Deposits from banks andcustomer depositsDeposits from banks and customers deposits are presented bynature and divided into demand or time deposits.They are mea-sured in accordance with IAS 39 as other financial liabilities usingthe amortized cost method.

At initial recognition, these liabilities are measured at fair value,which corresponds to market rates for the Group.Accordingly, no discount or premium is recognized at incep-tion. For liabilities with an initial maturity of more than oneyear, fair value includes transaction costs if they are material.

After initial recognition, deposits are measured at amortizedcost, which consists of reducing the liability by the amount ofrepayments. Accrued interest is recognized in profit or lossunder the heading “interest expense” whether or not the lia-bility is hedged.

The fair value of deposits from banks and customer deposits iscalculated by discounting future cash outflows at the market rateon the reporting date. If a quoted price is available that meetsthe criteria of IAS 39, the quoted price is used.

The fair value of liabilities with an initial maturity of less than oneyear and variable-rate liabilities corresponds to the carryingamount.


Current accounts in credit 4,200 2,759

Accounts and deposits 15,505 11,936

Demand 2,352 2,372

Time 13,153 9,565

Pledged securities 999 1,576

Demand 25 17

Time 974 1,559

Repurchase agreements 39,064 27,690

Demand 0 0

Time 39,064 27,690

Other liabilities 997 749

Accrued interest payable 512 273

Total (1) 61,277 44,984

(1) The fair value of deposits from banks at December 31, 2005 was €61,779 million.

V.11.1 - Deposits from banksDeposits from banks and customer deposits are deemed to be made at market rates.Accordingly, no discount is recognized.

Repurchase agreements and pledged securities are accounted for in the same way as in the separate financial statements. Securitiessold or pledged are not derecognized by the vendor or pledgor as the risks and rewards have not been transferred.

2005 ANNUAL REPORT

V.11.2 - Customer depositsCustomer deposits amounted to B104,483 million at December 31, 2005 against B97,878 million at January 1, 2005.The increase wasprincipally due to growth in demand deposits and special savings accounts.


Current accounts in credit 47,333 41,641

Demand 38,141 33,745

Time 9,193 7,896

Accounts and deposits 681 630

Demand 218 116

Time 463 514

Pledged securities 125 67

Demand 125 67

Time 0 0

Repurchase agreements 16,112 17,297

Demand 3,500 5,731

Time 12,612 11,566

Special savings accounts 38,057 36,256

Factoring liabilities 385 339

Accrued interest payable 1,096 1,004

Other 693 645

Total (1) 104,483 97,878

(1) The fair value of customer deposits (see note V.10) at December 31, 2005 was €105,197 million.

V.12 - Debt securitiesDebt securities (interest-bearing notes, interbank market instru-ments etc.) are broken down by nature. They do not includesubordinated debt, which is identified separately.

Debt securities are measured at fair value on inception, i.e. attheir issue price less transaction costs, and subsequently measu-red at amortized cost using the effective interest rate method.

No internal income or expenses are included in the effectiveinterest rate.Transaction costs include external expenses wherethey are material. Debt securities are issued at market rates andno market discount is recognized.

Premiums and discounts representing the difference between theissue price and the redemption price are included in the calcula-tion of the effective interest rate.The discount is deferred on anactuarial basis and released to income under net banking income.Accrued interest on debt securities is recognized in profit or lossand recorded in an accrued interest account in the balance sheet.

The fair value of variable-rate debt securities is equal to their car-rying amount on the balance sheet.

Fixed-rate debt securities are discounted using the fixed-rateavailable in the market on the reporting date (excluding spread)for a liability with the same residual maturity.


Interbank market instruments 52 0

Money market instruments 42,199 35,188

MTNs 11,752 9,480

CDs 30,447 25,708

Bonds 5,563 4,961

Other debt securities 931 1,098

Accrued interest payable 345 291

Total (1) 49,090 41,538

(1) The fair value of debt securities in issue at December 31, 2005 was €49,246 million.



V.13 - Insurance company technicalreservesInsurance companies cover their liabilities towards policyholdersby building up technical reserves calculated on a statistical basis:

n Mathematical reserves principally comprise:

– Unearned premium reserves which correspond to the pro-portion of premiums written during the year which relates toa subsequent financial period.

– Life insurance reserves which correspond to total premiumsreceived, plus investment income distributed to policyholders,less benefits paid. They also include a reserve to cover futureadministration costs.

n Loss reserves for life insurance correspond to the com-pensation due following a claim. For credit insurance, they

correspond to the estimated cost of all reported claims not yet

settled on the reporting date, plus a provision for unreported

claims calculated on a statistical basis.

n Deferred participation reserves represent the share of

investment income due to policyholders that has not yet been

distributed.These reserves must be distributed within a period

of eight years. Unrealized gains and losses on investments repre-

senting contracts with a discretionary participation feature are

largely offset (about 92%) by the recognition of a deferred par-

ticipation liability under the shadow accounting principle permit-

ted by IFRS 4, as a proportion of these gains and losses will

accrue to the policyholders through the return on their contract.

n Other technical reserves comprise reserves for financial

uncertainties and reserves for deferred acquisition costs.


Mathematical reserves 27,090 24,401

Life insurance business 22,012 19,862

Property & casualty business 183 176

Unit-linked business 4,895 4,363

Loss reserves 1,014 934

Deferred participation reserve 1,555 1,056

Other technical reserves 17 31

Total 29,677 26,422

2005 ANNUAL REPORT

V.14 - Provisions and impairment charges

V.14.1 - Summary

01/01/2005 Increase Utilization Surplus Exchange Change Other 12/31/2005in millions of euros EU IFRS released differences in scope EU IFRS

Impairment charges deducted from assets 4,905 1,449 (715) (774) 43 3 13 4,925

Performing loans (1) 748 103 0 (73) 18 0 0 796

Non-performing loans 3,990 1,208 (602) (629) 24 0 (12) 3,980

Other 166 138 (113) (71) 0 3 25 148

Provisions recognized as liabilities 2,006 378 (292) 0 2 1 (18) 2,077

Provisions

Provisions for counterparty risk 315 129 (117) 0 1 (1) 1 329

Provisions for impairment risk 31 50 (27) 0 0 0 (27) 26

Provisions for employee benefits 1,142 78 (72) 0 0 0 (4) 1,144

Provisions for operating risks 89 50 (38) 0 0 2 14 117

Provisions for regulated savings accounts 299 19 (13) 0 0 0 0 306

Provisions for current income tax 130 52 (25) 0 1 0 (3) 156

Total 6,911 1,827 (1,008) (774) 45 4 (5) 7,002

Impact on net income (2) (45)

(1) The information previously reported about collective impairment provisions has been amended following an adjustment to the method of measuring losses. The amount previouslyreported (€703 million) was based on expected losses resulting from the application of Basel II, using the probability of default on a one-year horizon. Expected losses have been recalcu-lated to factor in the probability of default based on the actual maturity of each exposure included in the groups of assets to be assessed for impairment (industries and countries). This ledto a €45 million increase in provisions recognized in the opening balance sheet and a €30 million deduction from equity net of deferred tax (i.e. €24 million attributable to the Group).

(2) Inpact on income statement

Given the presentation of the financial statements, charges to and reversals of provisions may impact on each line item of the incomestatement.The table below shows the impact of movements in provisions on the main consolidated income statement items:

in millions of euros Charges Reversals Net impact

Net banking income (247) 307 60

Operating expenses (123) 132 9

Amortization, depreciation and impairment of property, plant and equipment and intangible assets (3) 3 0

Gross operating income (373) 442 69

Impairment charges and other credit provisions (1,399) 1,315 (84)

Gains or losses on other assets (3) 0 (3)

Income before income tax (1,775) 1,757 (18)

Income tax (52) 25 (27)

Net income (1,827) 1,782 (45)



V.14.2 - ProvisionsA provision is a liability of uncertain timing or amount. A liability isa present obligation arising from past events, the settlement ofwhich is expected to result in an outflow of resources embodyingeconomic benefits that can be reliably measured.

The amount recognised as a provision is the best estimate of the expen-diture required to settle the present obligation on the reporting date.

This amount is discounted where the effect is material.Provisions arereviewed on each reporting date and adjusted if necessary to reflectthe best estimate on that date.

Provisions are not recognized for future operating losses or majorrepairs. No contingent liabilities or assets have been recognized.

In accordance with IAS 37, a provision is taken against a financingcommitment if there is a risk that the counterparty might defaultduring the commitment period, as the financing commitment isirrevocable.

Provision charges and reversals are recognized in the incomestatement on the line items corresponding to the nature of thefuture expenses.

V.14.3 - Provisions for home loan savingsschemesRisks relating to home loan savings accounts and plans have beenassessed and provided for in the IFRS consolidated financial sta-tements as of January 1, 2005.

The purpose of the provisions is to cover the two risks inherentin these schemes:

n the risk of having to grant future loans at a contractually agreedrate which is lower than the market rate;

n the risk of paying future interest on the savings at an above-market rate.

Both risks have been measured prospectively until extinction ofthe savings carried on the balance sheet.This required mode-ling current outstandings (savings and conversion into loans)based on assumptions regarding future market rates and clientbehaviour.

The model used by the Group comprises three stages:

n Stage 1:Modeling a 30-year data law, based on observed datafor all generations of scheme in existence over the past fiveyears, including the sensitivity of client behaviour to the diffe-rence between the contractually agreed rates and market ratesboth in terms of savings and conversion into loans.

Notes 01/01/2005 Increase Utilization Exchange Change Other 12/31/2005in millions of euros EU IFRS differences in scope EU IFRS

Counterparty risk 315 129 (117) 1 (1) 1 329

Financing and guarantee commitments 138 51 (69) 0 0 (10) 110

Customer disputes 138 59 (28) 0 (1) 18 184

Other provisions 39 19 (20) 1 0 (6) 34

Impairment risk 31 50 (27) 0 0 (27) 26

Non-current financial assets 9 2 (5) 0 0 (3) 3

Real estate development 1 0 0 0 0 0 1

Other provisions 21 47 (22) 0 0 (24) 22

Employee benefits VIII.3.3 1,142 78 (72) 0 0 (4) 1,144

Active employees 437 53 (24) 0 10 25 501

Retired employees 705 25 (48) 0 (10) (30) 643

Operating risk 89 50 (38) 0 2 14 117

Restructuring 10 1 0 0 0 (1) 10

Other provisions 79 50 (38) 0 2 15 107

Home loan savings schemes V.14.3 299 19 (13) 0 0 0 306

Total 1,876 326 (267) 1 1 (16) 1,922

2005 ANNUAL REPORT

n Stage 2: Generating 10,000 run-off scenarios based on a setof 10,000 random interest rate trends using the Monte Carlomethod (Ornstein-Uhlenbeck process) and applying a mean-reverting diffusion process.This method incorporates a correla-tion matrix between the various indices based on ten-yearrolling historic data.The mean reversion target for each index isdetermined based on long-term forecasts made by the Group’seconomists, which are also used for asset and liability manage-ment purposes.

n Stage 3: Calculating the final provision based on the averageof the differences observed for each scenario between cashflows based on the contractually agreed rates (savings with nogovernment premium or loan) and those determined by themodel using future market rates for equivalent products for eachyear of the scheme.These differences are discounted using theaverage of month-end swap yields over the past twelve months.For the savings phase, the equivalent product used is the Fidélisstep-up interest rate account sold through the Banque Populairenetwork. For the lending phase, rates are determined by refe-rence to the average spread observed over the previous threeyears between the 5-year risk-free rate (average term of loans

granted) and the rate on home loans granted at market rates.

Provisions are taken for net capital losses per generation of inte-rest rate. Capital gains are not recognized. Each of the 10,000provisions is calculated after deducting flows relating to theamount outstanding that are deemed not to be sensitive tochanges in rates. For reasons of prudence, this risk-free profile iscapped at the level observed in the tenth year of each genera-tion, and then run off on a straight-line basis over the nexttwenty years.

The risk on home loan savings accounts is calculated in a similarway, using separate interest rate mismatch assumptions.However, for these accounts, the mismatch risk is only relevantin the event of conversion into a loan as the rate paid during thesavings phase is revisable and indexed to market rates.The futurelevel of lending rates is determined by the model based on theregulatory formula.

The total provision includes the difference between future cashflows discounted at the market rate in the year in which the loanis granted and future cash flows at the contractually agreed rate,for all home loans granted under the schemes which are outs-tanding on the calculation date.The difference is reversed on anactuarial basis over the term of the loans concerned.


Under 4 to Over Total Under 4 to Over Total4 years 10 years 10 years 4 years 10 years 10 years

Home loan savings plans(by generation)

Savings 6,645 2,774 4,669 14,088 5,978 5,634 2,215 13,827

Loans 0 130 159 289 0 162 244 406

Provision 44 7 159 210 37 58 113 208

Charge/reversal in the year 11 (49) 46 8 - - - -

Home loan savings accounts(by generation)

Savings 513 503 1,026 2,042 551 481 1,022 2,054

Loans 333 146 7 486 412 140 6 558

Provision - - - 95 - - - 91

Charge/reversal in the year - - - 2 - - - -



V.15 - Subordinated debtSubordinated debt ranks after all other secured or unsecured liabilities but before participating loans and notes and deeply subordina-ted notes. It is measured at amortized cost.

Preferred shares may be classified as either debt or equity depending on their characteristics. All the preferred shares issued by theBanque Populaire Group are recognized as subordinated debt whereas they were recognized in minority interests in the French GAAPconsolidated financial statements.

V.15.1 - Amounts outstanding12/31/2005 01/01/2005


Subordinated debt with fixed maturities 5,428 4,449

Deeply subordinated notes (1) 299 0

Other V.15.2 5,128 4,449

Perpetual subordinated debt V.15.2 194 218

Preferred shares (2) 610 559

Mutual guarantee deposits 23 19


Total (3) 6,404 5,385

(1) On January 25, 2005, Natexis Banques Populaires issued €300 million of deeply subordinated notes, recognized as Tier 1 capital, repayable on January 25, 2010.

(2) Preferred shares issued by Natexis Banques Populaires Preferred Capital 1, LLC (€200 million), Natexis AMBS (€240 million), and Natexis Banques Populaires Preferred Capital 3, LLC(€170 million), recognized as Tier 1 capital.

(3) The fair value of subordinated debt at December 31, 2005 was €6,479 million.

V.15.2 - Movements in other subordinated debt during the year

in millions of euros 01/01/2005 Issues Redemptions Exchange Change Other 12/31/2005EU IFRS (1) (2) differences in scope (3) EU IFRS

Other subordinated debt with fixed maturities 4,449 875 (297) 77 0 23 5,128

Subordinated notes 4,444 875 (297) 77 (3) 23 5,119

Subordinated debt 5 0 0 0 3 0 9

Other perpetual subordinated debt 218 0 (21) 7 0 (10) 194

Subordinated notes 188 0 (21) 7 0 15 190

Subordinated debt 30 0 0 0 0 (25) 5

Total 4,667 875 (317) 84 0 14 5,322

(1) Issues:Issues of redeemable subordinated notes: €750 million by Natexis Banques Populaires in October 2005 maturing in 2016 and €125 million (net of intragroup) by Banque Fédérale des BanquesPopulaires (€59 million in June 2005 maturing in 2015, €51 million in October maturing in 2015 and €42 million in December 2005 maturing in 2016).

(2) Redemptions:- Redemption by Natexis Banques Populaires of the redeemable subordinated notes issued in October 1993, May 1996 and August 1996 by the former Crédit National in USD (€263 million)and by Banque Fédérale des Banques Populaires for the October 1993 tranche of €34 million (net of intragroup). - Early redemption by Natexis Banques Populaires of perpetual subordinated notes maturing in 2049.

(3) Other movements in other subordinated debt mainly comprise the change in elimination of intragroup transactions, where other consolidated entities have taken up the subordinateddebt issued by the Group.

2005 ANNUAL REPORT

V.16 - Derecognition of assets and liabilitiesV.16.1 - Non-current assets held for saleA non-current asset is classified as held for sale if its carryingamount will be recovered principally through a sale transactionrather than through continuing use.The asset must be availablefor immediate sale and its sale must be highly probable within aperiod of one year, evidenced by an active plan to locate a buyerand complete the sale.

Non-current assets or groups of assets held for sale are no longer amortized. Impairment charges are taken correspondingto the difference between the carrying amount and fair value lesscosts to sell.

Net gains or losses generated by discontinued operations areidentified separately in the income statement under the line item“discontinued operations and non-current assets held for sale”.The net gain or loss includes net income generated by disconti-nued operations up to the date of discontinuation, plus gains orlosses on revaluing assets or groups of assets held for sale at theirfair value less costs to sell, or gains or losses on actual disposal,and the corresponding tax charge.

As of December 31, 2005, the Group had no non-current assetsheld for sale.

V.16.2 - Derecognition of financial assets and liabilityIf substantially all the risks and rewards of ownership of a financialasset are neither retained nor transferred, the Group then determi-nes whether it has retained control of the financial asset. If control isnot retained, the financial asset is derecognized. If control is retained,the financial asset continues to be recognized to the extent of theGroup’s continuing involvement. Continuing involvement is eviden-ced by the existence of contractual conditions such as an option orobligation to repurchase the assets transferred or receipt of financialcompensation related to the performance of the asset transferred.

A financial liability is derecognized if it is extinguished, cancelledor expires.

Repurchase agreements Vendor: The securities sold are not derecognized. The Grouprecognizes a liability representing the commitment to return thecash received (“securities sold under repurchase agreements”).This financial liability is measured at amortized cost, not fair value.

Purchaser : Securities purchased are not recognized on thebalance sheet. The Group recognizes a receivable representingthe cash disbursed to the vendor (“securities bought underrepurchase agreements”). This financial asset is treated foraccounting purposes as loans and receivables.

On subsequent reporting dates, the vendor continues to mea-sure the securities sold in accordance with the rules governingtheir original category.The purchaser recognizes the receivableat face value under loans and receivables.

Stock lendingStock lending/borrowing transactions do not qualify as transfersof financial assets within the meaning of IAS. Accordingly, thesecurities loaned are not derecognized. Under IAS, loaned secu-rities are not separately identified but recognized in their originalcategory and measured accordingly. Borrowed securities are notrecognized by the borrower.



12/31/2005 EU IFRS

in millions of euros Demand Under 3 months 1 to Over Perpetual Total3 months to 1 year 5 years 5 years

Assets

Cash and balances with central banksand post offices 3,042 78 0 0 0 8 3,129

Financial assets at fair value through profit or loss 2,237 10,317 4,110 5,749 3,425 7,487 33,325

Hedging instruments 5 14 26 115 104 15 279

Available-for-sale financial assets 1,223 3,672 2,404 6,436 7,520 8,664 29,919

Loans and advances to banks 26,156 4,997 9,403 14,636 493 59 55,744

Loans and advances to customers 27,770 20,929 15,424 38,112 42,473 1,895 146,603

Held-to-maturity financial assets 14 51 26 2,500 4,308 0 6,899

Total assets 60,446 40,058 31,394 67,550 58,323 18,128 275,899

Liabilities

Due to central banks 8 378 30 0 0 0 416

Financial liabilities at fair value through profit or loss 188 921 1,084 3,403 1,071 91 6,758

Hedging instruments 3 4 22 167 278 0 474

Deposits from banks 26,520 5,744 24,694 2,472 1,836 11 61,277

Customer deposits 71,190 12,838 8,615 6,804 3,719 1,317 104,483

Debt securities 2,861 37,051 4,981 2,684 1,488 24 49,090

Subordinated debt 125 1,534 279 2,204 2,006 257 6,404

Total liabilities 100,895 58,470 39,705 17,735 10,397 1,700 228,902

V.18 - Breakdown of the balance sheet by currencyThe following table shows a breakdown of total assets and liabilities by currency at December 31, 2005:

Total EUR USD GBP JPY CHF Other

Assets 288,711 234,364 45,376 3,566 2,048 819 2,538

Liabilities 288,711 236,340 44,715 3,576 401 751 2,928

V.17 - Assets and liabilities by residual maturityIAS 32 requires the disclosure of information on exposure to interest rate risk.The table below shows the contractual maturity of allthe Group’s assets and liabilities.

Assets and liabilities with no specific maturity, such as accrued interest, current accounts or receivables due on demand, appear in the“demand” column.

2005 ANNUAL REPORT

Note VI - Notes to the income statement

VI.1 - Net interest incomeThe line items “interest and similar income” and “interest and similar expense” comprise interest receivable on fixed-income securitiesclassified as available-for-sale financial assets, interest receivable on loans and advances to banks and customers, and interest payable ondeposits from banks and customer deposits.

They also include interest receivable on held-to-maturity financial assets, although this is a minority category for the Group and onlyconcerns insurance subsidiaries.

in millions of euros 12/31/2005 EU IFRS 12/31/2004 2004 IFRS

Income Expense Net Income Expense Net

Central banks and post offices 36 (7) 28 33 0 33

Securities 2,555 (2,393) 162 2,458 (2,018) 440

Loans and receivables 8,031 (3,718) 4,313 7,072 (3,253) 3,818

Banks 1,486 (1,905) (419) 1,231 (1,547) (316)

Customers 6,068 (1,767) 4,301 5,347 (1,654) 3,693

Lease financing 477 (46) 431 494 (52) 442

Subordinated debt (299) (299) (315) (315)

Other 15 0 15 15 0 15

Hedging instruments 850 (709) 141 688 (590) 99

Discontinuation of hedging relationship (CFH) 25 0 25 0 0 0

Accrued interest 824 (709) 116 688 (590) 99

Impaired loans, includingrestructured loans 52 52 174 174

Total 11,539 (7,126) 4,413 10,440 (6,176) 4,264



VI.2 - Net fee and commission incomeThe method of accounting for fees and commissions received in respect of services or financial instruments depends on the ultimatepurpose of the services rendered and the method of accounting for the financial instruments to which the service relates. Fees andcommissions for one-off services are recognized in income immediately the service is provided. Fees and commissions for ongoingservices such as guarantee commissions or management fees are spread over the period during which the service is provided.

Fees and commissions that form an integral part of the effective yield of an instrument such as commitment fees or loan set-up feesare recognized as an adjustment to the effective interest rate over the term of the loan.Accordingly, under EU IFRS, these fees are reco-gnized as interest income rather than fee and commission income.

VI.3 - Gains or losses on financial assets and liabilities at fair value through profit or lossThis item includes gains and losses on financial assets and liabilities at fair value through profit or loss, whether held for trading ordesignated as at fair value through profit or loss, including interest.

Hedging instruments include changes in value of Fair Value Hedges, including interest, plus the symmetrical changes in value of itemshedged. It also includes the ineffective portion of Cash Flow Hedges.

12/31/2005 12/31/2004in millions of euros IFRS-EU IFRS 2004

Net gains on financial assets and liabilities excluding hedging instruments 863 409

Net gains on financial assets and liabilities held for trading 145 343

o/w derivative financial instruments not designated as hedges (243) (195)

Net gains on other financial assets and liabilities designated as at fair value 385 174

Other 333 (108)

Hedging instruments and changes in value of hedged items (23) 0

Ineffective portion of cash flow hedges 7 0

Ineffective portion of fair value hedges (30) 0

Changes in value of fair value hedges 23 0

Changes in value of hedged items (53) 0

Total 841 409



Interbank transactions 53 (21) 32 10 (28) (19)

Customer transactions 1,267 (169) 1,098 1,336 (141) 1,195

Securities transactions 364 (31) 332 280 (33) 246

Payment services 750 (343) 407 690 (329) 361

Financial services 558 (166) 392 524 (121) 403

Financing, guarantee, securities,derivatives commitments 138 (51) 87 159 (48) 112

Other 28 (2) 26 26 (2) 24

Total 3,157 (784) 2,373 3,024 (701) 2,323

2005 ANNUAL REPORT

VI.5 - Income and expenses from other activitiesIncome and expenses from other activities comprises mainly incidental income and expenses relating to finance leases and income andexpenses relating to investment property.

This item also includes income and expenses relating to insurance activities, in particular life insurance premium income, paid benefitsand changes in insurance companies’ technical reserves.

VI.5.1 - Finance leases

VI.4 - Gains or losses on available-for-sale financial assetsNet gains or losses on available-for-sale financial assets principally comprise gains or losses on sale and impairment losses on variableincome securities (prolonged impairment).

Variable income securities classified as available-for-sale are tested for impairment and an impairment charge recognized if their carryingamount is lower than their recoverable amount.

Impairment losses on fixed income securities are recognized under impairment charges and other credit provisions.

This item also includes dividends on variable income securities, where the Group’s right is established.

12/31/2005 12/31/2004in millions of euros EU IFRS 2004 IFRS

Dividends 96 76

Gains or losses on sale 386 44

Gains 442 163

Losses (56) (119)

Impairment losses on variable income securities (21) 67

Total 461 187


Notes Income Expense Net Income Expense Net

Finance leases VI.5.1 352 (372) (21) 327 (332) (5)

Operating leases 45 (25) 20 31 (22) 9

Investment property 167 0 167 193 0 193

Other non-operating assets 6 (5) 1 0 (3) (3)

Sub-total real estate activities 569 (403) 166 552 (357) 194

Change in insurance companies’technical reserves 0 (1,673) (1,673) 0 (912) (913)

Other insurance income and expense VI.5.2 4,765 (3,374) 1,391 3,887 (2,970) 918

Sub-total insurance 4,764 (5,046) (282) 3,887 (3,882) 5

Other income and expense VI.5.3 461 (191) 270 433 (171) 263

Total 5,794 (5,640) 154 4,872 (4,410) 463



Gains or losses on sale 14 (46) (33) 4 (21) (17)

Impairment 29 (7) 22 32 (9) 22

Other income and expenses 309 (319) (10) 291 (302) (11)

Total 352 (372) (21) 327 (332) (5)



VI.6 - Operating expensesOperating expenses comprise mainly payroll costs, including wages and salaries net of rebilled expenses (see VIII.1), social security char-ges and employee benefits (see VIII.3) such as pensions (defined benefit plans) and share-based payments (see VIII.4), in accordance withIFRS 2.

This item also includes all administrative expenses and external services.

VI.5.2 - Other insurance income and expense


Life insurance premium income 3,641 2,844

Personal risk insurance premium income 119 106

Credit insurance premium income 751 700

Paid benefits and claims (3,193) (2,799)

Other net income 72 68

Total 1,391 918

VI.5.3 - Other income and expense

(1) Corresponding to sales of credit information services, marketing information services and receivables collection services provided by Coface subsidiaries.


Real estate activities 20 15

IT development and other services 49 43

Credit management services (1) 125 120

Other activities 76 85

Total 270 263

12/31/2005 01/01/2005In millions of euros Notes EU IFRS EU IFRS

Payroll costs

Wages and salaries (1,897) (1,780)

of which share-based payments (5) (4)

Post-retirement and other benefits (277) (265)

Social security charges (605) (566)

Incentive and profit-sharing plans (252) (216)

Payroll-based taxes (168) (154)

Other 2 (4)

Total payroll costs VIII . 1 (3,195) (2,986)

Other operating expenses

Taxes other than on income (161) (148)

Other general operating expenses (1,684) (1,592)

Merger-related costs (6) (17)

Other (38) (62)

Total other operating expenses (1,888) (1,820)

Total (5,084) (4,805)

2005 ANNUAL REPORT

VI.7 - Impairment charges and other credit provisionsThis item comprises mainly charges to and reversals of specific and collective impairment losses and provisions relating to loans andreceivables (note V.2), plus bad debts written off during the year and recoveries of bad debts previously written off.

At December 31, 2005, in accordance with IAS 32 and IAS 39, the line item “specific impairment” includes securities classified as loansand receivables.


Charge Net Write-offs not Recoveries of bad Netreversals covered debts written off

Provisions (126) 93 (33)

Financing commitments (51) 48 (3)

Other (74) 45 (30)

Financial assets at amortized cost (1,266) 848 (50) 53 (416)

Loans and receivables (1,266) 848 (50) 53 (416)

Specific impairment (1,164) 774 (50) 53 (387)

Collective impairment of performing loans (103) 73 (29)

Available-for-sale assets (4) 19 15

Other (3) 0 (2)

Total (1,399) 960 (50) 53 (436)

o/w Released 960

Utilized 355

Reversals 1,315

Write-offs provided for (355)

Net release: 960

in millions of euros 12/31/2004 2004 IFRS

Charge Net Write-offs not Recoveries of bad Netreversals covered debts written off

Provisions (165) 162 (3)

Financing commitments (66) 66 0

Other (1) (99) 96 (3)

Financial assets at amortized cost (1,134) 707 (53) 44 (437)

Loans and advances (1,134) 707 (53) 44 (437)

Specific impairment (1,134) 707 (53) 44 (437)

Available-for-sale assets (3) 3 0

Other (2) (47) 10 (37)

Non-performing securities (45) 10 (35)

Other (2) 0 (2)

Total (1,349) 882 (53) 44 (477)

o/w Released 882

Utilized 429

Reversals 1,311

Write-offs provided for (429)

Net release: 882

At December 31, 2004, IAS 32 and IAS 39 were not applied. Accordingly:

(1) charges to and reversals of industry and sector provisions were recognized in provisions under “other”;

(2) charges to and reversals of impairment charges against non-performing securities were recognized in “other”.



VI.9 - Gains or losses on other assetsThis item comprises capital gains and losses on the disposal of property, plant and equipment and intangible assets, as well as capitalgains and losses on the disposal of investments in consolidated companies.

VI.10 - Changes in value of goodwillThis item includes goodwill impairment losses. An impairment loss is recognized whenever there is objective evidence of impairment.No impairment losses were recognized in 2005.

VI.8 - Share of results of associates

(1) The increase in the share of net assets of financial institutions in 2005 was principally due to Volksbank International AG (acquired in 2005 - see note 1.2.2), partially offset by the changeof consolidation method for AchatPro, a subsidiary of BRED (fully consolidated in 2005).

(1) As part of its active property management policy, the Banque Populaire Group, through one of its subsidiaries, sold the Liberté 2 building in Charenton in September 2005, generating apre-tax capital gain of €95 million.


Share of net Share of net Share of net Share of netassets income assets income

Financial institutions (1) 187 5 43 (1)

Other companies 61 10 50 9

Total 248 15 93 7


Investments in Property, plant TOTAL Investments in Property, plant TOTALconsolidated & equipment consolidated & equipment

companies and intangible companies and intangibleassets assets

Net capital gains on disposals 38 (1) 123 162 5 15 20

Net capital losses on disposals (24) (21) (45) 0 (14) (14)

Total 14 102 116 4 2 6


Goodwill 0 (44)

(net impairment loss)

Samic - (5)

Natexis Bleichroeder Inc - (39)

Negative goodwill 3 1

Unistrat 1

VAL A 1 -

BP Développement 2 -

Total 3 (43)

2005 ANNUAL REPORT

VI.11 - Income tax

VI.11.2 - Reconciliation of the tax charge in the financial statements and the theoretical tax charge

VI.11.1 - Income tax chargeThe tax charge for the period comprises:

- tax payable by French companies at the standard rate of34.93% and by foreign companies and branches at the local rate;

- deferred taxes arising on temporary differences existing in theseparate financial statements between the book value and the taxvalue of assets and liabilities on the balance sheet or on specificconsolidation adjustments, calculated using the liability method.

Deferred income tax assets and liabilities are set off at the levelof each tax entity.The tax entity may either be a single entity ora group of entities that have elected for group tax relief. TheGroup does not recognize net deferred tax assets unless it is reasonably certain that they will be used to offset a future tax

charge. Accordingly, the effect of tax losses is not recognized ifthe tax entity has incurred losses in the previous two years, as itis presumed that the future tax benefit will not be recovered.

The capitalization reserve recognized in the separate financialstatements of insurance companies is intended to defer capitalgains arising on the sale of certain bonds to offset subsequentcapital losses.The portion presumed unlikely ever to be used isreclassified in equity.

Under IAS 12, it is treated as a temporary difference that givesrise to a deferred tax liability.

All temporary differences have been recognized regardless ofthe recovery or payment date. The net deferred income taxbalance is recognized in the balance sheet as deferred incometax liabilities or assets.


+ Net income attributable to equity holders of the parent 1,522 1,195

+ Net income attributable to minority interests 174 103

+ Income tax charge 855 736

+/- Other permanent differences (1) (129) (178)

- Share of results of associates (15) (7)

= Consolidated taxable income 2,407 1,849

* Standard tax rate 33.33% 33.33%

= Theoretical tax charge (802) (616)

+ Tax assets 11 8

+ Impact of group tax relief 12 13

+ Contribution and contribution on earnings (CSB) (33) (32)

+ Income taxed at reduced rates (23) (15)

+ Tax reassessments (41) (44)

+ Differences in foreign tax rates (9) (9)

+ Changes in deferred tax assets, restricted for prudence 1 (12)

+ Exit tax on long-term capital gains reserves 0 (25)

+ Other items (2) 29 (4)

= Tax charge for the year (855) (736)

o/w . Current (850) (741)

. Deferred (5) 5

(1) Including income taxable at reduced rates.

For comparability, interest on preferred shares has been reclassified from minority interests to net banking income in 2004 as well as 2005. For the two years under review, therefore, inte-rest on preferred shares is no longer a permanent difference as it was under French GAAP.

(2) The change in this item is mainly due to a decrease in tax on the private equity business (€17m) and prior year income arising on the taxation of finance leases (€7m).



Note VII - Risk management

VII.1 – Risk managementorganizationThe Group is exposed to four main categories of risk:


n market risks arising from capital markets transactions;

n interest rate, currency and liquidity risks, arising from retail ban-king transactions;

n operational risks, including compliance risk.

In accordance with standard CRBF 97-02, which was in forceduring 2005, each bank has set up risk management and moni-toring structures that are independent from operating units.

All Group banks have also set up their own systems of exposurelimits and decision-making procedures, complying with the rulesestablished at Group Banque Populaire level, as set out in thecredit risk manual updated in June 2004, the interest rate andliquidity risk manual updated in April 2004 and the operationalrisk manual updated in November 2005.

Each bank’s risk policy is determined by the bank’s executivemanagement and approved by its Board of Directors.The banksare also responsible for exercising continuous control over risks,in accordance with the rules laid down by the Board of Directorsof Banque Fédérale des Banques Populaires – dealing in particu-lar with the role of the Group Risk Management Committee –and by the banking regulator.

At the end of 2003, the Banque Populaire Group establishedcomprehensive rating systems that comply with future pruden-tial requirements.These systems are based on the use of homo-geneous methods throughout the Group and centralized ratingapplications dedicated to the principal client segments.

The Banque Populaire Group’s central body is responsible forassessing risk policies and management procedures according tostandard principles and criteria. Risks are monitored at Grouplevel, as follows:

n Banque Populaire banks, on a consolidated basis;

n Banque Fédérale des Banques Populaires subsidiaries on aconsolidated basis;


In addition to this consolidated risk monitoring system, the GroupRisk Management Committee performs monthly assessments ofmaterial individual exposures at Group level or at the level of indi-vidual banks. Responsibility for performing credit reviews and thecredit rating process may be delegated to the Banque Fédéraledes Banques Populaires Risk Management department.

All Banque Populaire Group entities are informed of the deci-sions made by the Group Risk Management Committee.

Risk diversification represents a fundamental risk management ruleand is governed by external and internal guidelines.As required by

the Group’s risk management manuals, each bank sets internal riskconcentration limits based on its own specific characteristics,which are usually lower than the limits authorized under bankingregulations. In 2005, a single limit lower than the regulatory limitwas introduced and will apply to all Banque Populaire Group enti-ties on a consolidated basis as of June 30, 2006.

The organization of risk monitoring and control procedures isdescribed in the “Chairman’s Report on Internal ControlProcedures” included in this annual report.

VII.2 – Analysis of the loan bookIn 2005, world economic growth, led by the United States, sho-wed considerable resilience to the sharp rise in oil prices, natu-ral disasters and Chinese competition,most often at the expenseof large domestic deficits.

Thanks to a better second half, GDP growth in the euro zonereached 2% against 1.4% the previous year, but unemployment isstill high.The new eastern European members are not yet strongenough to drive European growth.

In France, after a sluggish first half, an improvement in the secondhalf led to growth of almost 1.6%, with weak householdconsumption offset by 3.3% growth in corporate fixed invest-ment.

Inflation remained under control at 1.8% despite the rise in oilprices but the savings rate fell to 1.4% and household indebted-ness has risen by 17.9% over two years.

A slight decline in the euro at the year end should boost exportsand the ECB’s decision to raise interest rates by one notchshould not put a brake on growth. However, public spendingaccounts for 54.4% of GDP in France against an average of48.6% for the euro zone, while public debt has reached 66% ofGDP.

The Banque Populaire Group is well-placed to avoid any seriousrepercussions from these uncertainties, thanks to its strong riskmanagement culture and broad diversification in terms of bothcountry and industry exposure.

2005 ANNUAL REPORT

VII.2.1 - Total exposure

12/31/2005 01/01/2005 changein millions of euros EU IFRS EU IFRS

Customer loans 146,603 129,472 13.2%

Performing loans 144,740 127,776 13.3%

Lease financing 8,681 8,195 5.9%

Other loans and advances 115,283 99,588 15.8%

Commercial loans 3,624 3,513 3.2%

Export loans 1,206 1,145 5.3%

Short-term loans and consumer loans 24,299 20,087 21.0%

Equipment loans 33,827 30,119 12.3%

Home loans 44,081 38,764 13.7%

Other loans 8,247 5,960 38.4%

Overdrafts 8,454 7,527 12.3%

Factoring 3,469 2,683 29.3%

Unlisted fixed-income securities 2,931 2,958 -0.9%

Collective impairment (749) (691) 8.5%

Other 6,672 7,515 -11.2%

Non-performing loans 1,863 1,696 9.9%

Interbank and money market assets 55,740 39,550 40.9%

Customer loans rose by about 13%, driven by the Group’s core strategic segments such as retail banking. Interbank loans grew fasterthan customer loans.

VII.2.2 - Non-performing loansImpairment charges and other credit provisions totaled B436 million, a decrease of 8%.The total breaks down into B355 million forretail banking and B81 million for Natexis Banques Populaires.The decrease reflects an improvement in the economic climate coupledwith a continued highly conservative provisioning policy.

Coverage of non-performing loans (excluding collective impairment provisions) amounted to 68% at December 31, 2005, reflecting theGroup’s conservative policy.


In the local retail banking business, 99% of defaults concerned clients in France.

For Natexis Banques Populaires, a breakdown of exposure and impairment charges by country shows a slight decline in both exposureand impairment charges. However, within that total, there was a moderate increase in exposure to North America and in impairmentcharges in Africa and the Middle-East.


Gross Impairment Net Coverage Gross Impairment Net Coverage

Interbank and money market assets 108 (61) 46 57% 109 (60) 49 55%Customer loans 5,782 (3,919) 1,863 68% 5,626 (3,930) 1,696 70%

Customer loans excluding lease financing 5,552 (3,839) 1,713 69% 5,376 (3,845) 1,530 72%Lease financing 229 (80) 150 35% 250 (84) 166 34%

Total 5,889 (3,980) 1,909 68% 5,735 (3,990) 1,745 70%

Collective impairment provisions 0 (796) (796) 0 (748) (748)Interbank 0 (47) (47) 0 (58) (58)Customers 0 (749) (749) 0 (691) (691)

Total (inc. collective impairment) 5,889 (4,776) 1,113 81% 5,735 (4,739) 996 83%



Breakdown of Natexis Banques Populaires exposure and impairment charges12/31/2005 EU IFRS

in millions of euros

Specific Country Industry Total Specific- Country Industry Totalcredit risks risks impairment provi- provi-

Countries risks sions sions

France 874 - 5,074 5,948 527 - 69 596

Rest of western Europe 176 - 3,578 3,754 135 - 91 226

Eastern Europe 25 44 1,081 1,150 17 1 5 23

North America 152 - 1,795 1,947 81 - 94 175

Central & Latin America 90 973 180 1,243 46 37 3 86

Africa and Middle-East 25 1,510 192 1,727 13 91 11 115

Asia-Pacific 54 653 518 1,225 18 12 5 35

Total exposure and impairment charges 1,396 3,180 12,417 16,993 837 140 278 1,256

VII.3 – Market risksMarket risks primarily concern Natexis Banques Populaires, asubsidiary of Banque Fédérale des Banques Populaires.The mar-ket risk management system is described below.

VII.3.1 - Organization of market riskmanagement at Natexis Banques PopulairesThe market risk system covers market activities conducted byboth Natexis Banques Populaires and its subsidiaries.The impro-vement program launched by Natexis Banques Populaires in2002 continued during 2005. Improvements concerned organi-zation, procedures and risk measurement.

Control over market risk management is mainly provided by theMiddle Office, the Risk Management Department and the InternalControl Department. Internal Control and Risk Managementreport to the General Secretariat, and the Middle Office reportsto Corporate and Institutional Banking and Markets.

The Executive Management of Natexis Banques Populaires hasdistributed a directive formalizing the structure of the differentteams involved in managing market risks.This directive sets outthe work carried out in 2004 to determine each department’sduties in terms of controlling market risks.

VII.3.1.1 - Role of the various departments involvedThe major responsibilities of each control entity are as follows:

n First tier controls are carried out by the middle office, whichplays an operational role through the applications it manages anduses daily. It key tasks are:

- producing and analyzing results and risks on a daily basis;

- producing and analyzing provisions on a monthly basis;

- ensuring the reliability of market parameters used to calculateresults and risks;

- proposing methods to calculate reserves while ensuring thatthey are exhaustive and correspond to the nature of risks;

- developing the system of delegated limits and method of calculating risk, in conjunction with Risk Management;

- monitoring and reporting any limit violations.

n Risk Management is responsible for the financial component ofsecond tier controls, in particular overseeing market risks andmodels. Its key tasks are:

- validating the proposals made by the middle office, ensuringtheir consistency throughout the Group and making recommen-dations where necessary;

- monitoring market risks at the various consolidation levels andparticularly at Group level;

- ensuring internal and external reporting on market risks;

- validating internally-developed models and software modelsused to value products. In July 2005, the Risk ManagementDepartment distributed the pricer and model validation chart,which sets out the duties of the Risk Management Departmentin validating models and pricers, as well as the documents thatmust be provided by other divisions (Research and MO);

- validating the various authorizations and limits requested bythe Corporate and Institutional Banking and Markets depart-ment and proposed by the middle office;

- making recommendations on the risk management system;

- leading Market Risk activities at Natexis Banques Populairessubsidiaries and branches.

n Internal Control is responsible for the operational componentof controls:

- ensuring that adequate procedures are in place and periodi-cally assessing their appropriateness, particularly with regard tobusiness activities and regulations;

- ensuring that procedures are properly and correctly followed;

- making recommendations on the risk management system;

- more generally, ensuring that procedures governing the mana-gement and monitoring or market risks are respected.

2005 ANNUAL REPORT

This structure is completed by:

n A New Products Committee, enabling capital markets activi-ties to launch new products safely, after identifying and analyzingthe different risk factors that may impact the value of the pro-duct.The New Products Committee meets every six weeks andis completed by working parties that meet every week.The com-mittee examines the different risks inherent to a new product, inparticular market, counterparty, legal, accounting, tax and non-conformity risks.

n A Market Risks Committee, which meets monthly and compri-ses the heads of the various control levels together with frontoffice managers. It is chaired by the head of capital markets acti-vities.The committee validates new limits, proposes changes tolimits and reviews any identified limit violations.

n A Risk Monitoring and Supervision Committee, which meetsquarterly, comprising front office and middle office managers, theRisk Management department and the Internal Control depart-ment to present new methods for measuring risks and divide updevelopments for their implementation.

The Board of Directors validates overall risk limits for all entities.

in addition, the Internal Control depar tments of NatexisBanques Populaires and Banque Fédérale des BanquesPopulaires periodically conduct specific audit assignments.

VII.3.1.2 - Market risk measurementThe market risk management system is based on a risk metricsmodel that measures the risk run by each Natexis BanquesPopulaires entity. The current model consists of a number ofstandard metrics and VaR calculations.

n Standard metrics

The key standard metrics used are:

- sensitivity to a +/- 1% change in interest rates (overall and bymaturity);

- yield curve exposure expressed as the potential loss;

- currency exposure;

- equity exposure;

- sensitivity to a +/- 1% change in implied volatilities in the equity,foreign exchange and fixed income markets (overall, by maturityand by strike);

- sensitivity to a change in delta of an underlying (equities, fixedincome and currency);

- sensitivity to dividend levels;

- sensitivity to change in goverment security/swap spreads;

- sensitivity to change in issuer spreads;

- sensitivity to change in correlations;

- monthly and annual loss alerts.

New metrics and limits were introduced in 2005:

- deployment of the methodology for interest-rate risk measu-rement: curve risk indicator ;

- specific indicators relating to product developments giving riseto new types of risk (correlations).

All of these new products have been subject to the “NewProducts” procedure and model validation;

- further improvements to limits for interest-rate products andhybrid derivatives;

- significant increase in assets authorized for money marketsecurities, with deployment of the spread risk measurementmetric (Xsi - internal indicator) for this portfolio;

- launch of high-yield activities;

- increased sensitivity to yields on short-term treasury instruments;

- increase in limits for long/short equity, capital structure arbi-trage and convertible bonds from Natexis Arbitrage;

- tightening of loss alert levels.

n Limits

Maximum sensitivity of interest rate maturity schedules to a+/-1% shift in the yield curve is B100 million.

The currency risk limit is B3 million expressed in terms of a one-day potential loss with a 99% confidence level.

Maximum sensitivity to a change in issuer spreads in the secon-dary bond market trading book is B10 million, expressed interms of a one-day potential loss and a 99% confidence level.

Volatility limits for interest rate, currency and equity options are:

- B2.5 million for a 1% change in interest rate volatility;

- B1.35 million for a 1% change in equity volatility;

- B0.683 million to B0.975 million per currency for a 1% changein foreign exchange volatility.

These overall metrics are supported by more precise measure-ments by underlying, maturity and strike price.

n VaR - Value at Risk

in addition to these standard metrics, Natexis Banques Populairesalso uses the Value at Risk (VaR) method. It uses Riskmanager soft-ware developed by Riskmetrics to perform historical VaR calcula-tions designed to quantify the risk of losses from capital marketsactivities, using conservative assumptions.The model is based on:

- one year’s historical data;

- a one-day potential loss horizon;

- a 99% confidence level.

The scope of VaR calculations is as follows:

- trading and investment portfolios of the Corporate andInstitutional Banking and Markets core business, excluding the“structured equities” portfolio;

- trading portfolios of Natexis Bleichroeder S.A.;

- trading portfolios of Natexis Arbitrage;

- trading portfolios of Natexis Commodity Markets;

- the investment portfolio of the Finance department.



For the Corporate and Institutional Banking and Markets corebusiness, VaR calculations are conducted daily by the MiddleOffice and monthly by the Risk Management department ofNatexis Banques Populaires.

Natexis Metals’VaR calculations are conducted daily using localRiskmanager software and monthly by the Risk Managementdepartment.

Data is inputted into Riskmanager primarily using automaticinterfaces developed between the front office/middle office sys-tems and the software.These interfaces supply the characteris-tics of an operation, enabling the software to understand thevarious operations.

Market data are provided by Riskmetrics on the basis of infor-mation from Reuters and are subject to a data managementprocess by Riskmetrics.

VII.4 – Interest rate and liquidity riskThe Group’s financial risk management policy aims to:

- define the best strategy to develop net interest income whilecontrolling risk;

- ensure that business growth is consistent with the bank’s finan-cial structure, in terms of both interest rate risk and liquidity risk;

- limit exposure to interest rate risk through an appropriatehedging policy;

- validate the organizational and control rules for the asset-liabi-lity management function;

- define and periodically monitor internal risk limits.

The financial risk management policy of each Banque Populairebank must comply with the Group’s financial risk managementmanual.The manual sets out the risk management and reportingrules adopted at Group level for asset-liability management.More specifically, it includes the system for setting interest rateand liquidity risk limits.

VII.4.1 - Interest-rate riskIn the first three quarters of 2005, interest rates fell to recordlows in the Eurozone. At the year end, the yield curve began toflatten, which could have a negative impact on the retail bankingbusiness.The spread between 3-month Euribor and 10-year CMSfell from an average of 208 bp in 2004 to an average of 129 bpin 2005 and 91 bp in early 2006.

n Interest-rate risk limits

Limits are set as a percentage of projected net interest income ona “dynamic” basis (incorporating business forecasts) and as a per-centage of earnings capacity on a “static” basis (last balance sheet)over a four-year horizon based on pre-defined scenarios.

Each Bank is free to set its own limits, provided they are expressed interms of the indicator set out in the Group risk management manual.

Sensitivity of earnings capacity on a static basis (“regulatory” view):

The model uses four matrix benchmark scenarios (instant shocks):

- across-the-board shift in market rates: (+/- 200 bp);

- non-parallel shift in the yield curve: short rates +/-100 bp, longrates -/+100 bp.

The sensitivity of earnings capacity must comply with a dual limit,expressed as a percentage of earnings capacity and as an abso-lute value representing the “minimum required capacity”.

Sensitivity of net interest income on a dynamic basis:

The model uses projected (gradual) scenarios based on constantrates, Natexis Banques Populaires economists’ forecasts, a yieldcurve shift, a fall in rates, a rise in rates and a yield curve inversion.

For each of the four years concerned, net interest income mustbe higher than the previous year after application of a multiplier.

n Hedging

n Cash flow hedges - CFH

Cash flow hedges are used by Group entities to fix the futurecash flows generated by variable rate borrowings (mostly inter-bank) and private or public issues, and variable rate loans (com-mercial or interbank).

They are based on maturity schedules for hedged variable ratetransactions, which may factor in assumptions about the renewalof the assets or liabilities concerned.

n Fair value hedges - FVH

Fair value hedges are used by Group entities to hedge fixed-rateassets (securities and loans) or fixed-rate liabilities (deposits frombanks, long-term customer deposits, and private or public issues).

n Effectiveness tests

Prospective testing:For a hedge of a single asset or liability, prospective testing invol-ves checking that the financial characteristics of the hedged itemand the hedging instrument are the same.

For a hedge of a group of assets or liabilities, prospective testinginvolves drawing up:

n a schedule of cumulative variable-rate liabilities and fixed-rateborrower swaps by maturity for cash flow hedges;

n a schedule of cumulative variable-rate assets and fixed-ratelender swaps by maturity for cash flow hedges;

n a schedule of cumulative fixed-rate liabilities and fixed-rate len-der swaps by maturity for fair value hedges.

Hedging is demonstrated if the nominal amount of items to behedged is higher than the notional amount of hedging derivati-ves for each maturity band of the target repayment schedule.

Retrospective testing:Retrospective testing involves conducting ex post checks on theeffectiveness of the hedge, at least on each reporting date.

On each reporting date, changes in the value of hedging instru-ments, excluding accrued interest, since the previous reportingdate or inception of the hedge are compared with those of thehedged items over the same period.The ratio of their respective

2005 ANNUAL REPORT

changes should be between 80% and 125%. Outside these limits,the hedging ratio would no longer be justified under IFRS.

For the purpose of retrospective testing, the hedged items arerepresented by:

n a hypothetical asset or liability to isolate the risk item hedged,for fair value hedges;

n a hypothetical derivative representing a perfect hedge of theitems hedged for cash flow hedges.

n Results

n Retail banks

Interest-rate risk:

An increase in sensitivity of net interest income to a fall in ratesand an inversion of the yield curve over the four-year horizon.

On a dynamic basis, sensitivity of net interest income to a sudden200 bp fall in rates rose from -9% in 2004 to -24% in 2005,and sen-sitivity to a sudden flattening of the yield curve rose from -4% to -7%.A more gradual fall in interest rates and yield curve flatteningwould have less of an impact on net interest income in the first twoyears (-5% in 2006 and -4% in 2007 compared with the 2005 level).

On a static basis,average sensitivity of earnings capacity over the fouryears to a 200 bp fall in rates rose from -29% to -58%.Average sen-sitivity to an inversion of the yield curve rose from -15% to -19%.


Sensitivity:

Natexis Banques Populaires is chiefly exposed to a rise in short-term interest rates.

n Credit derivatives

Apart from securitization transactions, credit derivatives held bythe Group at end December 2005 were not material. Theirnominal amount was B2.5 billion, principally in Credit DefaultSwaps (CDS) held for trading purposes.

Most of these credit derivatives are carried by Natexis BanquesPopulaires in line with its policy of developing a credit derivativesbusiness within its capital markets activities.As part of a cautiousapproach, the Group implemented trading limits in several stages:

- January 2004: Creation of a credit derivatives trading book. InJanuary 2004, the risk committee delegated authorization to thetrader to trade CDSs in the cash market;

- April 2004:The authorization was extended to include direc-tional positions, subject to a volume limit in order to keep tightcontrol over the operating process;

- September 2004:The non-government bonds desk was authorizedto trade in CDSs.The limits delegated were fairly restrictive and thevolume restriction also applied to transactions initiated by this desk;

- October 2004:As the operating process was considered satis-factory, the volume restriction was lifted;

- Since December 2004:The CDS trading positions have beentransferred to the non-government bonds desk, which is now in

charge of CDS trading.The idiosyncratic risk is measured usingthe Xsi indicator (internal indicator), which is set monthly basedon the historic levels of JP Morgan bond indices. An Xsi basemeasurement is also taken to limit the risk in the cash market.

The credit derivatives authorized are plain vanilla credit default swaps.

One restriction applies to trading positions: traders are not allo-wed to pile up positions and must either cancel or assign thetransaction to close out a position.

A CDS Management Committee met once a week from January2004 to October 2004. A report was prepared after each wor-king session of the committee.

VII.4.2 - Liquidity riskLiquidity gap limits are set on a dynamic basis, assuming both anormal growth and a liquidity crisis scenario.

A second indicator used is the sensitivity of earnings capacity to a50 bp increase in the spread over short rates measured over aperiod of six months on a dynamic basis assuming a normalgrowth scenario.

Liquidity risk has not increased as a result of the rise in the customer asset-liability ratio.

The dynamic gap over six months for the Banque Populairebanks as a whole, excluding NCDs, has even decreased substan-tially from B5 billion to B0.8 billion, due to the increased pro-portion of refinancing in total liabilities. Over four years, thedynamic gap excluding NCDs has risen from B21 billion to B22billion, which still represents 16% of residual assets.

Liquidity indicators show that business growth is controlled, evenmore so than in the past.The slight increase in the asset-liability ratioshows that growth has been managed more through borrowingsthan customer liabilities. All banks comply with the regulatory ratios.

VII.5 – Operational risksThe Group’s system is based on a risk management manualapproved by the Board of Directors of Banque Fédérale desBanques Populaires in 2005, which identifies and lists the activi-ties covered and describes the reporting system.

Operational risk, as defined by the banking regulator, is the risk ofloss due to inadequacies or deficiencies in processes, people andsystems, or to external events.A risk mapping process based onthis definition led to the identification of four major types of ope-rational risk: systems and processes, fraud and external risk, legaland compliance risk, and strategic risk.

In 2004, the Group launched a project,overseen by Banque Fédéraledes Banques Populaires, to create a coherent operational risk mana-gement system by providing all Group entities with standardizedmanuals for identifying key activities and information systems, as wellas guidelines for establishing business continuity plans.Work on theproject continued throughout 2005 and has resulted in the imple-mentation of business recovery plans based on best practices.

In addition, an Operational Risk Charter was adopted in 2005 andwill govern relationships within the Group as of January 1, 2006.



Note VIII - Payroll costs, number of employees, employeecompensation and benefits

VIII.1 - Payroll costsPayroll costs amounted to B3,195 million at December 31, 2005against B2,986 million at December 31, 2004.

Payroll costs include wages and salaries net of rebilled expenses,social security charges, incentive and profit-sharing payments,payroll-based taxes, share-based payments in accordance withIFRS 2, and employee benefits such as expenses relating to defined

contribution pension plans and the annual charge for definedbenefit pension plans, including:

- incremental benefit entitlement for all employees;- interest cost (impact of discounting);- gross return on plan assets;- amortization of actuarial gains or losses (corridor method)

and past service costs.

VIII.3 - Employee benefitsIn accordance with IAS 19, the Banque Populaire Group providesfor all its obligations with respect to employee benefits.

VIII.3.1 - Obligations at end 2005Obligations mainly comprise the following:

n Supplementary banking pension

The Banque Populaire Group “Caisse Autonome de Retraite”(CAR)pension scheme was closed to new entrants as of December 31,1993,pursuant to the banking industry agreement of September 13,1993, the terms of which were applied to the Banque Populairebanks through an internal agreement dated January 7, 1994. Thisscheme also covered Natexis Banques Populaires employees pre-viously employed by the former Caisse Centrale des BanquesPopulaires.

The Group’s obligations towards active and retired employeesconcern supplementary pension benefits payable under the BanquePopulaire Group plan and the fraction of benefits due under the ban-king industry scheme closed to new entrants on December 31,1993that is not covered by the Social Security system, as well as theARRCO and AGIRC obligatory supplemental pension plans.

Concerning the specific Natexis Banques Populaires pension plans,the assets of the former BFCE pension fund are equal to the projec-ted benefit obligation while those of the former Crédit National fundare slightly lower than the projected benefit obligation.

n End-of-career allowances

For end-of-career allowances, consolidated entities cover all orpart of their commitments through insurance policies withAssurance Banques Populaires Vie, a fully consolidated insurancesubsidiary of the Group.

Provisions are recognized in the consolidated financial state-ments for all obligations of Group entities not covered by insu-rance policies.

A ministerial decree of July 18, 2005 reformed the system ofend-of-career allowances. Departures on the initiative of theemployer before the age of 65 are no longer subject to socialsecurity contributions. The impact of this decree amounted toB44 million in 2005 and was treated as a past service cost defer-red over the remaining vesting period on an entity-by-entitybasis.The charge for the year was B2 million, recognized underpayroll costs.

n Long-service awards

Long-service awards are payable to all Group employees whoreach 20 years, 30 years, 35 years and 40 years service with theGroup.The amount payable is based on the number of years’ ser-vice.

The Group’s obligation is determined using the projected unitcredit method, similar to that used for end-of-career allowances.

VIII.2 - Number of employeesThe number of full-time equivalents at the year end was as follows:

Number 12/31/2005 12/31/2004

Employees 45,530 44,509

Domestic operations 41,066 40,428

International operations 4,464 4,081

2005 ANNUAL REPORT

n Other benefits

Other employee benefits principally comprise:

n CATS early retirement agreement:

On February 18, 2002, the Banque Populaire Group signed anagreement with employee representatives, providing for theimplementation of a “CATS” early retirement plan in applicationof the A.F.B. industry-wide agreement dated January 15, 2001.On August 30, 2002, the Banque Populaire Group signed a “CATS” convention with the Ministry of Social Affairs,Employment and Solidarity, exempting early retirement pay-ments from social security taxes.

n Mutual health plan for retirees and early retirees:

Under IAS 19, the employer’s contribution paid by some conso-lidated companies to mutual health funds on behalf of retireesand early retirees is treated as a post-employment benefit.Theliability is therefore provided for in the consolidated financial statements.

n Executive officers’ pensions

The executive officers belong to the supplementary group pension scheme open to all executive officers of the BanquePopulaire Group, in accordance with the provisions of the statusaccorded to this category.

VIII.3.2 - Recognition and measurement of the liabilityThe provision recognized in the balance sheet is equal to:

- the amount of the actuarial liability in respect of post-retire-ment and similar benefits for active and retired employees;

- less the market value of plan assets;

- plus or less any actuarial gains or losses arising from:

n experience adjustments in respect of demographic variables;

n changes in actuarial assumptions such as the discount rate,employee turnover and future salary increases;

n differences between the actual return and expected return onplan assets.

The main actuarial assumptions made as at December 31, 2005,are as follows:

The rate of increase in medical costs is 2% for inflation plus 2.5%for the generation effect.

For end-of-career allowances and long service awards, employeeturnover is calculated by age bracket and grade based on athree-year average.The rate is 0% for employees over 55. Futuresalary increases are estimated by grade based on a constantpopulation and a three-year average

Actuarial gains and losses are recognized in profit or loss using the“corridor” method. Under this method, the portion that exceeds10% of the greater of the group’s obligation or the fair value ofplan assets is deferred over the remaining working lives of theemployees participating in the plan. The “corridor” method is notused for other long-term employee benefits such as long serviceawards.

The Group has used the option available under IFRS 1 to reco-gnize all as yet unrecognized actuarial gains or losses in equity inthe opening balance sheet at January 1, 2004.

The change in liability recognized in profit or loss therefore cor-responds to:

- incremental benefit entitlements (expenses);

- benefits paid during the period;

- interest cost on the opening liability (expenses);

- expected return on plan assets;

- amortization of actuarial gains and losses outside the “corridor”for the plans concerned.

Banque Populaire Group uses independent actuaries to measureits main liabilities.

Pensions End-of-career Long-service allowances awards

Discount rate 3.76% 3.60% 3.42%

Return on plan assets 6.00% 3.80% ///



VIII.3.3 - Summary of liabilities and provisions

in millions of euros Supplementary End-of-career Long-service Other Totalpensions allowances awards

Provisions recognized 536 333 103 170 1,142

Unrecognized actuarial gains and losses (1) 38 15 3 56

Total liability at January 1, 2005 574 348 103 173 1,199

Benefits paid in the period (21) (4) (7) (36) (68)

Incremental benefit entitlements 17 5 11 33

Interest cost 35 14 3 3 54

Expected gross return on plan assets (12) (5) 0 (17)

Change in management fees 1 0 1

Contribution to fund (3) (3)

Contribution-related expenses 0 0

Impact of change in plan recognized during the period (2) 0 (2)

Actuarial gains and losses (1) 5 0 3

Other (3) 3 3 (4) (1)

Change recognized in payroll costs (2) (1) 22 10 (29) 2

Actuarial gain or loss on liabilities 63 28 //////// 15 106

Actuarial gain or loss on return on plan assets (19) (2) //////// (21)

Other actuarial gains or losses 2 (1) //////// 1 2

Change in unrecognized actuarial gains or losses (1) 46 25 16 87

Impact of change in plan during the period (44) (44)

Cost not yet recognized (1) (44) (44)

Provisions recognized 535 355 113 141 1,144

Unrecognized actuarial gains or losses (1) 84 40 //////// 19 144

Deferral of changes in plan (42) 0 (41)

Total liability at December 31, 2005 619 354 113 161 1,247

(1) Pursuant to IAS 19.

(2) As these provisions are recognized as liabilities in the balance sheet, Increases (expense) are shown as positive amounts and reversals (income) are shown as negative amounts inbrackets.

2005 ANNUAL REPORT

The charge for 2005 recognized in “payroll costs” amounted to B5 million versus B4 million in 2004.

(1) The average share price of Natexis Banques Populaires shares in 2005, the period in which the options were exercisable, was €118.60 (against €92.61in 2004).

VIII.4 - Share-based payment plansVIII.4.1 - Stock option plansBanque Populaire Group grants stock options to certain of itsemployees. As required by IFRS 2, stock options granted afterNovember 7, 2002,which have not vested on the reporting date,are valued at their fair value on the grant date using the Black &Scholes model.The fair value is expensed in payroll costs on astraight-line basis over the vesting period with a correspondingincrease in equity. Fair value is reviewed on each reporting date

and adjusted if subsequent information indicates a change to theinitial estimation of vested rights. The expense is then adjustedfor the current and future years.

The Group has four stock option plans covered by IFRS 2. Theoptions are over Natexis Banque Populaires shares and are exercisa-ble over a period of three years after a lock-up period of four years.

VIII.4.2 - Stock options granted to the top 10 beneficiariesThe following table shows the number of stock options over Natexis Banques Populaires granted to (or exercised by) the 10 employees(excluding executive officers) of Banque Fédérale des Banques that were granted (or exercised) the highest number of options in 2005.

Year Attributes of the plan Number of options Amount (euros)

Date of Initial Expiry Granted Outstanding Exercise grant exercise date at end 2005 price

date

2002 11/20/2002 09/11/2006 09/09/2009 329,735 308,490 72.47

2003 11/19/2003 09/11/2007 09/09/2010 406,890 398,270 83.25

2004 11/17/2004 11/17/2008 11/16/2011 427,750 423,900 89.1

2005 11/15/2005 11/15/2009 11/14/2012 500,000 500,000 119.24

Stock options over Attributes of the plan Number of Natexis Banques Populaires shares options

Plan Initial Expiry Exercise number exercise date price

date (in euros)

Options granted in 2005 2005 Plan 11/15/2009 11/14/2012 119.24 85,000

2001 Plan 09/20/2005 09/19/2008 94.30 43,200

2000 Plan 09/20/2005 09/19/2007 83.14 49,500

Options exercised in 2005 (1) 1999 Plan 09/22/2004 09/21/2006 59.31 10,900

1998 Plan 07/07/2003 07/06/2005 57.65 1,500

105,100



Note IX - Segment reporting

IAS 14 requires the disclosure of information broken down bybusiness or geographical segments that are subject to differentrisks and returns.

The Banque Populaire Group’s

n primary format for reporting segment is business segment (seenote IX.1)

n secondary format is geographical segment (see note IX.2).

Segment reporting is based on financial aggregates taken fromthe balance sheet and income statement and reconciled with theconsolidated financial statements.

This information is completed by an analysis of the differences (noteIX.3) between insurance companies’ financial statements as presen-ted in the insurance format and their presentation in banking format.

IX.1 - Segment reporting analysisThe Banque Populaire Group is structured into three sectors (orlevels):

Level 1: Retail bankingThis level comprises the Banque Populaire Regional Banks, CASDENBanque Populaire, Crédit Coopératif, Crédit Maritime Mutuel, theMutual Guarantee Companies and the direct subsidiaries of these enti-ties.Along with the direct subsidiaries of Banque Fédérale des BanquesPopulaires (except for Natexis Banques Populaires), they account formost of the Group’s retail banking business. For clarity, the capital mar-kets business of the Banque Populaire banks, which is principallyconducted by BRED Banque Populaire, has not been reallocated.

Level 2: Financing, investment banking and servicesThis level comprises Natexis Banques Populaires, the BanquePopulaire Group’s Financing, Investment banking and Servicesbank,which is divided into the following four core businesses plusan “other businesses” segment:

n Corporate and Institutional Banking and Markets:

Corporate and Institutional Banking and Markets includes finan-cing and capital markets activities for a clientele of large compa-nies, banks and institutions. It has a highly integrated sales forcethat is responsible for marketing Natexis Banques Populaires pro-ducts and developing sales of all products to its clients, and parti-cularly products provided by the core business, which include:

- Financing products: working capital finance (overdrafts, spotcredits, discounting, credit lines, guarantees and bonds, documen-tary credits), financing for equipment, assets, acquisitions, projectsand international trade;

- Capital market products: interest rate, equity, credit and cur-rency derivatives, brokerage and arbitrage;

- Cash management and payment services: payment systems, EDI,authorizations, checks, letters of credit, transfers, cash management.

n Private equity and wealth management:

- The private equity business provides expansion capital, buy-insand buy-outs, venture capital (young companies) and internatio-nal private equity for a clientele of small and medium-sized,mostly unlisted companies;

- Wealth management provides advice, planning and asset mana-gement services for a clientele of high net worth individuals,mostly clients of the Banque Populaire retail banking networkbut also of Natexis Banques Populaires.

n Services :

- Financial services provide securities back office services inclu-ding custody (account holding, back office outsourcing, deposi-tory control), fund administration and accounting, issuer services,order receipt and transmission, office service. Most of this busi-ness comes from Natexis Banques Populaires clients.

- Banking services provide payment systems services includingelectronic payments, issuance and collection of low-volume elec-tronic transfers, check processing.

- Asset management provides savings, investment and insu-rance products and services through three business lines: insu-rance (individual life, group life, P&C, personal risk), financialmanagement (mutual funds, multi-manager funds, multi-distri-bution), employee benefits planning (development and marke-ting of products, administration of employee share ownershipplans, employee account holding, fund administration andaccounting).

n Receivables Management:

This business includes Coface and Factorem, which have a sha-red management structure. It includes trade receivables manage-ment and offers clients tailored products to manage, protect andfinance their receivables:

- Main activities: credit insurance, business information and creditrating (solvency and marketing), trade receivables management(from issuance to recovery), factoring (Factorem) and securitization.

- Other activities: bonds, management of public procedures onbehalf of the French State, trade receivables management training.

Receivables management has an extensive distribution networkcomprising:

- the Coface network covering 58 countries, supported by theCreditAlliance network (91 countries);

- the Banque Populaire retail banking network, which is a majorsource of factoring business for Factorem and offers substantialdevelopment potential for other activities.

n Other businesses:

Other activities not covered by these four core businesses aregrouped under “Other businesses”, which primarily comprisesthe functional departments (information systems, human resour-ces, finance and internal audit).

2005 ANNUAL REPORT

Level 3 - Federal activityThis level is represented by Banque Fédérale des Banques Populaires, which guarantees the consistency and financial solidarity of theGroup through its function as central body and holding company of Natexis Banques Populaires.

IX.1.1 - Segmental analysis of the income statement

At December 31, 2005 (1)

(1) Results for each segment comprise directly attributable operating income and expenses, including transactions with other segments of the Group. The information is therefore perfectlyconsistent with that published upon release of the financial statements on February 23, 2006 and published in the Group management report.

(2) The 2004 comparatives are based on IFRS excluding IAS 32, IAS 39 and IFRS 4.

Financing, investment banking and services bank

RetailBanking

Corporateand

InstitutionalBanking and

Markets

PrivateEquity &Wealth

Management

ServicesReceivables

Management Other Total

Federalactivity Total


Net banking income 5,194 1,259 264 725 781 9 3,039 9 8,242Year-on-year change (2) 4.5 % 8.7% 40.7% 18.7% 14.4% ns 13.5% ns 7.8%

Operating expenses (3,385) (726) (90) (440) (547) (191) (1,994) (11) (5,390)Year-on-year change (2) 3.3% 10.9% 1.7% 7.2% 6.4% ns 9.5% ns 5.6%

Gross operating income 1,810 533 173 285 234 (181) 1,044 (2) 2,852Year-on-year change (2) 6.6% 5.7% 75.1% 41.8% 38.6% ns 21.8% ns 12.3%

Income before income tax 1,483 472 159 282 223 (60) 1,075 (7) 2,551Year-on-year change (2) 11.9% 16.8% 88.9% 50.7% 35.8% ns 49.3% ns 25.4%




RetailBanking

Corporateand


Markets

PrivateEquity &WealthManag-ement

ServicesReceivables

Manag-ement

Other Total

Federalactivity

Unallo-cated

(1)Total


RetailBanking

Corporateand


Markets

PrivateEquity &WealthManag-ement

ServicesReceivables

Manag-ement

Other Total

Federalactivity

Unallo-cated

(1)Total

IX.1.2 - Segmental analysis of the balance sheet

Assets (at December 31, 2005)

Liabilities (at December 31, 2005)

[1] This item includes intragroup balances and transactions between segments (see IAS 14 para. 24) and non-segment assets (certain consolidation adjustments that cannot be allocatedto the core businesses, mainly deferred tax assets).

[1] This item includes intragroup balances and transactions between segments (see IAS 14 para. 24) and non-segment liabilities and equity (total equity and certain consolidation adjust-ments that cannot be allocated to the core businesses, mainly deferred tax liabilities).


Financial liabilities at fair value through profit or loss 1,922 5,285 5 6 0 50 5,346 2 (512) 6,758

Deposits from banks 21,182 48,568 629 455 1,899 8,054 59,605 12,418 (31,928) 61,277

Customer deposits 81,143 18,369 543 46 786 5,415 25,158 0 (1,818) 104,483

Debt securities 14,070 36,248 6 0 741 849 37,844 1,042 (3,866) 49,090

Insurance companies’ technical reserves 3,547 0 0 25,334 903 0 26,237 0 (107) 29,677

Subordinated debt 2,265 3,813 10 388 25 881 5,117 3,233 (4,211) 6,404

Other liabilities 5,993 3,925 146 4,343 702 998 10,114 205 14,709 31,022

Total liabilities 130,122 116,208 1,339 30,572 5,055 16,247 169,421 16,901 (27,734) 288,711


Financial assets at fair value through profit or loss 8,406 16,813 1,185 7,915 123 141 26,176 9 (1,267) 33,325

Available-for-sale financial assets 10,599 7,396 460 13,326 842 4,511 26,535 470 (7,684) 29,920

Loans and advances to banks 14,321 53,421 626 829 15 3,534 58,424 14,750 (31,752) 55,744

Loans and advances to customers 98,117 42,421 237 588 3,638 4,929 51,813 332 (3,658) 146,603

Held-to-maturity financial assets 0 0 0 6,973 122 0 7,094 0 (195) 6,899

Goodwill 0 13 24 236 443 20 736 20 (170) 586

Other assets 7,612 3,005 117 1,820 1,126 1,092 7,160 1,565 (703) 15,634

Total assets 139,055 123,069 2,648 31,686 6,308 14,226 177,938 17,146 (45,428) 288,711

2005 ANNUAL REPORT

[1] Intragroup balances and transactions between geographical segments (IAS 14 para. 24) and countries outside the four identified geographical segments.

IX.2 - Analysis by geographical segmentThe Banque Populaire Group has a large domestic banking network through the Banque Populaire banks, but also a significant internatio-nal business through Natexis Banques Populaires’ 116 offices abroad (including Coface).

The Group has identified four main geographical segments :

- France;

- Other EU countries;

- North America (Canada, USA);

- Other OECD countries.

Each legal entity has been allocated to a geographical segment based on its country of location.

IX.2.1 - Analysis of the income statement by geographical segment

Income Statement (at December 31, 2005)

in millions of euros France Other EU North Other OECD Unallocated Totalcountries America countries (1)

Net banking income 7,392 469 233 14 134 8,242

Operating expenses (4,959) (279) (109) (14) (29) (5,390)

Gross operating income 2,433 190 124 0 105 2,852

Impairment charges and other credit provisions (406) (10) (16) 0 (2) (436)

Operating income 2,026 180 107 0 103 2,416

Share of results of associates 14 1 0 0 0 15

Gains or losses on other assets 117 0 0 0 0 117

Change in value of goodwill 3 0 0 0 0 3

Income before income tax 2,159 181 107 0 104 2,551

Income taxes (740) (62) (36) (1) (16) (855)

Net income 1,419 119 71 (1) 88 1,696

Attributable to minority interests (120) (13) (13) 0 (28) (174)

Attributable to equity holders of the parent 1,299 106 58 (1) 60 1,522



[1] Intragroup balances and transactions between geographical segments (IAS 14 para. 24) and countries outside the four identified geographical segments.


Financial assets at fair value through profit or loss 28,961 712 3,285 0 366 33,325

Available-for-sale financial assets 28,742 792 358 9 18 29,919

Loans and advances to banks 59,558 1,431 13,547 0 (18,792) 55,744

Loans and advances to customers 129,605 6,850 9,710 0 439 146,603

Held-to-maturity financial assets 6,797 103 0 0 0 6,899

Goodwill 452 87 46 0 1 586

Other assets 14,080 1,047 271 14 223 15,635

Total assets 268,195 11,021 27,218 23 (17,745) 288,711

IX.2.2 - Analysis of the balance sheet by geographical segment

Assets (at December 31, 2005)


Financial liabilities at fair valuethrough profit or loss 6,777 23 32 0 (74) 6,758

Deposits from banks 67,492 7,997 4,385 0 (18,598) 61,277

Customer deposits 94,170 854 9,053 0 406 104,483

Debt securities 36,822 6 12,191 0 71 49,090

Insurance companies’ technical reserves 28,455 1,134 28 19 42 29,677

Subordinated debt 6,009 10 831 0 (446) 6,404

Other liabilities 28,469 997 698 4 854 31,022

Total liabilities 268,195 11,021 27,218 23 (17,745) 288,711

Liabilities (at December 31, 2005)

IX.3 - Analysis of insurance company businessThis table reconciles the amounts recognized in the separateaccounts of insurance companies (consolidated accounts of sub-groups in the case of the Coface Group) and the amounts reco-gnized in the consolidated financial statements presented in thebanking format.

The main reclassifications concern general operating expenseswhich are analyzed by destination in the insurance format financialstatements and by nature in the banking format.

At the level of net banking income, insurance income and expen-ses that are similar to banking income and expenses (mainly inte-rest, fees and commissions) are reclassified under the related line

items in the banking format, in the interests of consistency.Movements in technical reserves and loss expenses are deduc-ted from net banking income and not recognized as impairmentcharges.

Reclassifications made in the balance sheet are not material. Themain insurance-specific balance sheet items are presented under“Insurance company investments”on the assets side and “Insurancecompanies’ technical reserves” on the liabilities side.Accrued inte-rest, which is reported on a separate line in the insurance format,is included on the same line as the item to which it relates in thebanking format.

2005 ANNUAL REPORT

December 31, 2005

in millions of euros Banking format

Insurance Net Operating Gross Other Minority Netformat banking expenses operating items interests income

income income

Separate or sub-consolidated financial statements (*)

Premium income 4,439 4,439 0 4,439 4,439

Investment income 1,698 1,700 (2) 1,698 1,698

Mark-to-market gains on assets heldto cover linked liabilities 510 510 0 510 510

Other underwriting income 7 7 0 7 7

Loss expenses (2,185) (2,179) (6) (2,185) (2,185)

Transfers to technical reserves (2,224) (2,224) 0 (2,224) (2,224)

Policyholder dividends (884) (884) 0 (884) (884)

Acquisition and administration costs (706) (323) (383) (706) (706)

Investment expenses (417) (409) (8) (417) (417)

Mark-to-market losses on assets heldto cover linked liabilities (8) (8) 0 (8) (8)

Other underwriting expenses 64 78 (14) 64 64

Investment income transferred out of the technical account (2) (2) 0 (2) (2)

Underwriting result 291 705 (413) 291 0 0 291

Investment income transferred from the technical account (29) (29) 0 (29) (29)

Other non-underwriting income 343 342 1 343 343

Other non-underwriting expenses (213) (64) (148) (213) (213)

Impairment charges and other credit provisions (7) 0 (7) (7)

Share of results of associates 4 0 4 4

Exceptional items 37 0 37 37 37

Employee profit-sharing (1) (1) (1) (1)

Income taxes (87) 0 (87) (87)

Goodwill amortization (8) 0 (8) (8)

Minority interests (1) 0 (1) (1)

Net income 331 953 (525) 429 (97) (1) 331

Consolidation adjustments (149) (42) (43) (85) (23) (41) (149)

Contribution of insurance companiesto the Group 182 911 (567) 344 (120) (41) 182

* Coface sub-group

In accordance with IFRS, net banking income generated by the insurance business is broken down as follows in the banking format:

Interest income and expense 801

Fee and commission income and expense (235)

Gains or losses on financial instruments at fair value through profit or loss 83

Gains or losses on available-for-sale financial assets 249

Income and expenses from other activities 13

Net banking income 911



Note X - Commitments

X.1 - Guarantee commitmentsA non-financial guarantee commitment given (or received) is acontract entailing an obligation (or right) to give (or receive)non-financial assets in the event of default by the debtor.

A financial guarantee commitment is a contract that requires theissuer to make specified payments to reimburse the holder for aloss it incurs because a specified debtor fails to make paymentwhen due.The exercise of these rights is subject to the occur-rence of an uncertain future event.

IAS recognizes three types of financial guarantee:

- guarantees granted (received) upon the transfer of financialassets/liabilities;

- financial guarantees treated as derivative financial instruments:these include credit derivatives (see table on derivative financialinstruments for details);

- financial guarantees that meet the definition of an insurancecontract and are accounted for as insurance contracts.

The new standards do not apply until 2006. Amounts shownrepresent the nominal value of the commitment:

X.2 - Financing commitmentsIn accordance with IAS 39 (para. 2), financing commitmentsoutside the scope of IAS 39 are recognized in accordance withIAS 37 “Provisions, contingent liabilities and contingent assets”.

n The following financing commitments fall within the scope ofIAS 39:

- commitments classified as financial liabilities at fair value throughprofit or loss. If an entity has a past practice of reselling or secu-ritizing loans shortly after origination, these loans are subject toIAS 39 from the commitment phase;

- commitments that can be settled net (i.e. sale);

- commitments to provide a loan at a below-market interestrate.

In the case of commitments to provide a loan at a below-market interest rate, a discount is recognized in expenses and acorresponding amount in accrued income and deferred expen-ses.The discount is subsequently incorporated into the loan andthe calculation of the effective interest rate.

n Other financing commitments covered by IAS 37.

A financing commitment given is a contingent liability, defined byIAS 37 as a possible obligation arising from past events whoseexistence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not whollywithin the control of the enterprise or a present obligation ari-sing from past events but which is not recognized because:

- it is not probable that an outflow of economic benefits will berequired to settle the obligation, or

- a reliable estimate of the amount of the obligation cannot bemade.


Guarantee commitments given

To banks: 2,755 2,043

- Confirmed documentary credits 1,401 981

- Other guarantees 1,354 1,062

To customers: 24,179 20,891

- Real estate guarantees 1,289 1,127

- Tax and other bonds 1,770 1,831

- Other bonds and endorsements 8,077 6,929

- Other guarantees 13,043 11,004

Total guarantees given 26,934 22,933

Guarantees received from banks 6,440 7,630

2005 ANNUAL REPORT

X.3 - Other commitmentsIn 2002, Banque Fédérale des Banques Populaires issued a gua-rantee relating to the shares issued by Natexis BanquesPopulaires on the acquisition of Natexis Bleichroeder Inc. inDecember 2002.

The acquisition of Natexis Bleichroeder Inc. (formerly Arnhold &Bleichroeder Inc) was paid for through the issuance of 1,401,082new shares.The share issue, carried out on December 6, 2002,represented a capital increase of 3%.

Arnhold & Bleichroeder Holdings, the former owner of NatexisBleichroeder Inc., is committed to retaining at least 45% of theseshares for a minimum of five years.The remaining 55% of the sha-res may be sold over a period of seven years, as follows: no morethan 10% between six months and one year after the transactiondate, a cumulative maximum of 35% in the period to the end ofthe second year, a cumulative maximum of 45% in the period tothe end of the third year and a cumulative maximum of 55% inthe period to the end of the seventh year.

Arnhold & Bleichroeder Holdings and Banque Fédérale desBanques Populaires have also signed a value protection agree-ment stating that if the 55% of the shares referred to above aresold at a price below their value at the date of issue – i.e.B75.56– Banque Fédérale des Banques Populaires will transfer additio-nal Natexis Banques Populaires shares to Arnold & BleichroederHoldings without consideration.

This value protection agreement will only apply if the sharehol-ders of Arnold & Bleichroeder Holdings have refused an offer topurchase the Natexis Banques Populaires shares at a price pre-viously proposed by Banque Fédérale des Banques Populaires. Inthat case the Natexis Banques Populaires shares may not be soldto a third party at a price lower than that offered by BanqueFédérale des Banques Populaires.


Financing commitments given

To banks 3,335 2,681

To customers: 41,173 32,078

Documentary credits 2,225 1,156

Other confirmed lines of credit 37,468 28,581

Other commitments 1,480 2,341

Total financing commitments given 44,507 34,760

Financing commitments received

- from banks 6,998 5,514

- from customers 0 0

Total financing commitments received 6,998 5,514

The nominal value of commitments governed by IAS 37 is as follows:



Note XI - Related parties

Related parties are companies consolidated by the Banque Populaire Group (regardless of consolidation method) and the executiveofficers of Banque Fédérale des Banques Populaires, the Banque Populaire Group’s central body.

XI.1 - Executive officers’ compensationXI.1.1 - Compensation, benefits in kind, loans and guaranteesn Total gross compensation paid to executive officers of Banque Fédérale des Banques Populaires includes both a fixed and a variablecomponent.

The fixed and variable compensation paid to Philippe Dupont and Michel Goudard has been unchanged since 2003.The table belowshows the compensation paid to executive officers in 2005:

n Philippe Dupont and Michel Goudard each have a car and anapartment paid for by the bank. In addition, Philippe Dupontreceives a standard allowance in his capacity as Chairman andChief Executive Officer.

Neither Philippe Dupont or Michel Goudard receive any allo-wances or benefits from companies controlled by BanqueFédérale des Banques Populaires.

Taxable allowances and benefits received from Banque Fédéraledes Banques Populaires in 2005 amounted to B63,868 forPhilippe Dupont and B11,437 for Michel Goudard.

n No loans or guarantees have been granted to directors orexecutive officers.

XI.1.2 - Directors’ feesDirectors’ fees paid to members of the Board of Directors ofBanque Fédérale des Banques Populaires are determined on thebasis of each member’s attendance rate at Board meetings andBoard Committee meetings, and are therefore entirely variable.

Total directors fees paid in 2005 in respect of 2004 amounted toB209,504, including B10,945 paid to Philippe Dupont.

The directors of Banque Fédérale des Banques Populaires arealso paid fees in their capacity as directors of companies control-led by Banque Fédérale des Banques Populaires.Total fees paidin respect of 2005 amounted to B180,740, including B10,065paid to Philippe Dupont.

Michel Goudard also received fees of B10,065 in his capacity asnon-voting director of Natexis Banques Populaires.

XI.1.3 - Post-employment benefitsPhilippe Dupont and Michel Goudard belong to the generalstate pension scheme and the ARRCO and AGIRC obligatorysupplementary schemes. As executive officers, they also belongto the two following Banque Populaire Group supplementaryplans:

n Pension benefits

Philippe Dupont and Michel Goudard belong to the supplemen-tary group pension scheme open to all executive officers of theBanque Populaire Group, in accordance with the provisions ofthe status accorded to this category.

The aggregate amount of pension benefits paid to each execu-tive officer may not exceed 60% of their compensation duringthe employment period, which amount is capped at B335,000.For executive officers appointed after January 1, 2004, the maxi-mum has been lowered to 50%.

This plan was established before May 1, 2005, i.e. before theintroduction of law no. 2005-842 of July 26, 2005.

It applies to Philippe Dupont in his capacity as executive officerof Banque Fédérale des Banques Populaires and as executiveofficer of Natexis Banques Populaires.

n Loss of office compensation

Executive officers who are removed from office (except in thecase of gross misconduct) are entitled to an allowance equal toone year’s compensation, plus one-twelfth of annual compensa-tion per year of service with the Group, and in the case of thechief executive officer one-twelfth of annual compensation per

in euros 2005

B.F.B.P. Companies controlled Total by B.F.B.P. compensation

Fixed Variable Long-service Fixed Variableaward

Philippe DUPONT 224,427 75,000 - 263,000 75,000 637,427

Michel GOUDARD 290,000 90,000 22,308 - - 402,308

2005 ANNUAL REPORT

(1) The average Natexis Banques Populaires share price in the final quarter of 2005, the period in which the options were exercisable, was €131.09.

year as chief executive officer. The maximum amount payablemay not exceed 42/12ths of annual compensation.

On retirement or early retirement, executive officers are entit-led to an allowance equal to one-fortieth of annual compensa-tion per year of service with the Group, up to a maximum of40/40ths of annual compensation.

XI.1.4 - Stock options granted to andexercised by executive officersNo options have been granted over Banque Fédérale des BanquesPopulaires shares.

However, executive officers have been granted options overNatexis Banques Populaires (see board) shares in their capacityas executive officers of Banque Fédérale des Banques Populairesand in their capacity as director of companies controlled byBanque Fédérale des Banques Populaires.

Attributes of the plan Number of options granted

Natexis BanquesPopulaires stock As directoroptions granted Initial Expiry Exercise As of companies Number Numberto executive Plan number exercise date price executive controlled of options of options officers date (in euros) officer by B.F.B.P. exercised outstandingof B.F.B.P. of B.F.B.P. (1) at end-2005

Philippe DupontN°9–CA 09/19/01 09/19/2005 09/19/2008 94.30 10,000 10,000 20,000 0N°10–CA 11/20/02 09/10/2006 09/09/2009 72.47 5,500 5,500 - 11,000N°11–CA 09/10/03 09/10/2007 09/09/2010 83.25 6,000 6,000 - 12,000N°12–CA 11/17/04 11/17/2008 11/16/2011 89.10 6,000 6,500 - 12,500N°13–CA 11/15/05 11/15/2009 11/14/2012 119.24 7,000 7,000 - 14,000

Michel GoudardN°9–CA 09/19/01 09/19/2005 09/19/2008 94.30 6,000 - 6,000 0N°10–CA 11/20/02 09/11/2006 09/11/2009 72.47 4,200 - - 4,200N°11–CA 09/10/03 09/10/2007 09/10/2010 83.25 4,200 - - 4,200N°12–CA 11/17/04 11/17/2008 11/17/2011 89.10 5,000 - - 5,000N°13–CA 11/15/05 11/15/2009 11/14/2012 119.24 6,000 - - 6,000

XI.2 - Information aboutconsolidated companies

XI.2.1 - Transactions with consolidatedcompanies

A list of consolidated companies can be found in note IV.3.

Transactions with fully-consolidated companies are eliminated inconsolidation.Transactions with non-consolidated related com-panies are not material.

Transactions with proportionately consolidated joint venturecompanies are eliminated in proportion to the Group’s interestin the assets and liabilities of the company. Only three companies

were proportionately consolidated in 2005. The uneliminatedportion of transactions with these companies was not material:

- Loans and advances to joint venture companies:B10 million,

- Deposits with joint venture companies:B10 million.

Transactions with associated companies accounted for by theequity method are not eliminated.The amounts involved are notmaterial (less than B1 million).

XI.2.2 - Results of joint venture companiesand associatesThe following table shows the total net income of joint venturecompanies and associates and the share attributable to theGroup at December 31, 2005:

in millions of euros Joint ventures Associates

100% Group 100% Groupshare share

Net income 4 2 36 9



Note XII - Financial statements based on French GAAP

The consolidated financial statements for 2003 and 2004 and their notes were prepared using French generally accepted accountingprinciples and were published in the annual report filed with the Autorité des Marchés Financiers on March 25, 2005 under numberD.05-0283.

Note XII-1 sets out the published financial statements for the year ended December 31, 2004 which served as the basis for the tran-sition tables (see note I).

Note XII-2 sets out the main accounting policies used to prepare the financial statements at December 31, 2004 which served as abasis for the transition tables.

XII.1 - Consolidated financial statements (French GAAP)XII.1.1 - Consolidated balance sheet - Assets (French GAAP)

XII.1.2 - Consolidated balance sheet - Liabilities (French GAAP)

in million of euros 12/31/2004 12/31/2003

Interbank and money market assets 55,463 53,438

Customer loans 120,584 111,800

Lease financing 8,890 8,072

Bonds, equities and other fixed and variable income securities 26,256 22,397

Insurance company investment portofolios 26,044 23,451

Investments in affiliates and other securities held for investment 989 2,096

Property and equipment and intangible assets 2,389 2,237

Goodwill 228 261

Accrued income, prepaid expenses and other assets 9,561 13,411

Total assets 250,404 237,163


Interbank and money market liabilities 46,972 39,682

Customer deposits 98,253 98,945

Debt securities 42,001 37,527

Insurance company technical reserves 25,725 23,660

Deferred income, accrued charges and other liabilities 16,861 18,212

Negative goodwill 142 290

Provisions for contingencies and charges 1,939 1,873

Subordinated debt 4,675 4,431

Fund for general banking risks 2,192 2,077

Minority interests 2,068 1,962

Shareholders’ equity (excluding FGBR) 9,576 8,504-Capital stock 3,033 2,886-Additional paid-in capital 741 635-Retained earnings 4,743 4,130-Net income for the year 1,059 853

Total liabilities 250,404 237,163

2005 ANNUAL REPORT

XII.1.3 - Consolidated income statement (French GAAP)

XII.1.4 - Consolidated statement of off-balance sheet items (French GAAP)


Interest income 9,620 9,283

Interest expense (6,100) (5,933)

Income from variable income securities 65 65

Net fee and commission income 2,321 2,172

Net gains on trading account securities 414 361

Net gains on securities held for sale 240 183

Other banking revenues and expenses 74 32

Gross margin on insurance operations 810 722

Other net income 196 181

Net banking income 7,640 7,066

General operating expenses (4,788) (4,491)

Depreciation, amortization and provisions for impairment of property and equipment and intangible assets (307) (305)

Gross operating income 2,545 2,270

Provisions for loan losses (480) (565)

Operating income 2,065 1,705

Income from companies accounted for by the equity method 7 11

Net gains on disposals of fixed assets 26 19

Income before exceptional items and tax 2,098 1,735

Exceptional items (30) (23)

Corporate income tax (700) (544)

Goodwill amortization and negative goodwill written back to income (33) (17)

Net charge to fund for general banking risks (115) (169)

Minority interests (161) (129)

NET INCOME 1,059 853


Commitments given

Banking operations 58,012 50,144

- Financing commitments 34,760 31,673- Guarantees 22,933 17,955- Commitments on securities 319 516

Insurance operations 0 0

Commitments received

Banking operations 13,713 10,199

- Financing commitments 5,514 3,955- Guarantees 7,900 5,378- Commitments on securities 299 866

Insurance operations 85 36



XII.2- Summary of the mainaccounting policies used to prepare the 2003 and 2004consolidated financial statementsunder French GAAPXII.2.1 - Consolidation methods

XII.2.1.1 - Accounting principlesThe consolidated financial statements of the Banque PopulaireGroup for the years ended December 31, 2003 and 2004 havebeen prepared in accordance with French generally acceptedaccounting principles and the standards formulated by theComité de la Réglementation Comptable, including standardCRC 99-07 on consolidation methods and principles and stan-dard CRC 2000-04 on the presentation of consolidated financialstatements.

There were no changes of accounting method during the period.

XII.2.1.2 - Consolidation methodsCompanies controlled exclusively by the consolidating entitywhose business represents an extension of the consolidatingentity’s banking or financial services businesses are fully consoli-dated.This method is also applied to exclusively controlled com-panies engaged in related lines of business, such as insurance, aswell as to real estate investment and development companiesand IT services companies.

Exclusive control is deemed to be exercised when the consoli-dating entity is in a position to manage the financial and opera-ting policies of the subsidiary in order to benefit from thesubsidiary’s business. This is the case where the consolidatingentity holds the majority of the voting rights (and not just themajority of the shares) or exercises dominant influence by virtueof contractual rights or due to the dilution of the subsidiary’scapital, without holding the majority of voting rights.

Jointly controlled subsidiaries are consolidated by the proportio-nal method. Joint control is deemed to be exercised when thefinancial and operating policies of the subsidiary are decidedjointly by a limited number of shareholders.

Affiliates over which the consolidating entity exercises significantinfluence are accounted for by the equity method. Significantinfluence is deemed to be exercised when the consolidatingentity holds at least 20% of the voting rights.

XII.2.1.3 - Scope of consolidationSubsidiaries that are not material in relation to the Group as awhole are not consolidated. Materiality is determined on thebasis of the subsidiary’s qualitative contribution to the Groupaccounts without applying any threshold in terms of net assetsor revenues.

To maintain consistency between the consolidated financial sta-tements of sub-groups and those of the Banque PopulaireGroup, all entities consolidated at the level of a sub-group are

also consolidated at the next level, even if they are not conside-red material at Group level.

XII.2.1.4 - Presentation of the consolidated financial statementsThe consolidated financial statements are presented in millionsof euros.

The consolidated financial statements have been prepared basedon the financial statements of Group companies at December 31.Entities that do not have a December 31 year-end are consoli-dated based on audited interim financial statements prepared atthat date.

XII.2.1.5 - Business combinationsBusiness combinations are accounted for by the purchasemethod, in accordance with standard CRC 99.07. Under thismethod, the net assets of newly-acquired subsidiaries are takento the consolidated balance sheet at the date of acquisition afterfair value adjustments to identifiable assets, liabilities and off-balance sheet items.The difference between the cost of sharesin a newly-acquired subsidiary and the consolidating entity’sequity in the underlying net assets after fair value adjustments isrecorded as goodwill.

Goodwill is amortized and negative goodwill written back to theincome statement by the straight-line method over a perioddetermined based on the objectives and nature of the acquisi-tion, not to exceed 10 years. Goodwill representing less than B1million is amortized over one year.

The Banque Populaire Group, assisted by a firm of independentvaluers, tests the value of any goodwill in excess of B4 million onan annual basis, using the discounted cash flow method, to deter-mine whether the amortization schedule should be revised.

In the case of sale of part of the consolidating entity’s interest inthe company concerned, a corresponding fraction of the una-mortized goodwill or negative goodwill is written off or writtenback to the income statement.

The Banque Populaire Group does not use the pooling of interests method - provided for in paragraph 215 of standardCRC 99-07 - to account for business combinations.

XII.2.1.6 - Foreign currency translationThe balance sheets and off-balance sheet items of foreign subsi-diaries and branches are translated into euros at the year-endexchange rate with the exception of their capital stock or capi-tal allocation and reserves, which are translated at the historicalrate. Differences arising on translation are taken directly toconsolidated shareholders’ equity.

The income statements of foreign subsidiaries and branches aretranslated at the average rate for the year. The difference bet-ween net income translated at the average rate and the year-endrate is also taken to consolidated shareholders’ equity.

The exchange rates applied are the rates published by theBanque de France.

2005 ANNUAL REPORT

XII.2.1.7 - Leasing transactions as lessorFinance leases where the Group is lessor - i.e. lease financing gran-ted by the Group’s specialist leasing companies - are recorded inthe consolidated balance sheet in an amount corresponding tothe net investment in the lease and not the net book value in theindividual company accounts. Lease payments are analyzed bet-ween amortization of the net investment and interest income.Deferred taxes are recorded on the total difference betweenaccumulated book depreciation of the leased assets and the accu-mulated amortization of the net investment in the lease.

The difference is recorded under shareholders’ equity net ofdeferred taxes. Lease financing on which any installments aremore than three months past due (equipment leases) or sixmonths past due (real estate leases) are classified as non-perfor-ming. Where a finance lease is classified as non-performing, allother amounts receivable from the client concerned are alsoclassified as non-performing.

Gains and losses on disposal of leased assets and movements inprovisions for impairment in value of leased assets and tempora-rily unleased assets are included in net banking income. Leasetermination penalties are recorded under interest income.Charges to provisions for losses on lease financing recordedunder “Provisions for loan losses” correspond solely to the frac-tion of the provision covering the past due principal.

In the case of finance leases concerning real estate, a provisionfor impairment in value is recorded where the book value of theproperty is higher than its estimated market value and there is aprobable or certain risk of it remaining the property of the les-sor when the lease expires.

Real estate and equipment leased to clients under operating lea-ses are included in “Property and equipment” and valued accor-dingly.

XII.2.1.8 - Leasing transactions as lesseeOperating assets leased under finance leases where the Groupis lessee are recorded in the consolidated balance sheet under“Property, plant & equipment”, except for assets whose unit costis not material. Depreciation is calculated over the estimateduseful lives of the assets.

The annual depreciation charge is recorded in the consolidatedincome statement under “Depreciation, amortization and provi-sions for impairment of property and equipment and intangibleassets”.

XII.2.1.9 - Regulated reserves and provisionsRegulated reserves and provisions recorded solely for tax pur-poses, including excess tax depreciation recorded in theaccounts of subsidiaries, are eliminated in consolidation.

XII.2.1.10 - Provisions for employee-relatedbenefitsFor the purpose of comparability between 2004 and previousyears, the Group elected not to apply CNC recommendation2003-R.01 of April 1, 2003 on accounting for employee benefits.

The employee-related liabilities of all Group entities are provi-ded for in the consolidated balance sheet using consistentmethods throughout.

The main provisions for employee-related liabilities concern:

n pension benefits payable by the Caisse Autonome de Retraites(CAR) pension scheme;

n pension benefits payable by the Caisses de Natexis BanquesPopulaires pension plan;

n long-service awards payable to employees on retirement andearly-retirement benefits;

n long-service awards payable to active employees;

n early retirement agreement (CATS).

* The Banque Populaire Group “CAR” pension scheme was clo-sed to new entrants as of December 31, 1993, pursuant to thebanking industry agreement of September 13, 1993, the terms ofwhich were applied to the Banque Populaire banks through aninternal agreement dated January 7, 1994.This scheme also cove-red Natexis Banques Populaires employees previously employedby the former Caisse Centrale des Banques Populaires.

The Group’s obligations towards active and retired employeesconcern supplementary pension benefits payable under theBanque Populaire Group plan and the fraction of benefits dueunder the banking industry scheme closed to new entrants onDecember 31, 1993 that is not covered by the Social Securitysystem.

Commitments are calculated each year based on updated indi-vidual employee data. The projected obligation is determinedusing appropriate mortality tables and a discount rate of 3.5%net of inflation.

* Concerning the specific Natexis Banques Populaires pensionplans, the assets of the former BFCE pension fund exceed theprojected benefit obligation and those of the former CréditNational fund are equal to the projected benefit obligation.Consequently, no provision has been booked in the consolidatedfinancial statements for these plans.

* Long-service awards payable to employees on retirement arefunded in par t or in full under insured plans set up withProspérité, a fully consolidated insurance subsidiary of theGroup. In accordance with opinion no. 2001-G of the CNCUrgent Issues Task Force, the related mathematical reserves car-ried in the accounts of Prospérité are eliminated from the conso-lidated balance sheet and a provision for charges is recorded inthe same amount.

Unfunded obligations are provided for in full in the consolidatedbalance sheet by the projected unit credit method, based onemployees’ vested rights on the reporting date and projected end-of-career salaries.The obligation is calculated by applying a discountrate of 3.5% and a staff turnover rate ranging from 0% to 7.5%.

* Obligations for the payment of long-service awards to activeemployees are also calculated by the projected unit creditmethod, in the same way as for long-service awards payable toemployees on retirement.



* Early retirement plans:

On February 18, 2002, the Banque Populaire Group signed anagreement with employee representatives, providing for theimplementation of a “CATS” early retirement plan in applicationof the A.F.B. industry-wide agreement dated January 15, 2001.On August 30, 2002, the Banque Populaire Group signed a“CATS” convention with the Ministry of Social Affairs,Employment and Solidarity, exempting early retirement pay-ments from social security taxes.

A provision was recorded in the consolidated financial state-ments, covering the Group’s obligation towards employees eligi-ble for early retirement under the plan.The estimated cost of theplan, determined on an actuarial basis, is being recognized overthe remaining service lives of the employees concerned, up tothe expiry date of the agreement on March 31, 2006.

Obligations towards employees who have applied for early reti-rement are included in accrued expenses in an amount corres-ponding to the benefits payable to these employees in theperiod until they reach the normal retirement age.

XII.2.1.11 - Fund for general banking risksFunds for general banking risks are recorded by Group entitiesto cover general risks. Charges to these funds are not tax deduc-tible and do not give rise to any deferred tax asset.

Funds for general banking risks, which form an integral part ofconsolidated shareholders’ equity, include the Banque Fédéraledes Banques Populaires guarantee fund, as well as the guaranteefunds set aside by the Banque Populaire banks that are availableto the Group under the internal guarantee mechanism, and thefunds for general banking risks recorded in the accounts of indi-vidual Group banks.

XII.2.1.12 - Intercompany transactionsMaterial intercompany receivables, payables and off-balancesheet commitments and intercompany income and expensesbetween fully consolidated companies are eliminated in full inconsolidation. In the case of intercompany transactions with pro-portionally consolidated companies, eliminations are prorated tothe Group’s interest in the company concerned.

Intercompany dividends, provisions for impairment in value ofinvestments in consolidated companies and gains on intercom-pany sales of assets are eliminated in full.

XII.2.1.13 - Corporate income taxThe corporate income tax charge recorded in the consolidatedstatement of income includes:

- current taxes payable by the French entities, at the rate of35.43%, and by foreign subsidiaries and branches at the local cor-porate tax rate.

- deferred taxes arising from temporary differences between thebook value of assets and liabilities and their tax basis.

Deferred tax assets and liabilities are netted off at the level ofeach taxable entity. In the case of companies that have electedfor group relief, deferred tax assets and liabilities are netted off

at the level of the tax group. Net deferred tax assets are reco-gnized only where their future recovery is deemed probable. Inaccordance with this principle, net deferred tax assets are reco-gnized at the level of each entity only when they do not corres-pond to tax loss carryforwards or when the taxable entity hasnot reported a tax loss in either of the preceding two years.

Deferred taxes are determined by the liability method for alltemporary differences. They are not discounted, whatever theyear in which the temporary differences are expected toreverse.

Pursuant to the 2005 Finance Act providing for the reductionand then abolition of the 3% surtax, deferred taxes are calcula-ted at the rate of 34.94% for temporary differences reversing in2005 and 34.44% for those reversing in 2006 and subsequentyears.

Deferred taxes of foreign subsidiaries are calculated using localtax rates.

XII.2.1.14 - Insurance companiesThe accounts of Group insurance companies are not restated inconsolidation based on Group policies. However, income andexpenses are reclassified by nature, in accordance with bankaccounting standards, rather than by destination.

Balance sheet and off-balance sheet items are included in thecorresponding captions of the financial statements presented inthe banking format, with items that are specific to the insurancebusiness reported separately. These items are “Insurance com-pany investment portfolios” and “Insurance company technicalreserves” in the balance sheet, and “Gross margin on insuranceoperations” in the income statement.

Insurance company investments in securities issued by otherconsolidated entities are qualified as intercompany receivablesand are therefore eliminated in consolidation. Consequently, inthe consolidated balance sheet, insurance company technicalreserves are represented by assets recorded under either “insu-rance company investment portfolios” or under banking assets.

In accordance with standard CRC no. 2000-05 on the consolida-ted financial statements of insurance companies, insurance com-pany loss equalization reserves have been eliminated inconsolidation. In addition, a portion of the capitalization reserve,net of deferred taxes, has been credited to policyholder surplusreserves, corresponding to the amount that is expected to bewritten back from the capitalization reserve in the case of a fallin value of qualifying investments, to cover distributions to poli-cyholders.

The loss equalization reserves recorded by the Coface group areincluded in technical reserves because they cover a macro-eco-nomic risk of a change in claims experience over several years.

XII.2.2 - Accounting policies and valuation methodsThe consolidated financial statements have been prepared fromthe financial statements of Group companies presented accor-ding to the following accounting policies and valuation methods.

2005 ANNUAL REPORT

XII.2.2.1 - Interbank and money market assets and customer transactionsInterbank and money market assets include all receivables, inclu-ding subordinated loans, due from credit institutions as part ofthe Group’s interbank activity, save for those evidenced by a cer-tificate. They also include assets purchased under resale agree-ments, regardless of the underlying, and receivables relating tosecurities sold under repurchase agreements.

Customer loans are analyzed between commercial loans, custo-mer overdrafts and other customer loans.

Loans are recorded in the balance sheet at face value, includinglow interest loans and restructured loans but excluding purcha-sed customer loan portfolios which are stated at acquisition cost.

Non-performing loans are identified and accounted for using themethods set out in standard CRC no. 2002-03 on credit risk,applied for the first time on January 1, 2003.This standard inclu-des rules regarding the method of classifying non-performingloans, identifying irrecoverable loans and the accounting treat-ment of loans restructured at below market rates.

Loans are classified as non-performing when one installment ismore than three, six or nine months overdue, depending on thetype of loan.

All other loans to the same customer are also classified as non-performing, even in cases where no provision is booked for theoutstanding principal based on an analysis of the recovery risk.

In the case of non-performing loans where the debtor has resu-med making regular payments in accordance with the originalrepayment schedule, the loan may be reclassified as sound. Non-performing loans that have been restructured are also reclassi-fied as sound provided the restructuring terms are met.

If a restructured loan reclassified as sound is at below marketrates, it is recorded in a separate account at nominal value lessa discount corresponding to the difference between theexpected future cash flows calculated at a) the new interestrate and b) the lower of the original rate of interest and themarket rate prevailing at the time of the restructuring.Discounts on restructured loans calculated as described aboveare deducted from the carrying value of the loan and amorti-zed over the remaining life of the loan by the yield-to-maturitymethod.

If any installments on a restructured loan are not paid, whateverthe terms of the restructuring, the loan is permanently reclassi-fied as irrecoverable.

Irrecoverable loans include loans where an event of default hasoccurred, restructured loans where the borrower has once againdefaulted and loans classified as non-performing for more thanone year once a write-off has been envisaged, in accordance withthe opinion issued by the CNC Urgent Issues Task Force onDecember 18, 2003.

Provisions for non-performing loans are deducted from thevalue of the asset concerned to cover the estimated risk of non-recovery, after taking account of any collateral or other guaran-tees.

Provisions are determined on a case-by-case basis and adjustedat quarterly intervals or more frequently where necessary, basedon an analysis of the related risk and available collateral.

Accrued interest on non-performing loans is recorded separatelyin the balance sheet and credited to the income statement.A pro-vision is booked for the total amount accrued, together with alloverdue interest. Charges to provisions for accrued interest are setoff against the related revenue in the income statement.

Accrued interest on irrecoverable loans is not booked to the incomestatement unless it is actually received.

Provision movements, loan write-offs, recoveries on loans written offin prior years, and discounts calculated on restructured loans arereported in the consolidated income statement under “Provisions forloan losses”, except for movements in provisions relating to accruedinterest on non-performing loans,which are recorded under “net ban-king income”.Amortization of discounts on restructured loans calcu-lated in accordance with the yield-to-maturity method as well asinterest thereon are also included in net banking income.

Loans to real estate professionals are classified as non-performingon a case-by-case basis taking account of the exit potential, the abi-lity of the company’s shareholders to contribute fresh capital andtheir credit rating. A provision is booked for the total amount ofaccrued interest.A provision is booked for the outstanding princi-pal based on guarantees received, future rental revenues, the pro-jected exit price compared with market values and the credit ratingof the parties concerned.

XII.2.2.2 - Conversion of assets and liabilities in foreign currenciesAssets, liabilities and off-balance sheet commitments denomina-ted in foreign currencies are converted into euros at the year-end exchange rate. Revenues and expenses denominated inforeign currencies are converted at the exchange rate ruling onthe transaction date.

Fixed assets and investments in affiliates denominated in foreigncurrencies but financed in euros are converted at the historicalexchange rate.

Hedged and unhedged forward purchases and sales of foreigncurrencies are converted at the exchange rate quoted for theremaining term.

Exchange differences arising on conversion of borrowings forwhich the currency risk is guaranteed by the State or whichrelate to Natexis Banques Populaires’ institutional activities arerecorded in an accruals account.

XII.2.2.3 - Securities transactionsTrading account securities, securities held for sale, investmentsecurities and equity securities held for investment are valued inaccordance with Comité de la Réglementation Bancaire etFinancière standard CRBF 90-01 (revised).

They are carried in the consolidated balance sheet under“government securities and equivalent” where the issuer is theState, or under “bonds and other fixed income securities” or“equities and other variable income securities” in other cases.



n Trading account securities

Trading account securities are carried in the balance sheet atcost, including transaction expenses and accrued interest at thedate of acquisition. At the period-end, they are marked to mar-ket and the resulting unrealized gain or loss is booked to theincome statement under “Net gains on trading account securi-ties”, together with realized gains and losses on trading accountsecurities sold during the period.Trading account securities thatare still in the portfolio six months from the date of acquisitionare transferred to “Securities held for sale” at their market priceon the transfer date.

n Securities held for sale

Securities held for sale are stated at the lower of cost and mar-ket, determined on a case-by-case basis.The market price of lis-ted securities is the price quoted on the market at the year-endand that of unlisted securities is their probable realizable value.Premiums and discounts, corresponding to the difference bet-ween the cost of fixed-income securities and their redemptionprice, are amortized to the income statement over the remai-ning life of the securities, by either the yield-to-maturity methodor the straight-line method depending on the type of securitiesconcerned.

Where securities are hedged, the hedging gain or loss is takeninto account to determine provisions for impairment in value.

Dividend income from equities carried in the “held for sale”portfolio is recorded in the income statement under “Incomefrom variable income securities”.

Movements in provisions for impairment in value and disposalgains and losses are recorded in the income statement under“Net gains on securities held for sale”.

n Investment securities

Investment securities are fixed-income securities acquired withthe intention of being held to maturity that are either match-funded (generally via refinancing agreements, subordinateddebt and time deposits) or on which the interest rate risk hasbeen hedged (mainly by means of swaps in which there is aliquid market). If the match-funding or hedging relationship isbroken, the securities are transferred to the “held for sale”portfolio.

Premiums and discounts are amortized to the income statementover the remaining life of the securities.

Interest income on bonds and other fixed-income securities isrecognized on an accruals basis.

In the case of sale of investment securities before maturity, theresulting gain or loss is recorded in the income statement under“Net gains on disposals of fixed assets”.

n Equity securities held for investment

These securities are acquired with the intention of being held inthe medium to long-term in order to sell them at a profit.Theyare stated at the lower of cost, excluding transaction expenses,and fair value to the Group. Unrealized losses are not netted offagainst unrealized gains on the same line of securities.

Movements in provisions for impairment in value and disposalgains and losses are taken to the income statement under “Netgains on securities held for sale”.

The bulk of the portfolio consists of investments made by theprivate equity subsidiaries of Natexis Banques Populaires.

XII.2.2.4 - Investments in affiliates, other investments in related companies and other equity interestsInvestments in affiliates, other investments in related companiesand other equity interests are stated at the lower of cost, exclu-ding transaction expenses, and fair value to the Group.

The criteria used to determine fair value include the averagestock market price for listed companies, and adjusted net assetsfor unlisted companies.

An impairment provision is taken for any unrealized losses.Unrealized gains are not recognized.Transaction expenses incur-red at the time of purchase or sale are included in operatingexpense.

Disposal gains and losses and movements in provisions forimpairment in value are recorded in the income statementunder “Net gains on disposals of fixed assets”.

Dividends are recorded under “Income from variable incomesecurities” when their payment has been approved at aShareholders’ Meeting.

XII.2.2.5 - Property, plant & equipment and intangible assetsStandard CRC no. 2002-10 on asset depreciation, amortizationand impairment is applicable from January 1, 2005.The BanquePopulaire Group has not elected for early adoption of this stan-dard. Article 15 of the standard contains transitional provisionsapplicable from January 1, 2003, supplemented by the provisionsof opinion 2003-F issued by the CNC Urgent Issues Task Force,relating to expenses incurred under multi-year programs formajor repairs or refits.

n Assets used in the business

Fixed assets of the former Crédit National purchased prior toDecember 31, 1976 are stated at fair value as determined at thetime of the 1976 legal revaluation. Assets purchased since 1976are stated at cost.

Fixed assets of the former BFCE are carried in the Group’sconsolidated balance sheet at their fair value as determined atthe time of acquisition of BFCE by Crédit National.

For all other Group entities, land and buildings are stated at costor at fair value as determined at the time of legal revaluations.

Property and equipment are depreciated over their estimateduseful lives by the straight-line method or by the reducingbalance method where the related depreciation charge is taxdeductible.

n Non-operating assets

Investment properties are stated at the lower of cost and estima-ted market value determined by capitalizing normalized rental

2005 ANNUAL REPORT

income. In accordance with the terms of the letter datedOctober 21, 1997 from the Secretary General of the FrenchBanking Commission (Commission Bancaire Française), provi-sions for impairment in value have been recorded for individualinvestment properties and other properties not used in the busi-ness, whose market value is less than their net book value.

Unrealized losses are not netted off against unrealized gains onother properties for the purpose of determining the amount ofthe provisions. The cost of large-scale multi-year maintenanceprograms, which are intended solely to keep the assets concer-ned in good working order without extending their initial estima-ted useful life, is accrued on a straight-line basis over the periodbetween each successive maintenance operation and bookedunder provisions for contingencies and charges.

n Intangible assets

Leasehold rights and purchased goodwill are stated at cost. Aprovision is recorded in the consolidated financial statements iftheir fair value to the Group is lower than their net book value,after taking account of the amortization or provisions recordedin the individual accounts of the entity that owns the asset.

Purchased software is amortized over a maximum of five years.

Intangible assets include the value attributed to the networks ofCoface.The Coface insurance network has been valued on thebasis of 40% of premium income.The credit information and cre-dit management network has been valued using a range of crite-ria, including discounted cash flows, P/E multiples and revenuemultiples. The networks are not amortized but are tested forimpairment at each year end.

In 2004 the Banque Populaire Group, assisted by a firm of inde-pendent valuers, measured the residual value of these networksusing the discounted cash flow method.

XII.2.2.6 - Subordinated debtThe majority of the Group’s subordinated debt is raised byBanque Fédérale des Banques Populaires and Natexis BanquesPopulaires.

Should the issuer go into liquidation, fixed-term and perpetualsubordinated debt is repaid only once all other creditors havebeen paid.

Where perpetual subordinated loan notes are treated as equi-valent to debt repayable in installments, each periodic paymentis broken down between the repayment of principal, which isdeducted from the outstanding debt, and interest,which is recor-ded in the income statement under banking expenses.

In the consolidated financial statements, subordinated debt issuancecosts are expensed in the income statement in the year of issue.

XII.2.2.7 - Provisions for contingencies and chargesProvisions for contingencies and charges are intended to coverseveral types of risk:

n Provisions for domestic counterparty risks:These include gene-ral provisions for loan losses and losses on irrevocable off-balance sheet commitments, recorded as liabilities.

n Provisions for industry and country risks: These provisionscover certain businesses of Natexis Banques Populaires andBRED Banque Populaire that carry potential future risks.Thesebusinesses and the level of the related provisions are affected bycyclical developments in each industry and country, and areexpected to change over time.

n Provisions for country risks: Group loans exposed to countryrisks other than the sovereign risks referred to above are analy-zed and provided for according to the method recommended bythe regulatory authorities, based on the estimated value of theloans on the secondary country risk market. Country risksmainly concern loans granted by Natexis Banques Populaires.

XII.2.2.8 - Financial futures and optionsThe Group’s exposure to risks on financial futures and options isconstantly monitored by closely tracking results and positionsand performing regular controls to check compliance with theexposure limits set by management.

n Interest rate instruments

These instruments are recorded off-balance sheet at their nomi-nal value.

In accordance with standards CRBF 90-15 and 92-04, interestrate swaps, FRAs, caps and floors are classified based on the pur-pose for which they are acquired, as follows:

- micro-hedging (hedging of specific transactions or positions)

- macro-hedging (structural balance sheet management)

- speculative position-taking

- specialized management of a trading portfolio

The first two categories are treated for income statement pur-poses as equivalent to lending/borrowing transactions and theamounts received or paid are taken to the income statement onan accruals basis.

Income and expenses on instruments acquired as hedges of spe-cific items or groups of items with similar characteristics arerecorded on a symmetrical basis with the income and expensesarising on the hedged items.The income or expense arising onthe hedging instrument is recorded under the same caption asthe income or expense on the hedged item, under “Interestincome” or “Interest expense”, except for income and expenseson hedges of trading securities which are included in “Net gainson trading account securities”.

Income and expenses on financial futures acquired to hedgestructural interest rate exposure are recorded in the income sta-tement under “Interest income” or “Interest expense” on anaccruals basis.

Financial futures acquired for speculative position-taking pur-poses are stated at the lower of cost and market. Unrealizedgains are not recognized.

Instruments held in connection with the specialized manage-ment of trading portfolios are valued at replacement cost orby the yield-to-maturity method, net of a discount for coun-terpar ty risks and the discounted present value of future



management costs. Changes in value during the period aretaken to the income statement under “Net gains on tradingaccount securities”.

Equalization payments made when interest rate swaps are ter-minated or assigned are recognized immediately in the incomestatement. Where the amounts involved are material they arerecognized on an accruals basis over the residual term of thenew contract where the swap is replaced or over the residualterm of the old contract where the swap is not replaced.

Internal contracts are accounted for in compliance with formalregulatory guarantees, without recognizing any material inter-company profits.

Positive or negative margin changes on exchange-traded futuresare recorded in the income statement.

Provision is made for unrealized losses on over-the-countercontracts, by way of a charge to the income statement, butunrealized gains are not recognized.

n Options

Options or forward contracts acquired as hedges are accountedfor separately from contracts acquired in connection with tra-ding activities, based on the notional amount of the underlyinginstrument.

Premiums paid and received on interest rate, currency andequity options are recorded in a suspense account. At the year-end, exchange-traded options are marked to market and theunrealized gain or loss recorded in the income statement. In thecase of over-the-counter options, a provision is booked for anyunrealized losses but unrealized gains are not recognized.Whenthe option is resold, repurchased, exercised or allowed to lapse,the premium is taken to the income statement immediately.

Income and expenses on options acquired for hedging purposesare recognized on a symmetrical basis with the income andexpenses on the hedged items.

n Currency instruments

Spot currency transactions outstanding at the year end arevalued at the year-end rate.

Contangos and backwardations on currency futures acquired ashedges are recognized in the income statement on an accrualsbasis. Other forward foreign exchange contracts and currencyfutures are marked to market.

Forward currency swaps are treated as a forward purchase of foreigncurrency combined with a forward sale of the same currency.

Currency swaps are accounted for in accordance with standardCRBF 90-15 (revised).

XII.2.2.9 -Interest income and expense, fees and commissionsInterest and fees treated as interest are recorded in the incomestatement on an accruals basis. Fees and commissions not trea-ted as interest are accounted for as follows.

- fees for non-recurring services are recorded in the income sta-tement when the service is performed.

- fees for ongoing services and services performed in severalsuccessive stages are recognized by the percentage of comple-tion method.

XII.2.2.10 - Exceptional itemsExceptional income and expenses are items of income andexpense that are unusual in terms of their amount and fre-quency.

XII.2.2.11 - Summary of accounting principlesapplied by insurance companiesn Insurance company investment portfolios

Premiums collected by insurance companies are invested in three categories of assets - marketable securities, includingfixed and floating rate bonds, equities, real estate, loans anddeposits.

Bonds and other fixed-income securities are stated at cost.Premiums and discounts, corresponding to the difference bet-ween cost and redemption price, are amortized over the remai-ning life of the securities. A liquidity risk reserve is booked forother securities whose aggregate cost is greater than their aggre-gate realizable value at the year-end.

Unlisted real estate investments are stated at cost, net of trans-action expenses.The realizable value shown in the statement ofinvestments is determined on the basis of five-yearly indepen-dent valuations which are updated annually.

Investments in related companies are stated at cost.

Assets held to cover linked liabilities are marked to market.

n Technical reserves

Insurance companies are required to hold investments with avalue at least equal to their commitments to policyholders.Thesecommitments are evidenced by technical reserves, recorded asliabilities.

The amount of technical reserves required is determined by sta-tistical calculations of commitments towards policyholders.

Unearned premium reserves correspond to the portion of pre-miums written during the year that corresponds to insurancecover to be provided the following year.

Life reserves correspond to total premium income plus invest-ment income attributable to policyholders less paid losses andbenefits.A separate reserve is recorded to cover future manage-ment costs of life insurance policies.

Loss reserves correspond to the capital sum payable following aclaim.

For credit insurance, loss reserves also include an amount tocover the estimated total cost of reported claims not settled atthe period end. A reserve is also recorded for claims incurredbut not reported, determined by reference to claims experiencein prior underwriting years. In 2003, Coface harmonized themethods used by certain of its subsidiaries to calculate their lossreserves.This had no impact on net income after taking accountof loss equalization reserves.

2005 ANNUAL REPORT

Policyholder surplus reserves represent the portion of invest-ment income attributable to policyholders but not yet distribu-ted. The policyholders’ surplus must be paid out in dividendswithin eight years.

Liquidity risk reserves are recorded where the total realizablevalue of non-amortizable securities held for sale is less than theircarrying value.The amount charged to the reserve is the lowerof a) one-third of the total unrealized loss at the year-end and b)the difference between the opening provision and the totalunrealized loss at the year-end. Standard CRC no. 2004-10,which has amended the provisions of standard 2000-05 on thetreatment of liquidity risk reserves, no longer allows such reser-ves to be carried in the consolidated balance sheet.

This change of accounting treatment had no impact on the 2004consolidated financial statements as the risk of depreciation ininsurance company investments is covered by the long-termimpairment provision and no charge was made to liquidity riskreserves carried in the insurance companies’ individual accountsat the year end.

Other technical reserves include loss equalization reserves, finan-cial contingency reserves and reserves for deferred acquisitioncosts.



STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTSBanque Populaire Group

Year ended December 31, 2005

This is a free translation into English of Statutory Auditor’s report issued in the French language and is provided solely for the convenienceof English speaking readers.This report should be read in conjonction with, and construed in accordance with, French law and professionalauditing standards applicable in France, international accounting standards (IAS) and international financial reporting standards (IFRS)endorsed by the European Union.

In compliance with the assignment entrusted to us by the Conseil Syndical de la Chambre Syndicale des Banques Populaires onSeptember 20, 2000 and by the Board of Directors of Banque Fédérale des Banques Populaires on June 23, 2004, we have audited theaccompanying consolidated financial statements of the Banque Populaire Group for the year ended December 31, 2005.

The consolidated financial statements have been approved by the Board of Directors of Banque Fédérale des Banques Populaires. Ourrole is to express an opinion on these financial statements based on our audit.The consolidated financial statements have been prepa-red for the first time in accordance with the international accounting standards (IAS) and international financial reporting standards(IFRS) endorsed by the European Union.They include comparative data for 2004 prepared on the same basis, with the exception ofIAS 32, IAS 39 and IFRS 4, which have been applied as of January 1, 2005 as permitted by IFRS 1.

I. Opinion on the consolidated financial statementsWe conducted our audit in accordance with the professional standards applicable in France.These standards require that we planand perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidatedfinancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall consolidated financial statement presentation.We believe that our audit provides a reasonable basisfor our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position, assets and liabilities ofthe Banque Populaire Group at December 31, 2004 as of December 31, 2005, and the results of the operations of the entities andbodies included in the consolidation for the year then ended, in accordance with international financial reporting standards.

II. Justification of our assessmentsIn accordance with the requirements of Art. L. 823-9 of the French Commercial Code (Code de commerce) on the justification of ourassessments, we draw your attention to the following matters:

Estimates made in the course of the banking business

The Banque Populaire Group uses significant estimates in the course of its banking business:

- As described in notes II,V and V.14 to the consolidated financial statements, the Banque Populaire Group records provisions to coverthe credit risks inherent in its business.We examined the control procedures implemented by management for monitoring credit risks,modeling provisions, assessing the risks of non-recovery and determining the specific and collective provisions required.

- The Banque Populaire Group uses internal models and techniques to value financial instruments that are not traded in an active mar-ket, as well to record certain provisions and assess eligibility for hedge accounting (particularly financial assets and liabilities at fair valuethrough profit or loss, available-for-sale financial assets and financial instruments measured at amortized cost, the fair value of which isdisclosed in notes II and V to the consolidated financial statements).We examined the control procedure for verifying the models anddetermining the underlying data used.

- As described in notes II and V to the consolidated financial statements, the Banque Populaire Group records a provision to cover therisk inherent in home loan savings schemes.The method of calculating this provision complies with the provisions published by the CNCin its release of December 12, 2005.We examined the application of these provisions on a test basis.

Other estimates

- The Banque Populaire Group makes significant accounting estimates to assess the amounts of goodwill and employee benefit obliga-tions carried on the balance sheet.We examined the underlying assumptions and data used and verified that the accounting estimates

2005 ANNUAL REPORT

were based on documented methods in accordance with the principles described in notes II,V and VIII.3 to the consolidated financialstatements.

On this basis, we assessed the reasonableness of these estimates.

Our assessment of these matters formed an integral part of our overall audit of the consolidated financial statements, and thereforecontributed to our opinion as expressed in the first part of this report.

III. Specific verificationWe have also reviewed, in accordance with the professional standards applicable in France, the information relating to the Group contai-ned in the management report.We have no matters to report with respect to its fairness or its consistency with the consolidated finan-cial statements.

Paris and Neuilly-sur-Seine, March 22, 2006

The Statutory Auditors

SALUSTRO REYDEL BARBIER FRINAULT ET AUTRESMember of KPMG International ERNST & YOUNG

Michel Savioz Richard Olivier Olivier Durand

06CHAIRMAN’S REPORT ON INTERNAL CONTROL PROCEDURES


Chairman’s report on internal control procedures This report forms an integral part of the full Chairman’s report on the conditions inwhich the work of the Board of Directors is prepared and organized and the internalcontrol procedures within the Company.

The Banque Populaire Group’s internal control system complieswith French banking and financial services regulations. Theserequire, in addition to general organizational systems, a system ofexternal monitoring by the Banking Commission and theFinancial Markets Authority (Commission Bancaire and Autoritédes Marchés Financiers). It also complies with the corporategovernance principles of the Banque Populaire Group.

These principles were defined by the Board of Directors ofBanque Fédérale des Banques Populaires, the Group’s centralbody, and are set out in a corporate governance charter and aninternal control char ter for the Banque Populaire Group.Changes in internal control regulations announced on March 31,2005, prompted an extensive review of the organization of thesystem to be implemented within the Group’s entities.A total offive charters have been drawn up covering all areas of risk, com-pliance and audit.

They are supplemented by procedures designed to ensure thatfor each family of risk – financial and operational – the level ofcontrol is appropriate and consistent across the entire Group.

In addition, the process of implementing new capital adequacystandards under the Basel II framework, being coordinated atGroup level, presents an opportunity to update and enhanceexisting procedures.

Risk monitoring and management systems within the BanquePopulaire Group and the organization of internal control infor-mation systems reflect the decentralized organization structureand are organized on two levels: at the level of each bank, on aconsolidated basis where applicable, and at that of BanqueFédérale des Banques Populaires.

Organization of internal control atthe level of the consolidated entities On November 20, 2002, the Board of Directors of BanqueFédérale des Banques Populaires approved the corporate gover-nance charter and internal rules framework applicable to theBoards of Directors of the individual Banque Populaire banks.

This charter establishes the rules of corporate governance andcodes of conduct to be followed by all the Banque Populairebanks. It sets out the responsibilities of each bank’s Board ofDirectors, Chairman, Chief Executive Officer and ConsultativeCommittees. All Group banks are required to have a RiskManagement Committee (with the option of also creating anAudit Committee) and a Remuneration Committee.They mayalso choose to set up other committees, such as a Member-Stakeholder Committee.

Well before the May 15, 2001 Corporate Governance Act ente-red the statute books, the Banque Populaire banks had alreadydecided to optimize the effectiveness of their executive andmanagement structures by separating the roles of Chairman andChief Executive Officer, thus separating responsibility for strate-gic decisions and control from the implementation of these deci-sions and the management of the business.

In addition, on January 21, 2004, the Board of Directors ofBanque Fédérale des Banques Populaires approved the internalcontrol charter for the Banque Populaire Group.This establishesthe central principle that each and every member of an organi-zation has responsibility for its internal control system.

In each material Group entity, internal controls are organizedfrom the lowest to the highest level.The organizational structureis defined by the Chief Executive Officer with the approval of theChairman.

Responsibilities and resources are allocated as efficiently as possible,in line with the guidance issued by the Board of Directors, to ensurethe coverage, exhaustive identification and management of risks.

Internal involvement in control Three levels of control are used:

n First tier : each member of staff is responsible for performingpreliminary or simultaneous checks of each operation that theycarry out in performing their professional duties and functionsand supervisors are responsible for checking the transactions per-formed by those reporting to them.These first-tier controls pro-vide the foundations of the internal control system. They aredescribed in written procedures and must be formally evidenced.

GENERAL ORGANIZATION

2005 ANNUAL REPORT

n Second tier : continuous checks are undertaken to ensurecompliance with internal and external rules and regulations aswell as to verify the existence, implementation and effectivenessof first-tier controls. Second-tier controls cover functional areassuch as accounting, commitments and risks. Regulatory controlsapply to this second tier. Control at this level is performed by theCompliance Officer, the Investment Services Depar tmentControl Officer, the Information Systems Security Officer, theTRACFIN correspondent and any other officers with responsibi-lity for specific controls required by the applicable regulations.

n Third tier : consisting of periodic audits and investigations car-ried out by the Internal Audit department.The internal auditorshave free access to all information they require to conduct theiraudit, including confidential and privileged information. A mana-ger oversees all such audit work.

The Internal Control Officer is responsible for ensuring theconsistency and effectiveness of this three-tier system, reportingto senior management – who have ultimate responsibility forinternal control, the Risk Management Committee and theBoard of Directors.

The role of the Board of Directors The Board of Directors oversees control of the main risks incur-red by the bank, as well as the quality and reliability of the inter-nal control system in accordance with banking regulations.

The Risk Management Committee – one of the Committees ofthe Board – is responsible for organizing reporting systems cove-ring company-level and consolidated risk data, the results ofinternal control procedures and the main findings of internalauditors, in accordance with banking regulations.The Committeeassesses the quality of internal control, including risk measure-ment, monitoring and management systems. It is also responsiblefor recommending additional measures where appropriate.

Organization of internal control at the level of Banque Fédérale des Banques PopulairesIn its role as the Banque Populaire Group’s central body, as definedin the Monetary and Financial Code,Banque Fédérale des BanquesPopulaires oversees the cohesiveness of the Banque Populaire net-work and takes all necessary measures to guarantee the liquidityand solvency of Banque Populaire banks as well as of the networkas a whole through the Group Risk Management Committee.More generally it supervises and controls all establishments makingup the Banque Populaire Group, particularly its subsidiaries.

Internal control structures The Group Risk Management Committee exercises its supervi-sory role by drawing on the resources of Banque Fédérale desBanques Populaires Risk Control and Audit department.

In 2005, the work of the Internal Audit and Risk ManagementDepartment was organized around three sub-departments:

n The Risk Management department, expanded in 2005 – whichhas no involvement in commercial decisions – is responsible forensuring that the same rules are applied throughout the Group,deploying appropriate risk control and continuously monitoringthe risks governed by standard CRBF 97-02 (credit/counterpartyrisk, interest rate risk, liquidity risk and operational risk) acrossthe entire Group. The Risk Management department, in itsvarious areas of competence, has therefore continued toenhance the Group’s risk control system.

n The Internal Control Procedures department is responsiblefor providing methodological and technical support to theGroup entities and promoting the adoption by all entities of bestpractices identified within the Group. In 2005, the department’swork concentrated mainly on the production of Group-wideaudit methodologies, the organization and management of aGroup audit concerning compliance with AMF regulations gover-ning customer relations and the creation of guidelines for anti-money laundering procedures. Annual internal controlassessments are performed and the results presented to theGroup Risk Management Committee, for the purpose of prepa-ring the Group’s CRBF 97-02 report.

n The Internal Audit department and its information systemsaudit unit perform periodical audits of Banque Populaire Groupentities in accordance with the internal audit charter approvedby the Board of Directors of Banque Fédérale des BanquesPopulaires. These tasks are carried out in accordance with anannual plan based on priorities established by the RiskManagement and Internal Control departments, with recurringaudits of all Group departments and entities carried out on a rol-ling program spanning several years. Each audit includes quanti-tative and qualitative risk analysis and assessments of the qualityof information systems and internal control systems.The internalauditors also assess the overall efficiency of the audited entities.The head of Internal Audit reports to the Group Chairman andChief Executive Officer and these reports are submitted to theBoard of Directors. In addition, reports are submitted to theGroup Risk Management Committee describing the action takento implement the internal auditors’ recommendations. In 2005, asub-department was created to audit operational models.

Within the framework of the reform of standard CRBF 97-02,periodic control functions (Internal Audit) and permanentcontrol functions (Risk Management department) will be sepa-rated as of January 1, 2006; a Group Compliance departmentwill be created specifically for this purpose.

Role of the Board of Directors of BanqueFédérale des Banques PopulairesThe Board of Directors of Banque Fédérale des BanquesPopulaires ensures that the Group’s main risk exposures are pro-perly managed and monitors the quality and reliability of the sys-tem of internal control.

In 2005, the Board of Directors of Banque Fédérale des BanquesPopulaires, assisted by the Group Risk Management Committee,continued to keep a close watch over the system of internal controlemployed within Banque Fédérale des Banques Populaires and the



Banque Populaire Group as a whole in order to manage all risks ari-sing in the course of the Group’s business, whatever their origin.

Decisions of the Board concerning internalcontrol During 2005, the Board of Directors of Banque Fédérale desBanques Populaires made a number of decisions concerninginternal control in addition to those made by the Group RiskManagement Committee.The matters addressed were:

n February:

- review of the Chairman’s draft report on internal control pro-cedures in the Banque Populaire Group during 2004.

n April:

- review of Group balance sheet risks and implementation ofa procedure designed to set maximum limits for banks andthe Group as a whole;

- approval of the principle for finding a new system for measu-ring balance sheet risks at Group level;

- review of a report by the Banking Commission.

n May:

- designation of members of Committees of the Board (GroupRisk Management Committee,Audit Committee,RemunerationCommittee).

n June:

- consideration of annual internal control reports regardingBanque Fédérale des Banques Populaires and the BanquePopulaire Group;

- analysis of the results of the Group audit concerning com-pliance with AMF regulations;

- definition of a series of priority actions relating to the deve-lopment of the Group internal control system, in particularwithin the framework of the reform of standard CRBF 97-02;

n September:

approval of Group charters organizing the various aspects ofpermanent control of risks (credit risks, operational risks, financialrisks), compliance and periodic controls (audit) within the frame-work of the reform of standard CRBF 97-02;

n November:

- review of the Basel II project and the general inspectionreport concerning Basel II;

- consideration of the reply to a follow-up letter from theBanking Commission;

- adoption of Group guidelines concerning operational riskand analysis of business continuity plans for Group banks;

- setting new limits for the concentration of major counter-party risks;

- approval of the new organizational structure of BanqueFédérale des Banques Populaires in accordance with regula-tions in force as of January 1, 2006.

Issues dealt with in meetings of the Group RiskManagement Committee During 2005, there were six full meetings of the Group RiskManagement Committee:

n four to deal with matters concerning the Banque PopulaireGroup:

- in March to approve the Chairman’s report on the BanquePopulaire Group’s internal control procedures during 2004,review balance sheet risks and propose considerations onthe development of internal limits and systems to monitordevelopment, as well as the review of a report by the BankingCommission;

- in June to analyze the annual internal control report, proposea series of priority actions relating to the development of theGroup internal control system, in particular within the frame-work of the reform of standard CRBF 97-02, and review theresults of a Group audit report on compliance with AMFregulations;

- in October to review the Basel II project, the general inspec-tion report concerning Basel II, guidelines for operationalrisks, limits for major counterparty risks and the draft reply toa follow-up letter from the Banking Commission;

- in December to approve planned Group audits in 2006,updated counterparty risk guidelines and the composition ofnew risk monitoring bodies.

n two meetings to deal with issues concerning Banque Fédéraledes Banques Populaires

- in June to analyze the annual report on internal control,balance sheet risks, the business continuity plan and res-ponses to recommendations made by the Internal Auditdepartment concerning IT risks;

- in December to assess the overall evaluation of risks as atJune 30 at Banque Fédérale des Banques Populaires, reviewbalance sheet risks and proposed new limits, and analyze thebusiness continuity plan.

2005 ANNUAL REPORT

Risk management organization In the course of its business, the Group is exposed to four maincategories of risks:


n market risks arising from capital market transactions;

n interest rate, currency and liquidity risks arising from retailbanking transactions;

n operational risks, including non-compliance risks.

In accordance with standard CRBF 97-02, each bank has set uprisk management and monitoring systems that are independentfrom operating units.

All Group banks have also set up their own systems of exposurelimits and decision-making procedures,complying with the rules esta-blished at Group level, as set out in the credit risk manual updated inJune 2004, the interest rate and liquidity risk manual updated in April2004 and the operational risk manual updated in November 2005.

Credit risks

Credit risk management in the banks based on Banque Populaire Group standardsEach bank’s risk policy is determined by the bank’s executivemanagement and approved by its Board of Directors.The banksare also responsible for exercising continuous control over risks,in accordance with the rules laid down by the Board of Directorsof Banque Fédérale des Banques Populaires – dealing in particu-lar with the role of the Group Risk Management Committee –and by the banking regulator.

The risk policy defines:

n business development strategies and objectives, particularlyregarding the type, quality and monetary value of risk exposures;

n the rules governing the organization and control of risk exposure;

n internal exposure limits, which are lower than regulatory limits.

The review process to examine credit risk control in lending acti-vities resulted in 2005 in the adoption of the risk control char-ter, which governs relationships within the Banque PopulaireGroup as of January 1, 2006.

n Decisions and delegations

Lending decisions are based on formal procedures and approvalcircuits and are made by reference to an assessment of the rela-ted cost and the potential benefits for the bank. Clear limits areset on discretionary lending authority at each level, based on cre-dit ratings and monetary amounts. In accordance with CRBF 97-02 (Art.21), lending decisions are either countersigned or madein exercise of formal delegations of authority.Where appropriate,decision-makers take advice from the Group’s specialized entitiesor other experts on legal, financial, international or other matters.

n Credit risk measurement and monitoring – commitments surveillance

All business portfolios are monitored according to risk criteriaand by client category.

A preventative risk detection system, tailored for the specific featuresof each client category, allows clients to be contacted and problemsto be addressed before an incident occurs. In addition, several inde-pendent structures perform non-overlapping supervisory controls.

Risk monitoring systems are designed to provide each seniormanagement and the Board of Directors of each bank and of theBanque Populaire Group with quantitative and qualitative riskdata, covering both outstanding commitments and transactionflows.These systems include regular reviews of at-risk commit-ments covering both exposures and related commitments.

Information systems include applications to generate manage-ment information schedules analyzing the level of activity andqualitative and quantitative changes in risk, for both individual andaggregate exposures.

n Managing non-performing and irrecoverable loans

Non-performing and irrecoverable loans are monitored separa-tely in the banks, notably to ensure that the Banque PopulaireGroup’s conservative provisioning policy is followed in all cases.Each bank has a committee which meets regularly in order toreview the most significant troubled loans and commitments anddetermine appropriate levels of related provisions. In addition tothese provisions against specific loans, the banks may also recordgeneral provisions or reserves to protect themselves against aprobable escalation of risks in a given industry or country.

n Centralization of risks with a single counterparty or group

Data on exposures with banking counterparties are automati-cally aggregated.The banks have access to the Banque Fédéraledes Banques Populaires risk database containing informationabout the largest exposures, as well as to the analyses producedby Natexis Banques Populaires and the Group Risk ManagementCommittee, which are regularly updated.

n Client credit ratings

At the end of 2003, the Banque Populaire Group introduced aninternal credit rating system to comply with future regulatoryrequirements. This is based on uniform methodologies throu-ghout the Banque Populaire Group and centralized credit ratingprograms for the main client categories.

n For loans to companies, the system is based on quantitativeand qualitative assessments of the counterparty’s solvency anddraws on the expertise of the commercial team and risk mana-gers, with the latter having the last word.The counterparty ratingscale has sixteen levels, excluding default.

RISK MONITORING AND CONTROL PROCEDURES



n For small businesses and personal customers, the systems usestatistical techniques and take account of two main parameters:the rating of the counterparty and the loss rate on the transac-tion.The rating scale has ten levels, excluding default.

n Interbank transactions are conducted exclusively with counter-parties on the Banque Fédérale des Banques Populaires “appro-ved” list, which are selected based on the credit ratings awardedby external credit agencies. A new rating system is in the processof being rolled out within the framework of Basel II reforms.

n Risk diversification

Risk diversification presents a fundamental risk management ruleand is governed by external and internal guidelines. As requiredby the Group’s risk management manuals, each bank sets inter-nal risk concentration limits based on its own specific characte-ristics, which are lower than the limits authorized under bankingregulations. In 2005, a single maximum level below the regulatorythreshold was implemented, which will apply to all Group bankson a consolidated basis as of June 30, 2006.

Credit risk reporting and control structures at Banque Populaire GroupThe Group’s central body is responsible for assessing risk policiesand management procedures according to standard principlesand criteria. Risks are monitored at Group level as follows:

n Banque Populaire banks on a consolidated basis;

n subsidiaries of Banque Fédérale des Banques Populaires on aconsolidated basis;


In addition to this consolidated risk monitoring system, theGroup Risk Management Committee performs monthly assess-ments of material individual exposures at Group level or at thelevel of individual banks. Responsibility for performing creditreviews and the credit rating process may be delegated to theBanque Fédérale des Banques Populaires Risk Managementdepartment.

All Group entities are informed of the decisions made by theGroup Risk Management Committee.

For interbank risks, Banque Fédérale des Banques Populaires col-lates details of the limits set by each bank and outstanding com-mitments by counterparty. Its Risk Management departmentmonitors aggregate exposures by counterparty, based on limitsthat take into account the counterparty’s financial characteristicsand the weighting of the Group’s commitments in relation to thecounterparty’s total financing facilities.

Any differences in assessment of the level of the Group’sexposure or that of a Group bank are referred to the monthlymeeting of the Group Risk Management Committee for consi-deration.

As part of the Basel II project, the Risk Management department of Banque Fédérale des Banques Populaires has developed aninformation system covering the Group’s exposures in their entirety.

Market risks The Group’s exposure to market risks primarily concernsNatexis Banques Populaires, a subsidiary of Banque Fédérale desBanques Populaires. Natexis Banques Populaires’ market riskmonitoring system is described below.

Counterparty risk Exposure limits have been set for commitments to capital mar-ket counterparties, most of which are banking institutions.Theselimits are set by an ad hoc committee and are monitored by thebank’s risk monitoring system. Any limit overruns are reviewedat special monthly committee meetings.

Market risk policyNatexis Banques Populaires is active in capital markets throughthe Global Debt & Derivatives Markets and Equity Groupdepartments. Activities include intermediation, brokerage andasset management for clients and proprietary transactions.

Proprietary transactions fall into several categories:

n transactions to facilitate client transactions;

n trading transactions;

n arbitrage transactions;

n treasury transactions to manage overall interest rate and mis-match risks.

The entities carrying proprietary risks are the Global Debt &Derivatives Markets and Equity Group departments.

Market risk management systemThe permanent system for control of market risk at NatexisBanques Populaires comprises three pillars:

n a three-tier control architecture in the form of each entity’smiddle office or risk manager, the Internal Control Departmentand the Risk Department, these last two providing independentmonitoring of risks;

n a market risk measurement methodology to quantify thebank’s risk exposure;

n a system of exposure limits based on the risk indicators defi-ned using the internal risk measurement methodology andapplied to both Natexis Banques Populaires and its subsidiaries.

Control over market risks is based on a risk measurementmethodology that assesses market risk faced by all entities of theBanque Populaire Group. The current methodology uses stan-dard indicators and VaR calculations. However, Natexis BanquesPopulaires is developing a new internal VaR model, with a viewto obtaining approval from the Banking Commission.

The main standard indicators used include sensitivity to thevarious market risks including interest rate, currency, equity, com-modity, volatility, issuer and correlation risks.

Alongside these standard indicators, Natexis Banques Populairesperforms VaR calculations. The Natexis Banques PopulairesGroup uses an historic VaR approach.This serves to quantify thepotential losses on capital market activities using capital ade-quacy assumptions.

2005 ANNUAL REPORT

The heads of all capital markets businesses are assigned expo-sure limits defined by reference to risk management indicators.Delegations of authority are decided at monthly meetings of theMarket Risks Committee. Market risk exposures are measuredon a daily basis by middle offices using front office systems orspecially developed tools.

Compliance with exposure limits is also checked on a daily basisby middle offices, which report any overrun to the relevant ope-rational management team, the Internal Control department andthe Risks department. For each overrun, a decision on whetherto temporarily allow the overrun or to bring exposure backwithin limits immediately is taken jointly by the business line, themiddle office and the Risks Department.

Aggregate interest rate and liquidity risks Interest rate risk corresponds to the risk of losses or an erosionof interest margins due to an unfavorable change in interest ratesand is analyzed as a margin risk.

Liquidity risk is the immediate risk of being unable to honor thebank’s debts or to finance assets.

A specific policy for each bank in complying with rules of the Banque Populaire GroupEach bank is responsible for managing its own interest rate andliquidity risks in compliance with the methods and rules set outin the Group procedure manual as updated in April 2004.Theexecutive management of each bank determines the bank’sfinancial risk policy, subject to approval from the Board ofDirectors, with the aim of defining the best strategy to increaseinterest margins while also reducing the related risks: striking anappropriate balance between business growth and interest rateand liquidity risk, reducing exposure to interest rate risk throughappropriate hedging programs, validating the rules governing theorganization and control of balance sheet risk lines and periodi-cally monitoring internal exposure limits.

Working with Banque Populaire Group finance executives,Banque Fédérale des Banques Populaires has produced an inte-rest rate and liquidity risk procedure manual comprising mana-gement rules, measurement standards (methodologies andscenarios) and procedures dealing with exposure limits.

n Interest rate risks: exposure limits are expressed as a percen-tage of expected interest margin on a “rolling” basis that takesaccount of predicted increases in commitments and of earningscapacity on a “fixed” basis using the balance sheet at the previousyear-end, over a four-year time frame and according to predefi-ned scenarios.

n Liquidity risks: mismatch limits are expressed as a percentageof assets, taking account of forecast increases in commitments,based on normal and crisis scenarios over time frames of up tofour years.

The review process to examine financial risk control resulted in2005 in the adoption of the risk control charter, which governsrelationships within the Banque Populaire Group as of January 1,2006.

Interest rate and liquidity risk reporting structures for the Banque Populaire GroupBanque Fédérale des Banques Populaires sets the assumptionsto be used for the various scenarios and ensures that the sensi-tivity of profits at the Banque Populaire banks to changes in inte-rest rates is compatible with the earnings capacity at each bank.

Banque Fédérale des Banques Populaires’ Risk Managementdepartment has set up an information system to report detailsof interest rate and liquidity risk exposures of all BanquePopulaire banks on a standard basis.This reporting data providesthe Group Risk Management Committee with a comprehensiveoverview of risks on which to base recommendations to theBoard of Directors concerning capital adequacy decisions.

Operational risks

Managing operational risks The management of operational risks is based primarily on inter-nal control systems organized at the level of each individual bankin accordance with the requirements of CRBF 97-02. TheGroup’s approach is based on a risk management manual appro-ved by the Board of Directors of Banque Fédérale de la BanquePopulaire in 2005, a detailed inventory of the activities coveredand a reporting system.

The definition of operational risk is that provided by the regula-tor : the risk of loss resulting from inadequate or failed internalprocesses, people and systems, or from external events. A map-ping of such risks, based on this definition, has been undertakenby the Banque Populaire Group, classifying risks into four maincategories: systems and processes, fraud and external risks, legaland compliance risks and strategic risks.

The work undertaken in the risk mapping exercise of the BaselII project will ultimately provide the Group Audit and RisksCommittee with a centralized overview of the magnitude ofoperational risks.

In addition, the work carried out in the third quarter of 2004,under the supervision of Banque Fédérale des BanquesPopulaires, with a view to establishing a common methodologythroughout all entities in the Banque Populaire Group, based onharmonized manuals for the review of activities and informationsystems and a guide for the creation of business continuity plans,continued. Based on best practice within the group, this metho-dology allows for the implementation of business continuityplans.

The review process to examine operational risk control resultedin 2005 in the adoption of the risk control charter,which governsrelationships within the Banque Populaire Group as of January 1,2006.

Insurance and risk coverage In common with other banking groups, the Banque PopulaireGroup insures its major risks through policies with insurance andreinsurance companies.The policies taken out for 2006 completethe creation of a structure covering substantial and significant risks



for the Banque Populaire Group. Policies cover corporate andmanagement liability, fraud and embezzlement risks, the bulk ofthe Group’s IT infrastructure and buildings and significant sitessuch as the central offices and data centers. The policies coverbusiness interruption and consequential loss at each entity.

As in 2005, the entire program has been renewed for 2006 ongenerally better terms than previously available.All cover is pro-vided by leading international insurers of recognized and unques-tionable standing.

Future developments Preparation for a new international banking solvency ratio, theso-called Basel II ratio, is a major strategic project for the BanquePopulaire Group. Launched in 2000 and overseen by the Group’smost senior management, this major project covers all businesslines, involves all banks and data centers and has mobilized teamsthroughout the Group. In 2005, Banque Fédérale des BanquesPopulaires’ Internal Audit department conducted an in-depthaudit of the system in place covering all of the Group’s entities,with a view to approval by the banking regulator.

The project has been based on standardized methodologies andsystems selected by the Board of Directors of Banque Fédéraledes Banques Populaires. It had been widely and successfullyimplemented for major asset classes by the end of 2003.This hasbeen followed by the introduction of standardized managementtools and, for operational risks, the updating and group-wideintroduction of risk mapping and measurement tools.

Group compliance Combating money laundering Programs to prevent the laundering of the proceeds of crimehave been in place since the beginning of the 1990s and, follo-wing the events of September 11, 2001, they were extended toinclude measures to combat the financing of terrorism.

In these two complementary areas, Banque Fédérale desBanques Populaires has been committed to defining preventativeprocedures and providing training tools for employees ofBanque Populaire Group banks.

Increased detection resources Banque Fédérale des Banques Populaires has issued a frame-work set of anti-money laundering guidelines.This system appliesto all financial establishments in the Banque Populaire Group.Thisframework will be incorporated into the operating proceduresof each bank. It includes a catalogue of data query proceduresdesigned to comply with the legal and regulatory standards ofvigilance, developed within i-BP in 2005.

To increase the automation of the system, Banque Fédérale desBanques Populaires has selected a software system for the mana-gement of lists of terrorists published by the authorities for allBanque Populaire Group establishments (decision of the Board ofDirectors on January 22, 2003). Linked with a system for updating

lists, the structure adopted is based on centralized monitoring oftransactions carried out by Natexis Banques Populaires anddecentralized supervision of local client accounts.

In September 2005, Natexis Banques Populaires purchased acustomer profiling tool in order to enhance its existing systemfurther. This tool is supported by measures taken to detect alldoubtful or unusual transactions. It will be rolled out graduallywithin Natexis Banques Populaires in the course of 2006 andthen in its subsidiaries. Analysis has been carried out by i-BP, theIT service provider for the majority of the Group’s establish-ments, to set up a similar or identical system.

A group-wide training program Throughout 2005, considerable attention continued to be paidto increasing staff awareness and training in anti-money launde-ring procedures.This process was supported by the use of a sys-tem developed by the Fédération des Banques Françaises.

Ethics and compliance The Banque Populaire Group considers the application of thehighest ethical standards to be a critical factor in sustainabledevelopment and to this end increased the resources devotedto the ethics program in 2005.

A single regulatory framework for the entire Banque Populaire GroupWithin the Banque Populaire Group, the Code of Ethics produ-ced by the Chambre Syndicale des Banques Populaires (nowBanque Fédérale des Banques Populaires) has served as theblueprint for the internal ethical rules drawn up for each Groupentity.

The central purpose of these rules is to protect clients’ interestsat all times.Within the framework of applicable laws, regulationsand conventions, they require all employees to adhere to thehighest standards of diligence, loyalty, neutrality and discretion.

A Compliance Officer in each bank A Compliance Officer has been appointed at each BanquePopulaire bank. At Natexis Banques Populaires, to comply with thespirit of the guidelines issued by the French securities regulator(Conseil des Marchés Financiers, now renamed the AMF), thisfunction,which was segregated from the internal audit and controlfunction in 2002, has benefited from a steady increase in resour-ces and structures during 2005, with a significant increase in staffnumbers and a deployment of resources in all business lines.

The Central Compliance Team is responsible for coordinatingthe ethical compliance structures at Natexis Banques Populairesand its subsidiaries, for monitoring people in sensitive positionsat Natexis Banques Populaires, supervision lists, monitoring andmanaging multi-department projects, supervising the complianceofficers dedicated to each business line and working with theheads of these business lines.

Even though Banque Fédérale des Banques Populaires does notprovide investment services, it has appointed a compliance officer,who plays a key role in guiding and promoting ethical practice

2005 ANNUAL REPORT

throughout the Banque Populaire Group. In particular, theCompliance Officer is responsible for distributing and commen-ting on all documents published relating to the area of ethics.

Compliance function The review process to examine compliance resulted in 2005 inthe adoption of the compliance charter, which governs relations-hips within the Banque Populaire Group as of January 1, 2006.

Adaptation to the new regulatoryenvironment In the decree of March 31, 2005, the French government imple-mented fundamental reforms to CRBF regulation 97-02, in par-ticular requiring the separation of periodic and permanentcontrols in the organization of internal control procedures andestablishing a system to control risks of non-compliance.

Following a review conducted throughout the first half of 2005involving all concerned parties within the Banque PopulaireGroup, in September, the Board of Directors of Banque Fédéraledes Banques Populaires approved charters relating to the orga-nization within the Banque Populaire Group’s establishments andat the level of the Group as a whole of the various types of riskcontrol (credit risk, operational risk and financial risk), complianceand audit. Each establishment has to implement these chartersand adapt its organization and resources accordingly.

At the end of 2005, Banque Fédérale des Banques Populairesand nearly all structures of the Banque Populaire Group hadadapted their organization to comply with these charters. AtBanque Fédérale des Banques Populaires, new risk supervisorybodies are due to become functional in 2006. In terms of com-pliance, a New Products Committee will give its verdict on allproducts marketed by more than one establishment of theBanque Populaire Group and its subsidiaries. Furthermore, theStandards and Methods Committees will provide an opinion onproposed standards and methods of a collective nature withinthe Banque Populaire Group by different natures of risks. Finally,the Group Credit Risks Committee will follow on from themonthly meetings of the Group Risk Management Committee inthe supervision of the Banque Populaire Group’s counterpartyrisks on a consolidated basis.



Preparation of the consolidatedfinancial statements The consolidated financial statements of Banque Fédérale desBanques Populaires and the Banque Populaire Group are prepa-red by Banque Fédérale des Banques Populaires in its capacity ascentral body of the Banque Populaire banks and holding com-pany of the Natexis Banques Populaires sub-group.The BanqueFédérale des Banques Populaires Finance Department hasdrawn up and deployed a consolidation manual designed to gua-rantee the reliability of the process. It is based on the followingcore principles:

n definition and communication of accounting principles for theBanque Populaire Group including the analysis and interpretationof new texts issued during the period, both for French and inter-national (IFRS) accounting standards;

n use of the direct consolidation method to permit detailed exa-mination of the consolidation packages of consolidated entitiesaccording to a formal review process;

n use of a single consolidation system for all consolidations andsub-consolidations conducted within the Banque PopulaireGroup in order to guarantee the internal consistency of the scopes of consolidation, definitions, standards, charts of accountsprocessing sequences and analyses;

n the production of quarterly consolidated accounts in order toprovide a better level of control of half-yearly and full-yearaccounts, through anticipation of operations over the period, theprovision of reliable estimates on a consolidated basis and opti-mization of the reconciliation of intra-group transactions;

n checking of data reported by consolidated entities through thedistribution of application interfaces and the use of more than8,900 accuracy and consistency tests which must be completedfor the data to be transmitted;

n item-by-item analysis of all entries that impact on consolidatedshareholders’ equity and production of a tax proof for eachconsolidated entity respectively, providing full evidence of conso-lidated shareholders’ equity and individual justification of deter-red taxes;

n an audit trail system to trace the accounting data published inthe financial statements and the notes back to the accounts ofeach consolidated entity and the consolidation adjustments;

n archiving and security procedures including the twice-dailyback-up of the unified consolidation database and regular datarecovery testing;

n regular training of accounting teams at the consolidated enti-ties and action to promote the use of best practice throughoutthe Banque Populaire Group.

Conversion of Group consolidatedfinancial statements to IFRSAlthough the Banque Populaire Group is under no obligation toadopt IFRS as it is not listed, the Board of Directors of BanqueFédérale des Banques Populaires decided that the consolidatedfinancial statements of the Banque Populaire Group should beprepared in accordance with IFRS from January 1, 2005. Thisdecision was made to facilitate transparency and comparabilitywith other major banking institutions. It represents a majormilestone for the Group and for all direct users of its financialreporting.

Mindful of the importance of this transition, the Group launcheda project to implement these new standards in September 2002,which involved customizing and adjusting the parameters of itsinformation systems, drafting new procedures and trainingeveryone participating in the production of financial data.

In terms of the consolidation system, the conversion of theGroup’s financial statements to IFRS resulted in the distributionof a new consolidation package allowing the identification andchecking of all information additional to that required underFrench accounting standards to enable a transition to IFRS.Thissolution,with more than 4,500 tests, provides a full audit trail bet-ween consolidated financial statements prepared under Frenchstandards and those prepared under IFRS.

Control process Internal control processes at the level of the consolidated entities Reflecting the decentralized nature of the Banque PopulaireGroup, internal control procedures are tailored to the organiza-tion of each of the consolidated entities. In all cases, the processincludes several layers of controls:

n basic permanent controls are included in processing programsat the operational level;

n second-tier independent checks of processing operations byFinance and Accounting Departments to ensure the accuracyand completeness of accounting data;

n third-tier controls by internal auditors, corresponding tocontrols of controls;

n four th-tier controls by the Audit or Risk ManagementCommittees set up by the main entities covered by the scope ofconsolidation of the Banque Populaire Group.Their purpose is toanalyze individual and consolidated accounts of the entitiesconcerned and to ensure the appropriateness and consistentapplication of accounting methods and review of the mainassumptions used to prepare the financial statements.

INTERNAL AND CONTROL PROCEDURES COVERING FINANCIALAND ACCOUNTING INFORMATION

2005 ANNUAL REPORT

These continuous and periodic controls, performed in the diffe-rent accounting system environments within the BanquePopulaire Group, include reviews of account analyses producedby the various departments, checks to ensure that suspenseitems are cleared and errors corrected on a timely basis andmonitoring of indicators for “sensitive” accounts.

Top level controls In addition to the self-checking and external checking procedu-res performed at the level of the local entities responsible forpreparing individual or consolidated financial statements, thequality of accounting controls is verified by:

n Banque Fédérale des Banques Populaires, which reviews theregulatory reporting schedules prepared by the BanquePopulaire banks (BAFI 4000 schedules and supplementary sche-dules) in its capacity as the network’s central body.To enhancethe effectiveness of these controls, the Banque Fédérale desBanques Populaires Finance Department has elected to reviewthese schedules on a monthly basis, thus going beyond the requi-rements of the French banking regulator (Commission Bancaire)for quarterly reviews;

n the group’s external auditors, who work in collegiate fashionand whose opinions are based in part on the conclusions of theexternal auditors of each of the consolidated entities, particularlyas regards compliance with the standards of the BanquePopulaire Group, as laid down by Banque Fédérale des BanquesPopulaires, and the effectiveness of local internal control proce-dures;

n periodic internal audits by the Banque Fédérale des BanquesPopulaires Internal Audit Department at various entities withinthe Banque Populaire Group and at Banque Fédérale desBanques Populaires.

Role of the Audit Committee n The Audit Committee of Banque Fédérale des BanquesPopulaires, whose role is described on page 13, met twice in thepresence of the external auditors, on September 2, 2005, andFebruary 20, 2006, to review the consolidated financial state-ments for Banque Fédérale des Banques Populaires and theBanque Populaire Group to June 30 and December 31, 2005,respectively, prior to their presentation to the full Board ofDirectors.

n Under the framework established by the Commission Bancaire(CRBF 97-02) for supervision of credit institutions, the InternalAudit and Risk Management Department of Banque Fédéraledes Banques Populaires submits to the Group Risk ManagementCommittee and to the Board of Directors an annual report oninternal control in the Banque Populaire Group.

This report is based on a detailed questionnaire which allows theassessment of internal control procedures, particularly as theyconcern accounting and financial information from consolidatedentities, and includes consolidated information where appro-priate.

Outlook In 2006, as in 2005, the Banque Populaire Group will pursue stra-tegies to optimize its data processing and control systems andadapt these systems to keep pace with business developmentand with changes in the regulatory framework, such as Basel II,COREP, IFRS, Finrep and banking regulations.

The efforts undertaken to rationalize the resources and workingmethods of the teams responsible for producing, checking andmonitoring accounting and financial reporting schedules will alsobe pursued. In relation to this, three major projects were laun-ched in 2005:

n at the level of the Banque Populaire Group, the change ofconsolidation tool which, in accordance with existing principles,will allow for the consolidation of Coface and its subsidiaries inthe direct decentralized consolidation system as of the third quar-ter of 2006, while also offering a greater volume of consolidatedinformation and broader analysis and control functionalities;

n at the level of the Banque Populaire banks, an extensive over-haul of the accounting architecture of the banks belonging to theBanque Populaire IT community (16 out of 21 Banque Populairebanks), aiming for the gradual roll-out of a single accountinginterpretation solution based on identical accounting schedulesvalidated by external experts, as well as the creation of a data-base of elementary transactions, offering a more efficient audittrail and broader reproduction and analysis functions;

n at the level of Natexis Banques Populaires, the projects laun-ched in 2004 concerning the restructuring of the accountingcontrol system and the development of an enterprise systemsdevelopment plan continued in 2005:

- the reliability of the accounting control process throughmonthly reporting was ensured by the implementation of anadequate organization to support the role of employees respon-sible for first and second-tier checks, as well as redefining map-ping of controls and adapting it to the needs of the business lines,and finally the implementation of a centralized reporting systemoffering an overall view of the results of controls. An IT solutionto meet the reproduction, synthesis and management require-ments of accounting controls became operational with thelaunch of accounting control reproduction system “Nordicc” forthe preparation of the 2005 financial statements, the functionali-ties of which will be extended in 2006;

- the enterprise systems plan became operational with the pre-paration of the restructuring of the IT systems of central func-tions (accounting, management control management ofcounterparty risks etc.).The expression of the requirements ofthe new accounting system was defined at the same time as thetarget system structure. This architecture defines the target towhich business applications need to migrate in order to deliverthe data flows required by the enterprise systems, as well as thedatabases (third-parties, structures, activities, products) that needto be updated to manage data shared between managementapplications and enterprise systems.The group plans to create aninventory management warehouse to collect all of the datarequired for the enterprise systems and regulatory declarations.



STATUTORY AUDITORS’ REPORT ON THE CHAIRMAN’S REPORTON INTERNAL CONTROL PROCEDURESStatutory auditors’ report on the report of the Chairman of the BanquePopulaire Group on the internal control procedures relating to thepreparation and processing of accounting and financial information


Year ended December 31, 2005

This is a free translation into English of Statutory Auditor’s report issued in the French language and is provided solely for the convenience ofEnglish speaking readers.

The Statutory Auditors’ report includes information specifically required by French law in all audit reports, whether qualified or not, and this ispresented below in the opinion on the consolidated financial statements. This information includes an explanatory paragraph discussing theAuditor’s assessments of certain significant accounting and auditing matters.Theses assessments were considered for the purpose of issuing anaudit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captionsor on information taken outside of the consolidated financial statements.

This report, together with the Statutory Auditors’ report addressing financial and accounting information in the Chairman’s report on internalcontrol, should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable inFrance, international accounting standards (IAS) and international financial reporting standards (IFRS) endorsed by the European Union.

Dear Shareholders,

In accordance with our appointment as auditors of the Banque Populaire Group, we present our report on internal control procedu-res for the year ended December 31, 2005.

In his report, the Chairman comments in particular on the conditions for the preparation and organization of the work of the Boardof Directors of Banque Fédérale des Banques Populaires and the internal control procedures in place within the Group.

We present to you our observations on the information set out in the Chairman’s report on the internal control procedures relatingto the preparation and processing of accounting and financial information.

We performed our procedures in accordance with professional guidelines applicable in France.These require us to perform procedu-res to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating to the prepa-ration and processing of accounting and financial information.These procedures notably consisted of:

- obtaining an understanding of the objectives and general organization of internal control, as well as the internal control proceduresrelating to the preparation and processing of financial and accounting information, as set out in the Chairman’s report;

- obtaining an understanding of the work performed to support the information given in this report.

On the basis of these procedures, we have no matters to report in connection with the information given on the internal control pro-cedures relating to the preparation and processing of financial and accounting information contained in the Chairman’s report.

Paris and Neuilly-sur-Seine, March 22, 2006

The Statutory Auditors

SALUSTRO REYDEL BARBIER FRINAULT ET AUTRESMember of KPMG International ERNST & YOUNG

Michel Savioz Richard Olivier - Olivier Durand

2005 ANNUAL REPORT

Additional informationPerson responsible for the AMFannual report Philippe Dupont, Chairman of the Banque Populaire Group andChairman and Chief Executive of Banque Fédérale des BanquesPopulaires.

Statement by the personresponsible for the AMF annualreport “Having taken all reasonable care to ensure that such is the case,to the best of my knowledge, all of the information contained inthe annual report is in accordance with the facts and contains noomission likely to affect its import.

I have obtained a letter from the statutory auditors certifyingthat they have verified the information concerning the Group’sfinancial position and the consolidated accounts as set out in theannual report and have read the full annual report.”

The Chairman

Philippe Dupont

Financial communications Financial calendar n February 23, 2006

Publication of 2005 results of the Banque Populaire Group andNatexis Banques Populaires.

n May 18, 2006

Annual shareholders’ meeting of Banque Fédérale des BanquesPopulaires (morning) and Natexis Banques Populaires (afternoon).

n September 7, 2006

Publication of 2006 first-half results of the Banque PopulaireGroup and Natexis Banques Populaires.

Information officer Pierre JacobHead of Investor Relations of Group Financial CommunicationsBanque Fédérale des Banques PopulairesTel: +33 (0)1 40 39 68 79 / Fax : +33 (0)1 40 39 63 40E-mail: [email protected]

Documents on display Documents relating to the Banque Populaire Group and BanqueFédérale des Banques Populaires (memorandum and articles ofassociation, reports, letters and other documents, historical indi-vidual and consolidated financial data for each of the two yearspreceding the publication of this document) are partly includedin this document and may be viewed at the registered office ofBanque Fédérale des Banques Populaires, preferably by appoint-ment.

This annual report is available on the website of the Autorité des Marchés Financiers (www.amf-france.org) and in the “Financial Communications” section of the Group websitewww.banquepopulaire.fr

Any person wanting further information about the BanquePopulaire Group or Banque Fédérale des Banques Populairesmay, with no commitment and free of charge, request docu-ments:

- by post: Banque Fédérale des Banques PopulairesGroup Financial Communications Investor Relations Department Le Ponant de paris – 5 rue Leblanc75511 Paris Cedex 15

- by telephone: 01.40.39.68.79

07ADDITIONAL INFORMATION


Cross-reference table1. Persons responsible 2282. Statutory Auditors 233. Selected financial information

3.1. Selected historical financial information regarding the issuer for each financial year 73.2. Selected historical financial information for interim periods NA

4. Risk factors 865. Information about the issuer

5.1 History and development of the issuer 285.2 Investments 83

6. Business overview 6.1. Principal activities 46 - 606.2. Principal markets 46 - 606.3. Exceptional factors NA6.4. Extent to which the issuer is dependent on patents or licenses, industrial,

commercial or financial contracts or new manufacturing processes 986.5.The basis for any statements made by the issuer regarding its competitive position 46 - 60

7. Organizational structure 7.1. Brief description of the Group 257.2. List of significant subsidiaries 27

8. Property, plant & equipment 8.1. Existing or planned material tangible fixed assets 166 to 1678.2. Environmental issues that may affect the issuer’s utilization of the tangible fixed assets NA

9. Operating and financial review 9.1. Financial condition 859.2. Operating results 83

10. Capital resources 10.1. Information concerning the issuer’s capital resources 108 to 10910.2. Sources and amounts of the issuer’s cash flows 11110.3. Information on the issuer’s borrowing requirements and funding structure 149 to 17710.4. Information regarding any restrictions on the use of capital resources that have materially

affected or could materially affect the issuer’s operations NA10.5. Information regarding the anticipated sources of funds needed to fulfill commitments

referred to in items 5.2 and 8.1 149 to 177

11. Research and development, patents and licenses NA

12. Trend information 102 to 10313. Profit forecasts or estimates NA14. Administrative, management and supervisory bodies

and senior management14.1.Administrative bodies 814.2.Administrative, management or supervisory bodies

and senior management conflicts of interest 12

15. Remuneration and benefits 15.1.Amount of remuneration and benefits 9815.2.Total amounts set aside or accrued by the issuer to provide pension,

retirement or similar benefits 203

2005 ANNUAL REPORT

16. Board practices 16.1. Date of expiration of current term of office 816.2. Service contracts with members of the administrative bodies 1216.3. Information about the issuer’s audit committee and remuneration committee 17 to 1816.4.Whether or not the issuer complies with the corporate governance regime in its country of incorporation 8

17. Employees17.1. Number of employees 6517.2. Directors’ shareholdings and stock options 10017.3 Arrangements for involving employees in the issuer’s capital NA

18. Major shareholders 18.1. Shareholders owning more than 5% of share capital or voting rights 2618.2. Different voting rights 2618.3. Control over the issuer 2618.4.Arrangements known to the issuer, the operation of which may at a subsequent

date result in a change in control 26

19. Related party transactions 203 to 20420. Financial information concerning the issuer’s assets and liabilities,

financial position and profits and losses20.1. Historical financial information 104 to 214 – 22920.2. Pro forma financial information NA20.3. Financial statements 104 to 21420.4.Auditing of historical financial information 215 to 21620.5.Age of latest financial information 10420.6. Interim financial information NA20.7. Dividend policy NA20.8. Legal and arbitration proceedings 9820.9. Significant change in the issuer’s financial position 101

21. Additional information 21.1. Share capital NA21.2. Memorandum and articles of association 13 to 17

22. Material contracts 1223. Third-party information and statements by experts and

declarations of any interest NA24. Documents on display 22825. Information on holdings 138 to 148

Pursuant to article 28 of Commission regulation no. (EC) 809/2004 of April 29, 2004, the following information is incorporated by refe-rence in this registration document:

- the consolidated financial statements for the year ended December 31, 2004, the statutory auditors’ report thereon and theGroup management report, on pages 107 to 172, page 173 and pages 85 to 106 of the registration document filed with the AMFon March 25, 2005, under number D.05-0283;

- the consolidated financial statements for the year ended December 31, 2003, the statutory auditors’ report thereon and the Groupmanagement report, on pages 97 to 163, pages 164 to 165 and pages 79 to 96 of the registration document filed with the AMF onMay 4, 2004, under number R.04-074 filed with the AMF.

All other chapters of reference documents no.D.05-0283 and R.04-074 are either of no material interest to investors or covered elsew-here in this registration document.


CONTACTS

Le Ponant de Paris5, rue Leblanc, 75511 Paris Cedex 15Tel: +(33) 1 40 39 60 00 – Fax: +(33) 1 40 39 60 01

www.banquepopulaire.fr2005 annual reports for the Banque Populaire Group, Banque Fédérale des Banques Populaires andNatexis Banques Populaires can be downloaded under the heading «FINANCIAL COMMUNICATIONS».

Pierre Jacob

Investor Relations Department Cécilia MatissartFrédérique Duvignacq

Alain Hermann

Pierre Jouffrey

E-mail: [email protected]


Group Financial Communications

2005 ANNUAL REPORT

Printed using vegetable inks by IMP Graphic (Cosne-sur-Loire, France), an Imprim’vert printer. The Imprim’vert label is awarded to printers implementing indus-trial strategies on environmental protection (waste management, exclusion of toxic products, etc.). The paper selected for the cover of this work was made inIggesund Paperboards factory (Sweden), which is certified to ISO 14001 and EMAS environmental management standards. 100% of the raw material used for inter-ior pages is composed of used paper. It was produced by the Dalum Papir A/S factory (Denmark), which is certified to ISO 14001 and EMAS environmental mana-gement standards.

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Groupe Banque Populaire Annual Report

Documents

Transcript of Groupe Banque Populaire Annual Report