BREAKDOWN OF EXPOSURE AT RISK AND LOSS GIVEN DEFAULT BY PROBABILITY OF DEFAULT (PD) AND BY EXPOSURE CLASS

Data at 31/12/2008

(En millions d'euros) PD < 0.64% (not inclusive) 0.64% (inclusive) < PD < 15% (not inclusive) 15% (inclusive) < PD < 99% (not inclusive) PD > 99% (inclusive) Retail 187,494 176,618 11,367 12,258 Small businesses 10,864 70,625 5,129 4,383 Revolving retail 8,303 10,756 1,035 1,083 Residential mortgages 101,611 47,966 1,421 1,742 Other retail 66,716 47,270 3,782 5,050 TOTAL 187,494 176,618 11,367 12,258 Exposure at risk Data at 31.12.2008

(in millions of euros) Investment grade Sub Investment grade Sensitive Default

Central governments or central banks 81,400 432 306 83

Institutions 141,721 2,481 904 91

Corporates 256,517 56,954 8,453 5,731

TOTAL 479,637 59,866 9,663 5,905

Exposure at risk

Investment grade corresponds to the equivalent of Standard & Poors’ AAA to BBB- ratings. Sub investment grade corresponds to the equivalent of Standard & Poors’ BB+ to B ratings. Sensitive corresponds to the equivalent of Standard & Poors’ B- to C ratings. Default corresponds to the equivalent of Standard & Poors’ D rating.

The total wholesale portfolio (Central banks or central governments, Institutions and Corporates) has a good credit quality and 86.4% of exposures are investment grade. Corporates account for 59% of the total exposure and more than 95% of the sub investment grade exposure.

The Retail portfolio has a 3.1% exposure at default rate. Exposure to real estate, which accounts for 39.4% of total exposure, has a 1.1% default rate.

Data at 31/12/2008 PD < 0.64% (not inclusive) 0.64% (inclusive) < PD < 15% (not _inclusive) 15% (inclusive) < PD < 99% (not _inclusive) PD > 99% (inclusive)

Retail 14% 18% 24% 51%

Small businesses 17% 16% 23% 55%

Revolving retail 44% 44% 48% 69%

Residential mortgages 12% 13% 13% 32%

Other retail 13% 20% 24% 51%

Loss given default

Data at 31.12.2008 Investment grade Sub Investment grade Sensitive

Central governments or central banks 17% 48% 37%

Institutions 38% 52% 43%

Corporates 45% 50% 44%

Loss given default

The scale increase in loss given default (LGD) for each counterparty type reflects the methodology used for its calculation. For Central banks or central governments and Institutions, LGD is a function of country and counterparty ratings. LGD therefore increases as counterparty quality deteriorates. On the other hand, for Corporates, LGD depends only on country quality and the slight increase observed as quality deteriorates stems from the inclusion of country risk in corporate ratings. For exposure at default, LGD is equal to 45% for exposures in the IRB-F approach and equal to the provision coverage rate for exposure in the IRB-A approach.

For the Retail portfolio, the level of LGD is a function of the probability of default and of the guarantees or collateral received.

Comparison between estimated and actual losses

The ratio of Expected Losses (EL) to Exposure at Default (EAD) was 1.07% at 31 December 2008. It is calculated for the Central government or central banks, Institutions, Corporates, Retail and Equity portfolios. This ratio is due to the composition of the loan book. Retail accounts for 87% of total EL but only 48% of EAD, giving a EL/EAD ratio of 1.93% compared with 0.37% for Corporates.

The Pillar 3 working group of the European Banking Federation (EFB) suggests comparing the EL/EAD ratio with the amount of provisions as a percentage of gross exposure (see “Final Version of the EBF Paper on Driving Alignment of Pillar 3 Disclosures”). This ratio amounted to 1.15% at 31 December 2008.

II. Credit risk mitigation techniques

• collateral: a security interest giving the bank the right to liquidate, keep or obtain title to certain amounts or assets in the event of default or other specific credit events affecting the counterparty, thereby reducing the credit risk on an exposure;

• guarantee: undertaking by a third party to pay the sum due in the event of the counterparty’s default or other specific credit events, therefore reducing the credit risk on an exposure.

1. Collateral management

The main categories of collateral taken by the bank are described in the section of the management report entitled “Risk Factors – Credit Risk – Guarantees and Security Received”.

Collateral is analysed when granted to assess the value of the asset, its volatility and the correlation between the value of the collateral and the quality of the counterparty financed. Regardless of collateral quality, the first criteria in the lending decision is always the borrower’s ability to repay sums due from cash flow generated by its operating activities, except for some commodities financing.

For financial collateral, a minimum loan to value ratio is usually included in the loan contract, with readjustment clauses. Financial collateral is revalued according to remargining and marking-to-market frequency and at least quarterly.

The minimum loan to value ratio (or the haircut applied to the value of the collateral under Basel II) is determined by measuring the pseudo-maximum deviation of the value of the securities on the revaluation date. This measurement is calculated on a 99% confidence interval over a time horizon covering the period between each revaluation, the period between the date of default and the date on which asset liquidation starts, and the duration of the liquidation period. A haircut is also applied for currency mismatch risk when the collateral and the collateralised exposure are denominated in different currencies. Additional haircuts are applied when the size of the securities position implies a block sale or when the borrower and the issuer of the collateral securities belong to the same group.

The initial value of real estate assets granted as collateral is based on acquisition or construction cost. It may subsequently be revalued using a statistical approach based on market indices or on the basis of an expert appraisal carried out at least annually.

For retail banking (LCL, Cariparma, Emporiki), revaluation is automatic based on changes in the property market indices. Conversely, for project-type property financing, assets are mainly revalued on the basis of an expert appraisal combining various approaches (asset value, rental value, etc.) and including external benchmarks.

For minimum loan to value ratios (or the haircut applied to the collateral value under Basel II), Calyon projects the value of the real estate asset between the revaluation date and the date on which the collateral is realised by modelling the asset value, and includes repossession costs during that period. Assumptions as regards liquidation periods depend on the financing type (project, property investment companies, property developers, etc.).

Other types of asset may also be pledged as collateral. This is notably the case for certain activities such as aircraft, shipping or commodities financing. These businesses are conducted by the middle offices, which have specific expertise in valuing the assets financed.

2. Protection providers

Two major types of guarantee are used (other than intra-group guarantees): export credit insurance taken out by the bank and unconditional payment guarantees.

The main guarantee providers (excluding credit derivatives – see section below) are export credit agencies, most of which enjoy a good quality sovereign rating. The three major ones are Coface (France), Korea Export Insur (Korea) and Sace SPA (Italy).

Guarantees are also given by mutual guarantee companies such as Credit Logement or Interfimo, which cover low value loans but in total represent a significant amount of risk transference.

3. Use of credit derivatives

The use of credit derivatives is described in the section of the management report entitled “Risk Factors - Credit Risk – Credit Risk Mitigation Mechanisms - Use of Credit Derivatives”.