ANNUAL GENERAL MEETING, 19 MAY 2015 Questions from the shareholders What will be the impact of the separation of the offices of Chairman of the Board and Chief Executive Officer on the company’s operations and strategic decision-making? In the making for more than two years, this change in governance, which took effect at the end of the General Meeting, satisfies the requirements applicable to European banks. It is also in line with the Group’s strategy as it makes a clearer distinction between operating functions and control functions. The Board of Directors has responsibility for approving the strategic direction of the Group as determined by the General Management, ensuring its proper implementation and performing an annual review. As such, our new Chairman, Lorenzo Bini Smaghi, is responsible for convening meetings of the Board of Directors, setting the Board’s agenda and ensuring the smooth operation of the Board’s committees (Audit and Internal Control, Risk, Appointments, etc.). He is the guarantor of good Group governance. In addition, within the new European financial supervision system, the Chairman plays a central role through the quality of the relationships he maintains with the supervisory authorities. In cooperation with General Management, he may also represent the Group to the shareholders, clients and public authorities in order to increase its international prestige. Meanwhile, the day-to-day operation of Societe Generale and operational decision-making remains the responsibility of CEO Frédéric Oudéa, assisted by Deputy CEOs Séverin Cabannes and Bernardo Sanchez Incera. Important decisions, particularly decisions relating to the shareholders, will require the approval of the Board of Directors. More than an obligation, this strengthened governance arrangement represents an opportunity for Societe Generale in an unpredictable world. I’m unsure about the Group’s presence in Russia. Does Societe Generale intend to remain there? In the wake of the Ukrainian crisis and the fall in the price of oil, the Russian market is now experiencing severe hardship. Indeed, with its plunging currency and soaring interest rates, Russia is expected to go into recession this year. The Group reacted quickly by reducing its risk exposure, for instance by giving priority to funding in roubles and by significantly limiting loan origination. Admittedly, the local percentage of non-performing loans has now reached 8.5%. 6 | LETTER TO SHAREHOLDERS_JUNE 2015 However, about 85% of these risks are hedged via provisions, and our loan-to-deposit ratio is along the same lines. Furthermore, Societe Generale’s Russian subsidiaries enjoy substantial credibility as reflected in a high credit rating, which attracts depositors. As a result, our local subsidiaries have a favourable liquidity position. This policy will be continued and supplemented by a cost-cutting programme. The situation is therefore under control. Lastly, we have been seeing signs of an economic improvement in Russia for the past few weeks. Broadly speaking, Societe Generale’s presence in Russia is part of a long-term approach. We are convinced that Western Europe and Russia will remain bound by common interests, cultural relationships and strong economic ties, such as in the energy sector. The Russian economy also has strong growth potential. What are the consequences for the Group of the recent fall in interest rates? In French Retail Banking, lower interest rates have led many individual customers to renegotiate their mortgages. More broadly, the most notable feature of the market is that both short-term and long-term interest rates are very low right now. Paradoxically, we are living in an environment of flat rate curves. This situation is not the best for French retail banks, whose activity can be summed up as taking in short-term deposits to allocate them to long-term lending. SOCIETE GENERALE’S PRESENCE IN RUSSIA IS PART OF A LONG-TERM APPROACH
LETTER TO SHAREHOLDERS_96
To see the actual publication please follow the link above