CFM Indosuez Wealth Management Annual Report 2022 44 Compliance and Ethics function also submits reports to the General Management. Three Internal Control Committee meetings were held on 1 March, 15 June and 9 November 2022, as well as an E-CCI meeting on 18 March 2022. The Internal Control report on the measurement and monitoring of risks and cheques for the 2021 financial year was presented to the Internal Control Committee at its meeting on 1 March 2022, then to the Specialised Audit and Risk Committee at its meeting on 14 March 2022, and approved by the Board of Directors at its meeting on 15 March 2022 without comment. All the steps required to publish the Internal Control Report and its appendices with the ACPR were completed by 18 March 2022, within the deadlines set. Lastly, the half-yearly report on internal control was presented to the Board of Directors of CFM Indosuez Wealth on 12 October 2022. The Specialised Audit and Risk Committee meetings were held and chaired by Mr François Veverka and attended by the directors, the Statutory Auditors, the General Secretary of CFM Indosuez Wealth, the Head of the General Inspection Department and, in turn, representatives of the Credit Risk, Permanent Control, Finance, Compliance and Fraud departments, on the day before the Board meetings of 15 March, 19 May, 13 October and 20 December 2022. At its meeting on 15 March 2022, the Board of Directors approved the risk appetite matrix, with no change in profile compared with the previous year. CREDIT AND COUNTERPARTY RISK CFM Indosuez Wealth is exposed to counterparty risks in relation to natural persons, asset structures whose economic beneficiaries are natural persons or commercial companies linked to an entrepreneur customer whose activity or decision-making centre is based in Monaco. Any exception to this scope of counterparties is subject to prior approval by Indosuez Wealth Group General Management and its RPC department. With regard to financial institutions, the Indosuez Wealth Group does not have any risk delegation (CACIB process). Management Granting process The Indosuez Wealth Group's Framework Directive defines credit risk management in private banking and specifies the nature and type of eligible counterparties and the financing methods that can be envisaged. The lending policy is based mainly on the nature of the transactions, the delegate system, the credit decision process and the management of collateral. Transactions are selected on the basis of the type of loan granted, which can take 8 distinct forms: cash flow requirements, investment in movable assets, specific assets, mortgage loans, corporate loans, asset management transactions, Private Equity subscriptions and, mainly, bond issues and guarantees. The Risk and Permanent Control Department examines all applications submitted by the Sales Department and issues an opinion on each loan application. The local Risk Committee has sole authority to decide on the granting of loans. The Legal and Compliance functions are represented on the Risk Committee. In the event of an unfavourable opinion, an appeal procedure may be activated to submit the application to the higher decision-making body (local Risk Committee/Indosuez Wealth Group Credit Committee). Delegation mechanism All lending decisions are governed by the principle of dual signature by an authorised sales manager (Front Office signature) and by an authorised Risk and Permanent Control representative (Risk signature) depending on the level of local delegation. The Chief Executive Officer of CFM Indosuez Wealth has delegated authority to enter into risk commitments for operations relating to Wealth Management and Corporate clients. The Risk and Permanent Control Department manager has the same level of signing authority as the Managing Director. After being analysed and reviewed locally, loan files whose characteristics exceed CFM Indosuez's level of delegation are subject to an arbitration procedure and escalated to the Indosuez Wealth group and, where appropriate, to CACIB's RPC/DRI. Monitoring Credit and counterparty risks at CFM Indosuez Wealth are monitored by the Risk and Permanent Control Department, which reports operationally to the Chief Executive Officer and in terms of line management to the Indosuez Wealth Risk and Permanent Control function. Counterparty risk is focused on the customer lending business and is part of Wealth Management business line’s risk management strategy, approved by the governing bodies of CA CIB and CA SA and transposed in Indosuez Wealth Group’s Framework Directive. Credit risk management mechanisms Guarantees received and collateral Collateral is created by pledging assets held in the Bank's books (bonds, shares, other securities, deposits) that meet certain specific conditions (approved, liquid, continuously valued, pledged in favour of the Bank, rating, etc.), by taking out bank guarantees, life insurance policies assigned or delegated in favour of the Bank (provided that the underlying assets are eligible for pledge value). The pledge value of pledged financial instruments is defined according to the level of liquidity, volatility, issuer quality (S&P rating, Moody's), risk profile, etc. Equity securities subject to a pledge value must also be listed on approved stock exchanges and indices (excluding second market, open market or new market). In addition, rules governing the diversification and concentration of collateral must be complied with.
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